| | (All amounts are in thousands of U.S.
| | United States | | Canada | | Consolidated | | | (Unaudited) | | | (All amounts are in thousands of U.S. $'s) | Six Months Ended September 30, 2023 | | | | | | | Total revenues | $ | 3,020,489 | $ | 169,679 | $ | 3,190,168 | Depreciation and amortization, net of (gains) on disposals | | 309,398 | | 145 | | 309,543 | Interest expense | | 123,128 | | 1,413 | | 124,541 | Pretax earnings | | 675,514 | | 21,229 | | 696,743 | Income tax expense | | 160,630 | | 5,767 | | 166,397 | Identifiable assets | | 18,279,234 | | 742,216 | | 19,021,450 | | | | | | | | Six Months Ended September 30, 2022 | | | | | | | Total revenues | $ | 3,120,453 | $ | 180,251 | $ | 3,300,704 | Depreciation and amortization, net of (gains) on disposals | | 245,721 | | 4,216 | | 249,937 | Interest expense | | 105,425 | | 1,567 | | 106,992 | Pretax earnings | | 876,101 | | 30,788 | | 906,889 | Income tax expense | | 210,867 | | 7,811 | | 218,678 | Identifiable assets | | 17,515,009 | | 628,334 | | 18,143,343 |
amerco and consolidated subsidiariesU-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
notes to condensed consolidated financial statements – (continued)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12.13. Employee Benefit Plans
The components of the net periodic benefit costs with respect to postretirement benefits were as follows: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 331 | $ | 351 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 287 | | 227 | Other components | | 17 | | 53 | Total other components of net periodic benefit costs | | 304 | | 280 | Net periodic postretirement benefit cost | $ | 635 | $ | 631 |
| | Six Months Ended September 30, | | Quarter Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | | | | | | | | | | Service cost for benefits earned during the period | $ | 663 | $ | 701 | $ | 297 | $ | 331 | Other components of net periodic benefit costs: | | | | | | | | | Interest cost on accumulated postretirement benefit | | 574 | | 454 | | 368 | | 287 | Other components | | 34 | | 106 | | (4) | | 17 | Total other components of net periodic benefit costs | | 608 | | 560 | | 364 | | 304 | Net periodic postretirement benefit cost | $ | 1,271 | $ | 1,261 | $ | 661 | $ | 635 |
13.
| | Six Months Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 594 | $ | 663 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 735 | | 574 | Other components | | (6) | | 34 | Total other components of net periodic benefit costs | | 729 | | 608 | Net periodic postretirement benefit cost | $ | 1,323 | $ | 1,271 |
14. Fair Value Measurements Certain assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three-tiered approach to valuation. Financial assets and liabilities are recorded at fair value and are classified and disclosed in one of the following three categories: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short-term investments are based on quoted market prices. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair values of investments available-for-sale long-term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values on interest rate swap contracts are based on using pricing valuation models which include broker quotes. Fair values of long-term investment and mortgage loans and notes on real estate are based on quoted market prices, dealer quotes or discounted cash flows.Fair values of reinsurance recoverables and trade receivables approximate their recorded value.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution. We have mortgage receivables,loans, which potentially expose us to credit risk. The portfolio of notesloans is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notesloans from individual or groups of notesloans in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings. Other investments, including short-term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value. The carrying values and estimated fair values for the financial instruments stated above and their placement in the fair value hierarchy are as follows: | | Fair Value Hierarchy | | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | | Carrying | | | | | | | | Total Estimated | As of September 30, 2022 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | As of September 30, 2023 | | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (Unaudited) | | (Unaudited) | Assets | | (In thousands) | | (In thousands) | Reinsurance recoverables and trade receivables, net | $ | 203,202 | $ | – | $ | – | $ | 203,202 | $ | 203,202 | $ | 212,565 | $ | – | $ | – | $ | 212,565 | $ | 212,565 | Mortgage loans, net | | 424,633 | | – | | – | | 424,633 | | 417,894 | | 550,913 | | – | | – | | 521,831 | | 521,831 | Other investments | | 123,565 | | – | | – | | 123,565 | | 123,565 | | 88,712 | | – | | – | | 88,712 | | 88,712 | Total | $ | 751,400 | $ | – | $ | – | $ | 751,400 | $ | 744,661 | $ | 852,190 | $ | – | $ | – | $ | 823,108 | $ | 823,108 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | Notes, loans and finance leases payable | | 6,336,570 | | – | | 6,336,570 | | – | | 5,930,507 | $ | 6,436,800 | $ | – | $ | 5,961,511 | $ | – | $ | 5,961,511 | Total | $ | 6,336,570 | $ | – | $ | 6,336,570 | $ | – | $ | 5,930,507 | $ | 6,436,800 | $ | – | $ | 5,961,511 | $ | – | $ | 5,961,511 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | As of March 31, 2022 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (In thousands) | Assets | | | | | | | | | | | Reinsurance recoverables and trade receivables, net | $ | 229,343 | $ | – | $ | – | $ | 229,343 | $ | 229,343 | Mortgage loans, net | | 423,163 | | – | | – | | 423,163 | | 450,347 | Other investments | | 120,592 | | – | | – | | 120,592 | | 120,592 | Total | $ | 773,098 | $ | – | $ | – | $ | 773,098 | $ | 800,282 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance leases payable | | 6,059,713 | | – | | 6,059,713 | | – | | 5,875,781 | Total | $ | 6,059,713 | $ | – | $ | 6,059,713 | $ | – | $ | 5,875,781 |
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | As of March 31, 2023 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (In thousands) | Assets | | | | | | | | | | | Reinsurance recoverables and trade receivables, net | $ | 189,498 | $ | – | $ | – | $ | 189,498 | $ | 189,498 | Mortgage loans, net | | 466,531 | | – | | – | | 444,957 | | 444,957 | Other investments | | 109,009 | | – | | – | | 109,009 | | 109,009 | Total | $ | 765,038 | $ | – | $ | – | $ | 743,464 | $ | 743,464 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance leases payable | | 6,143,350 | | – | | 5,710,735 | | – | | 5,710,735 | Total | $ | 6,143,350 | $ | – | $ | 5,710,735 | $ | – | $ | 5,710,735 |
37
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of September 30, 20222023 and March 31, 20222023 that are measured at fair value on a recurring basis and the level within the fair value hierarchy. As of September 30, 2022 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (Unaudited) | Assets | | (In thousands) | Short-term investments | $ | 2,823,208 | $ | 2,821,751 | $ | 1,457 | $ | – | Fixed maturities - available for sale | | 2,552,311 | | 24,803 | | 2,527,416 | | 92 | Preferred stock | | 22,921 | | 22,921 | | – | | – | Common stock | | 40,526 | | 40,526 | | – | | – | Derivatives | | 10,167 | | 1,659 | | 8,508 | | – | Total | $ | 5,449,133 | $ | 2,911,660 | $ | 2,537,381 | $ | 92 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | Derivatives | | – | | – | | – | | – | Total | $ | – | $ | – | $ | – | $ | – |
As of March 31, 2022 | | Total | | Level 1 | | Level 2 | | Level 3 | | As of September 30, 2023 | | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | | (Unaudited) | Assets | | | | | | | | | | (In thousands) | Short-term investments | $ | 2,482,154 | $ | 2,482,154 | $ | – | $ | – | $ | 1,808,130 | $ | 1,807,142 | $ | 988 | $ | – | Fixed maturities - available for sale | | 2,821,092 | | 26,914 | | 2,794,086 | | 92 | | 2,472,128 | | 168,287 | | 2,303,782 | | 59 | Preferred stock | | 26,095 | | 26,095 | | – | | – | | 19,991 | | 19,991 | | – | | – | Common stock | | 46,212 | | 46,212 | | – | | – | | 42,045 | | 42,045 | | – | | – | Derivatives | | 7,474 | | 7,474 | | – | | – | | 22,854 | | 10,526 | | 12,328 | | – | Total | $ | 5,383,027 | $ | 2,588,849 | $ | 2,794,086 | $ | 92 | $ | 4,365,148 | $ | 2,047,991 | $ | 2,317,098 | $ | 59 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | Derivatives | | 587 | | – | | 587 | | – | | Embedded derivatives | | $ | 9,630 | $ | – | $ | – | $ | 9,630 | Total | $ | 587 | $ | – | $ | 587 | $ | – | $ | 9,630 | $ | – | $ | – | $ | 9,630 |
As of March 31, 2023 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | Assets | | | | | | | | | Short-term investments | $ | 1,809,441 | $ | 1,808,797 | $ | 644 | $ | – | Fixed maturities - available for sale | | 2,709,037 | | 251,832 | | 2,457,146 | | 59 | Preferred stock | | 21,982 | | 21,982 | | – | | – | Common stock | | 39,375 | | 39,375 | | – | | – | Derivatives | | 9,606 | | 4,295 | | 5,311 | | – | Total | $ | 4,589,441 | $ | 2,126,281 | $ | 2,463,101 | $ | 59 |
The fair value measurements for our assets using significant unobservable inputs (Level 3) were $0.1 million for both September 30, 2022 and March 31, 2022.42
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES 14.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Revenue Recognition Revenue Recognized in Accordance with Topic 606 ASC Topic 606, Revenue from Contracts with Customers (Topic 606), outlines a five-step model for entities to use in accounting for revenue arising from contracts with customers. The standard applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The standard also requires disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
We enter into contracts that may include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, and remitted to the applicable taxing authorities. We account for a contract under Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For contracts scoped into this standard, revenue is recognized when (or as) the performance obligations are satisfied by means of transferring goods or services to the customer as applicable to each revenue stream as discussed below. There were no material contract assets or liabilities as of September 30, 20222023 and March 31, 2022.2023. Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery. The performance obligations identified for this portfolio of contracts include moving and storage product sales, installation services and/or propane sales. Each of these performance obligations has an observable stand-alone selling price. We concluded that the performance obligations identified are satisfied at a point in time. The basis for this conclusion is that the customer does not receive the product/propane or benefit from the installation services until the related performance obligation is satisfied. These products/services being provided have an alternative use as they are not customized and can be sold/provided to any customer. In addition, we only have the right to receive payment once the products have been transferred to the customer or the installation services have been completed. Although product sales have a right of return policy, our estimated obligation for future product returns is not material to the financial statements at this time. Property management fees are recognized over the period that agreed-upon services are provided. The performance obligation for this portfolio of contracts is property management services, which represents a series of distinct days of service, each of which is comprised of activities that may vary from day to day. However, those tasks are activities to fulfill the property management services and are not separate promises in the contract. We determined that each increment of the promised service is distinct. This is because the customer can benefit from each increment of service on its own and each increment of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly affects either the entity’s ability to fulfill another day of service or the benefit to the customer of another day of service. As such, we concluded that the performance obligation is satisfied over time. Additionally, in certain contracts the Company has the ability to earn an incentive fee based on operational results. We measure and recognize the progress toward completion of the performance obligation on a quarterly basis using the most likely amount method to determine an accrual for the incentive fee portion of the compensation received in exchange for the property management service. The variable consideration recognized is subject to constraints due to a range of possible consideration amounts based on actual operational results. The amount accrued in the second quarter of fiscal 20232024 did not have a material effect on our financial statements. Other revenue consists of numerous services or rentals, of which U-Box contracts and service fees from Moving Help are the main components. The performance obligations identified for U-Box contracts are fees for rental, storage and shipping of U-Box containers to a specified location, each of which are distinct. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. The rental and storage obligations in U-Box contracts meet the definition of a lease in Topic 842, while the shipping obligation represents a contract with a customer accounted for under Topic 606. Therefore, we allocate the total transaction price between the performance obligations of storage fees and rental fees and the shipping fees on a standalone selling price basis. U-Box shipping fees are collected once the shipment U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS is in transit. Shipping fees in U-Box contracts are set at the initiation of the contract based on the shipping origin and destination, and the performance obligation is satisfied over time. U-Box shipping contracts span over a relatively short period of time, and the majority of these contracts begin and end within the same fiscal year. Moving HelpHelp® services fees are recognized in accordance with Topic 606. Moving HelpHelp® services are generated as we provide a neutral venue for the connection between the service provider and the customer for agreed upon services. We do not control the specified services provided by the service provider before that service is transferred to the customer.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Revenue Recognized in Accordance with Topic 842 TheASC Topic 842, Leases (Topic 842), the Company’s self-moving rental revenues meet the definition of a lease pursuant to the guidance in Topic 842 because those substitution rights do not provide an economic benefit to the Company that would exceed the cost of exercising the right. Please see Note 7,8, Leases, of the Notes to the Condensed Consolidated Financial Statements.
Self-moving equipment rentals are recognized over the contract period that trucks and moving equipment are rented. We offer two types of self-moving rental contracts, one-way rentals and in-town rentals, which have varying payment terms. Customer payment is received at the initiation of the contract for one-way rentals which covers an allowable limit for equipment usage. An estimated fee in the form of a deposit is received at the initiation of the contract for in-town rentals, and final payment is received upon the return of the equipment based on actual fees incurred. The contract price is estimated at the initiation of the contract, as there is variable consideration associated with ratable fees incurred based on the number of days the equipment is rented and the number of miles driven. Variable consideration is estimated using the most likely amount method which is based on the intended use of the rental equipment by the customer at the initiation of the contract. Historically, the variability in estimated transaction pricing compared to actual is not significant due to the relatively short duration of rental contracts. Each performance obligation has an observable stand-alone selling price. The input method of passage of time is appropriate as there is a direct relationship between our inputs and the transfer of benefit to the customer over the life of the contract. Self-moving rental contracts span a relatively short period of time, and the majority of these contracts began and ended within the same fiscal year. Self-storage revenues are recognized as earned over the contract period based upon the number of paid storage contract days. We lease portions of our operating properties to tenants under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers. The following table summarizes the minimum lease payments due from our customers and operating property tenants on leases for the next five years and thereafter: | | Years Ending March 31, | | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | | (Unaudited) | | | (In thousands) | | | | | | | | | | | | | | Self-moving equipment rentals | $ | 6,605 | $ | – | $ | – | $ | – | $ | – | $ | – | Property lease revenues | | 17,916 | | 11,354 | | 8,694 | | 6,937 | | 4,884 | | 39,491 | Total | $ | 24,521 | $ | 11,354 | $ | 8,694 | $ | 6,937 | $ | 4,884 | $ | 39,491 |
| | Years Ending September 30, | | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | | (Unaudited) | | | (In thousands) | | | | | | | | | | | | | | Self-moving equipment rentals | $ | 7,139 | $ | – | $ | – | $ | – | $ | – | $ | – | Property lease revenues | | 20,722 | | 14,491 | | 11,509 | | 8,275 | | 5,678 | | 37,972 | Total | $ | 27,861 | $ | 14,491 | $ | 11,509 | $ | 8,275 | $ | 5,678 | $ | 37,972 |
The amounts above do not reflect future rental revenue from the renewal or replacement of existing leases. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognized in Accordance with Other Topics Traditional life and Medicare supplement insurance premiums are recognized as revenue over the premium-paying periods of the contracts when due from the policyholders. For products where premiums are due over a significantly shorter duration than the period over which benefits are provided, such as our single premium whole life product, premiums are recognized when received and excess profits are deferred and recognized in relation to the insurance in force.in-force. Property and casualty insurance premiums are recognized as revenue over the policy periods. Interest and investment income are recognized as earned.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Net investment and interest income has multiple components. Interest income from bonds and mortgage notes are recognized when earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date. In the following tables, revenue is disaggregated by timing of revenue recognition: | | Quarter Ended September 30, | | Quarter Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | | | | | | | | | | Revenues recognized over time: | $ | 127,091 | $ | 108,038 | $ | 118,368 | $ | 127,091 | Revenues recognized at a point in time: | | 118,966 | | 110,924 | | 111,759 | | 118,966 | Total revenues recognized under ASC 606 | | 246,057 | | 218,962 | | 230,127 | | 246,057 | | | | | | | | | | Revenues recognized under ASC 842 | | 1,373,925 | | 1,355,934 | | 1,305,523 | | 1,373,925 | Revenues recognized under ASC 944 | | 52,373 | | 52,578 | | 49,472 | | 52,373 | Revenues recognized under ASC 320 | | 30,509 | | 36,780 | | 64,738 | | 30,509 | Total revenues | $ | 1,702,864 | $ | 1,664,254 | $ | 1,649,860 | $ | 1,702,864 |
| | Six Months Ended September 30, | | Six Months Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | | | | | | | | | | Revenues recognized over time: | $ | 230,285 | $ | 187,853 | $ | 209,683 | $ | 230,285 | Revenues recognized at a point in time: | | 245,321 | | 231,642 | | 229,352 | | 245,321 | Total revenues recognized under ASC 606 | | 475,606 | | 419,495 | | 439,035 | | 475,606 | | | | | | | | | | Revenues recognized under ASC 842 | | 2,661,956 | | 2,546,944 | | 2,527,839 | | 2,661,956 | Revenues recognized under ASC 944 | | 99,060 | | 98,892 | | 93,964 | | 99,060 | Revenues recognized under ASC 320 | | 64,082 | | 71,779 | | 129,330 | | 64,082 | Total revenues | $ | 3,300,704 | $ | 3,137,110 | $ | 3,190,168 | $ | 3,300,704 |
In the above tables, the revenues recognized over time include property management fees, the shipping fees associated with U-Box container rentals and a portion of other revenues. Revenues recognized at a point in time include self-moving equipment rentals, self-moving and self-storage products and service sales and a portion of other revenues. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We recognized liabilities resulting from contracts with customers for self-moving equipment rentals, self-storage revenues, U-Box revenues and tenant revenues, in which the length of the contract goes beyond the reported period end, although rental periods of the equipment, storage and U-Box contract are generally short-term in nature. The timing of revenue recognition results in liabilities that are reflected in deferred income on the balance sheet.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
15.16. Allowance for Credit Losses
Trade Receivables Moving and Storage has two ( 2 )(2) primary components of trade receivables, receivables from corporate customers and credit card receivables from customer sales and rental of equipment. For credit card receivables, the Company uses a trailing 13 monthsmonth average historical chargeback percentage of total credit card receivables to estimate a credit loss reserve. The Company rents equipment to corporate customers in which payment terms are 30 days. The Company performs ongoing credit evaluations of its customers and assesses each customer’s credit worthiness. In addition, the Company monitors collections and payments from its customers and maintains an allowance based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high-risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. Management believes that the historical loss information it has compiled is a reasonable base on which to determine expected credit losses for trade receivables because the composition of trade receivables as of that date is consistent with that used in developing the historical credit loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time). To adjust the historical loss rates to reflect the effects of these differences in current conditions and forecasted changes, management assigns a rating to each corporate customer which varies depending on the assessment of risk. Management estimated the loss rate at approximately 2.5% and 6%4% as of September 30, 20222023 and March 31, 2022,2023, respectively. Management developed this estimate based on its knowledge of past experience for which there were similar improvements in the economy. As a result, management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly, the allowance for expected credit losses as of September 30, 2022,2023 and March 31, 2023 was $ 3.1 million.$4.4 million and $3.8 million, respectively. Accrued Interest Receivable Accrued interest receivables on available for sale securities totaled $ 28.5$28.7 million, and $29.6 million as of June 30, 2023 and December 31, 2022, respectively and are excluded from the estimate of credit losses. As outlined in subtopic 326-20-30-5A, weWe have elected not to measure an allowance on accrued interest receivables as our practice is to write off the uncollectible balance in a timely manner. Furthermore, we have elected to write off accrued interest receivables by reversing interest income (in accordance with subtopic 326-20-35-8A).income.
Mortgage loans, netLoans, Net Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at amortized cost. Modeling for the Company’s mortgage loans is based on inputs most highly correlated to defaults, including loan-to-value, occupancy, and payment history. Historical credit loss experience provides additional support for the estimation of expected credit losses. In assessing the credit losses, the portfolio is reviewed on a collective basis, using loan-specific cash flows to determine the fair value of the collateral in the event of default. Adjustments to this analysis are made to assess loans with a loan-to-value of 65% or greater. These loans are evaluated on an individual basis and loan specific risk characteristics such as occupancy levels, expense, income growth and other relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS When management determines that credit losses are expected to occur, an allowance for expected credit losses based on the fair value of the collateral is recorded. Reinsurance recoverablesRecoverables Reinsurance recoverables on paid and unpaid benefits was less than 1% of the total assets as of June 30, 20222023 which is immaterial based on historical loss experience and high credit rating of the reinsurers.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Premium receivablesReceivables Premium receivables were $ 4.3$7.0 million and $4.1 million as of June 30, 2023 and December 31, 2022, respectively, in which the credit loss allowance is immaterial based on our ability to cancel the policy if the policyholder does not pay premiums. The following details the changes in the Company’s reserve allowance for credit losses for trade receivables, fixed maturities and investments, other: | | Allowance for Credit Losses | | Allowance for Credit Losses | | | Trade Receivables | | Investments, Fixed Maturities | | Investments, other | | Total | | Trade Receivables | | Investments, Fixed Maturities | | Investments, other | | Total | | | (Unaudited) | | (Unaudited) | | | (in thousands) | | (in thousands) | Balance as of March 31, 2021 | $ | 4,421 | $ | 1,320 | $ | 501 | $ | 6,242 | | Provision for (reversal of) credit losses | | 4,228 | | (1,260) | | – | | 2,968 | | Write-offs against allowance | | – | | – | | – | | – | | Recoveries | | – | | – | | – | | – | | Balance as of March 31, 2022 | $ | 8,649 | $ | 60 | $ | 501 | $ | 9,210 | $ | 8,649 | $ | 60 | $ | 501 | $ | 9,210 | Provision for (reversal of) credit losses | | (5,506) | | 1,948 | | 4 | | (3,554) | | (4,860) | | 2,041 | | 16 | | (2,803) | Write-offs against allowance | | – | | – | | – | | – | | – | | – | | – | | – | Recoveries | | – | | – | | – | | – | | – | | – | | – | | – | Balance as of September 30, 2022 | $ | 3,143 | $ | 2,008 | $ | 505 | $ | 5,656 | | Balance as of March 31, 2023 | | $ | 3,789 | $ | 2,101 | $ | 517 | $ | 6,407 | Provision for (reversal of) credit losses | | | 578 | | (429) | | 300 | | 449 | Write-offs against allowance | | | – | | – | | – | | – | Recoveries | | | – | | – | | – | | – | Balance as of September 30, 2023 | | $ | 4,367 | $ | 1,672 | $ | 817 | $ | 6,856 |
16. Subsequent Events
Background of the Independent Special Committee
The Board of Directors (the “Board”) created an Independent Special Committee (the “Committee”) to consider various matters and actions. The Committee retained outside advisors to help examine multiple options aimed at enhancing the marketability and liquidity of the Company’s stock. The Committee paid particular attention to actions intended to make stock ownership more inclusive and accessible for retail investors, including team members and customers of the Company. The Committee approved the following actions.
Creation of the Series N Non-Voting Common Stock
The Committee authorized the creation of a new series of Common Stock, designated as Series N Non-Voting Common Stock (the “Series N Common Stock”). The Series N Common Stock will have a par value of $ 0.001 per share. Application to the Nasdaq Global Select Market has been made to list the new Series N Common Stock under the ticker symbol “Nasdaq: UHALB”.Shares of the Company’s outstanding common stock, $ 0.25 par value (the “Voting Common Stock”) will continue to trade under the symbol “Nasdaq: UHAL.”
9-for-1 Stock Dividend Involving Non-Voting Common Stock
The Committee approved issuance of shares of the Non-Voting Common Stock through a stock dividend, on a 9-for-1 basis , to all existing holders of the Company’s Voting Common Stock. The stock dividend is intended to have the same general effects as a 10-for-1 stock split.
The shares of Non-Voting Common Stock will be distributed after the close of trading on, or about, November 9, 2022 to stockholders of record of Voting Common Stock at the close of business on November 3, 2022. We anticipate trading of the 176,470,092 shares of Non-Voting Common Stock to begin on November 10, 2022.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Name Change
The Committee approved changing the company name of AMERCO to U-Haul Holding Company to help alleviate any perceived disconnect by institutional or retail investors alike. We intend to make this name change by the end of the calendar year 2022.
Dividend Policy
In response to the Committee’s recommendation to consider a dividend policy, the Board adopted a dividend policy for the new Series N Common Stock.
Series N Non-Voting Common Stock: Unless the Board in its sole discretion determines otherwise, it shall be the policy of the Company to declare and pay a quarterly cash dividend on each share of the Company’s Series N Non-Voting Common Stock, in the amount of $ 0.04 per share, commencing with the third quarter of fiscal year 2023.
17. Accounting Pronouncements Adoption of new Accounting Pronouncements On April 1, 2023, the Company adopted ASU 2018-12 which is applicable to Oxford. The Company adopted ASU 2018-12 effective April 1, 2023 and used the modified retrospective method with a transition date of April 1, 2021. The updated accounting guidance required changes to the measurement and disclosure of long-duration contracts. For the Company, this includes all life insurance products, annuities, Medicare supplement products and our long-term care business. Entities will be required to review, and update if there is a change to cash flow assumptions (including morbidity and persistency) at least annually, and to update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in the Company's results of operations and the effect of changes in discount rate assumptions will be recorded in other comprehensive income. The most significant impact will be the effect of updating the discount rate assumption quarterly to reflect an upper-medium grade fixed-income instrument yield, rather than Oxford Life’s expected investment portfolio yield. This will be partially offset by the de-recognition of cumulative adjustments to DAC associated with unrealized gains and losses associated with long-duration contracts. The Company uses a published spot rate curve constructed from “A”-rated U.S. dollar denominated corporate bonds matched to the duration of the corresponding insurance liabilities, to calculate discount rates. The Company groups its long-duration contracts into calendar year cohorts based on the contract issue date. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DAC and other capitalized costs such as unearned revenue are amortized on a constant level or straight-line basis over the expected term of the contracts. Under ASU 2018-12, the annual amortization of DAC in our Consolidated Statements of Operations will differ from previous trends due to: (1) the requirement to no longer defer renewal commissions until such year as the commissions are actually incurred, (2) the requirement to no longer accrue and amortize interest on our DAC balances, and (3) the modification of the method for amortizing DAC including the updating of assumptions. For business with deferrals of renewal commissions, as is the case with our final expense life insurance policies, the expected amortization rate, as a percentage of premium, for certain blocks of business will no longer be level but will increase over the period of time during which commissions are deferred. The decrease in amortization in the near term will primarily impact our life insurance line of business. Upon adoption, the Company made adjustments to AOCI for the removal of cumulative adjustments to DAC associated with unrealized gains and losses previously recorded in AOCI. In total, we expect the impact on net earnings, largely from the decrease in amortization, to be immaterial during fiscal 2024, but could become material with a large increase in sales. Market risk benefits, which are contracts or contract features that provide protection to the policyholder from capital market risk and expose the Company to other-than-nominal capital market risk, are measured at fair value.Market risk benefits are contracts or contract features that guarantee benefits, such as guaranteed life withdrawal benefits, in addition to an account balance which expose insurance companies to other than nominal capital market risk and protect the contract holder from the same risk. Certain contracts or contract features to be identified as market risk benefits were accounted for as embedded derivatives and measured at fair value, while others transitioned to fair value measurement upon the adoption of ASU 2018-12. Also in consideration of market risk benefits, upon adoption, there were impacts to (1) AOCI for the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date and (2) retained earnings for the difference between fair value and carrying value at the transition date, excluding the changes in the instrument-specific credit risk. The requirement to review, and update if there is a change, cash flow assumptions at least annually is expected to change the pattern of earnings being recognized. Adoption significantly expanded the Company’s disclosures, and will impact systems, processes, and controls. While the requirements of the new guidance represent a material change from existing GAAP, the accounting adoption had no economic impact on the cash flows of our business nor influence on our business model of providing basic mortality and longevity protection-oriented products to the underserved senior market. In addition, it did not impact our statutory earnings, statutory capital, or capital management philosophies. The following tables present the effect of the adoption of ASU 2018-12 on selected consolidated balance sheet data for the fiscal years ended March 31, 2023 and 2022. | | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Total Assets | | | | | Prior to adoption | $ | 18,124,648 | $ | 17,299,581 | Effect of adoption: | | | | | Derecognition of shadow DAC | | (25,141) | | 26,131 | Re-measurement due to discount rate | | – | | – | Other adjustments | | 1,227 | | 1,471 | Subtotal | $ | (23,914) | $ | 27,602 | | | | | | After adoption | $ | 18,100,734 | $ | 17,327,183 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Total Liabilities | | | | | Prior to adoption | $ | 11,596,313 | $ | 11,347,089 | Effect of adoption: | | | | | Deferred income tax adjustment on Shadow removal | | (5,280) | | 5,488 | Re-measurement due to discount rate | | (1,626) | | 87,258 | Deferred income tax adjustment on discount rate | | 342 | | (18,324) | Other adjustments | | 6,794 | | 8,511 | Subtotal | $ | 230 | $ | 82,933 | | | | | | After adoption | $ | 11,596,543 | $ | 11,430,022 |
| | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Accumulated other comprehensive income (loss) | | | | | Prior to adoption | $ | (267,046) | $ | 46,384 | Effect of adoption: | | | | | Derecognition on shadow DAC (tax effect) | | (19,861) | | 20,644 | Re-measurement due to discount rate | | 1,626 | | (87,258) | Re-measurement due to discount rate (tax effect) | | (342) | | 18,324 | Other adjustments | | – | | – | Subtotal | $ | (18,577) | $ | (48,290) | | | | | | After adoption | $ | (285,623) | $ | (1,906) |
| | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Total Stockholders' equity | | | | | Prior to adoption | $ | 6,528,335 | $ | 5,952,492 | Effect of adoption: | | | | | Derecognition on shadow DAC (tax effect) | | (19,861) | | 20,644 | Re-measurement due to discount rate (tax effect) | | 1,284 | | (68,934) | Other adjustments | | (5,567) | | (7,042) | Subtotal | $ | (24,144) | $ | (55,332) | | | | | | After adoption | $ | 6,504,191 | $ | 5,897,160 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | Year Ended March 31, 2023 | | | As previously reported | | Adoption impact | | As adjusted | | | (Unaudited) | | | (In thousands) | | | | | | | | Deferred policy acquisition costs, net | $ | 152,377 | | (23,914) | $ | 128,463 | Total assets | | 18,124,648 | | (23,914) | | 18,100,734 | Policy benefits and losses, claims and loss expenses payable | | 875,034 | | 5,168 | | 880,202 | Deferred income taxes, net | | 1,334,427 | | (4,938) | | 1,329,489 | Total liabilities | | 11,596,313 | | 230 | | 11,596,543 | Accumulated other comprehensive loss | | (267,046) | | (18,577) | | (285,623) | Retained earnings | | 7,008,715 | | (5,567) | | 7,003,148 | Total stockholders' equity | | 6,528,335 | | (24,144) | | 6,504,191 | Total liabilities and stockholders' equity | | 18,124,648 | | (23,914) | | 18,100,734 |
| | April 1, 2021 | | March 31, 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Deferred policy acquisition costs, net | $ | 131,187 | $ | 89,749 | Total assets | | 14,693,044 | | 14,651,606 | Policy benefits and losses, claims and loss expenses payable | | 1,040,951 | | 909,701 | Deferred income taxes, net | | 1,182,123 | | 1,199,280 | Total liabilities | | 9,846,608 | | 9,732,515 | Accumulated other comprehensive income | | 42,319 | | 106,857 | Retained earnings | | 5,017,451 | | 5,025,568 | Total stockholders' equity | | 4,846,436 | | 4,919,091 | Total liabilities and stockholders' equity | | 14,693,044 | | 14,651,606 |
The following tables present the balances of and changes in deferred acquisition costs, future policy benefits and market risk benefits and balances amortized on a basis consistent with DAC on April 1, 2021 due to the adoption of ASU 2018-12 by Oxford. Deferred Policy Acquisition Costs | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, end of year March 31, 2021 | $ | 15,654 | $ | 64,552 | $ | 9,543 | $ | 89,749 | Adjustments for removal of related balances in accumulated other comprehensive income | | 41,438 | | – | | – | | 41,438 | Adjusted balance, beginning of year April 1, 2021 | $ | 57,092 | $ | 64,552 | $ | 9,543 | $ | 131,187 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future Policy Benefit | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, end of year March 31, 2021 | $ | 8,370 | $ | 310,311 | $ | 18,341 | $ | 337,022 | Change in discount rate assumptions | | 2,307 | | 115,978 | | 4,847 | | 123,132 | Change in cash flow assumptions, effect of net premiums exceeding gross premiums | | – | | 1,747 | | – | | 1,747 | Change in cash flow assumptions, effect of decrease of the deferred profit liability | | – | | 2,580 | | – | | 2,580 | Adjusted balance, beginning of year April 1, 2021 | $ | 10,677 | $ | 430,616 | $ | 23,188 | $ | 464,481 |
Market Risk Benefits | | | | | | | | Deferred Annuities | | | | | | | | | (Unaudited) | | | | | | | | | (In thousands) | | | | | | | | | | Balance, end of year March 31, 2021 | | | | | | | $ | 7,339 | Adjustment for the difference between carrying amount and fair value, except for the difference due to instrument-specific credit risk | | | | | | | | 3,791 | Adjusted balance, beginning of year April 1, 2021 | | | | | | | $ | 11,130 |
| | | | | | Retained Earnings | | Accumulated Other Comprehensive Loss | | | | | | | (Unaudited) | | | | | | | (In thousands) | | | | | | | | | | Liability for future policy benefits | | | | | $ | (4,327) | $ | (123,132) | Market risk benefits | | | | | | (3,791) | | – | Deferred acquisition costs and related asset balances | | | | | | – | | 41,438 | Tax effect | | | | | | – | | 17,156 | Total | | | | | $ | (8,118) | $ | (64,538) |
Recent Accounting Pronouncements In August 2018,March 2023, the Financial Accounting Standards Board (“FASB”)FASB issued ASU 2018-12,2023-01, Targeted Improvements to the Accounting for Long-Duration ContractsLeases (Topic 842 – Common Control Arrangements (“ASU 2018-12”2023-01”). The amendmentsASU 2023-01, accounting for leasehold improvements, requires a lessee in this update require insurance companiesa common-control lease arrangement to annually review and updateamortize leasehold improvements that it owns over the assumptions used for measuringimprovements’ useful life to the liability under long-duration contracts, such as life insurance, disability income, and annuities. common control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The amendment prescribes standardized liability discount rate, consistency in measurement of market risk benefits, simplified amortization of deferred acquisition costs and enhanced disclosures. The amendments areis effective for fiscal years, and interim periods within those fiscal years beginning after December 31, 2020. In November 2020, FASB issued ASU 2020-11, Financial Services – Insurance (Topic 944), which deferred the effective date of ASU 2018-12 to years beginning after December 15, 2022.2023. We are currently in the process of evaluating the impact if any of the adoption of ASU 2018-12 2023-01 U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS on our financial statements; however,statements. 18. Deferred Policy Acquisition Costs, Net The following tables present a rollforward of deferred policy acquisition costs related to long-duration contracts for the adoptionsix-month periods ended September 30, 2023 and 2022.
| | Six Months Ended September 30, 2023 | | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, beginning of year | $ | 55,396 | $ | 66,954 | $ | 6,113 | $ | 128,463 | Capitalization | | 5,441 | | 2,212 | | 120 | | 7,773 | Amortization expense | | (9,631) | | (4,515) | | (725) | | (14,871) | Balance, end of period | $ | 51,206 | $ | 64,651 | $ | 5,508 | $ | 121,365 |
| | Six Months Ended September 30, 2022 | | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, beginning of year | $ | 56,175 | $ | 68,676 | $ | 8,718 | $ | 133,569 | Capitalization | | 10,468 | | 4,212 | | 220 | | 14,900 | Amortization expense | | (9,457) | | (3,872) | | (1,315) | | (14,644) | Balance, end of period | $ | 57,186 | $ | 69,016 | $ | 7,623 | $ | 133,825 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. Policy Benefits and Losses, Claims and Loss Expenses Payable The following tables present the balances and changes in the policy benefitsand a reconciliation of ASU 2018-12 will impact the statements of operations because the effect of any updatenet liability for future policy benefits to the assumptions we used at the inception of the contracts will be recorded in net income.liability for future policy benefits for Oxford. | Six Months Ended September 30, 2023 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands) | Present value of expected net premiums | | | | | | | | | | | | | | Balance, beginning of year | $ | 223,118 | $ | 196,569 | $ | 419,687 | Beginning balance at original discount rate | $ | 225,071 | $ | 212,454 | $ | 437,525 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experience | | (187) | | (5,644) | | (5,831) | Adjusted beginning of year balance | $ | 224,884 | $ | 206,810 | $ | 431,694 | Issuances | | 5,072 | | 77 | | 5,149 | Interest accrual | | 5,554 | | 4,096 | | 9,650 | Net premium collected | | (19,833) | | (13,357) | | (33,190) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 215,677 | $ | 197,626 | $ | 413,303 | Effect of changes in discount rate assumptions (AOCI) | | (1,650) | | (14,337) | | (15,987) | Balance, end of period | $ | 214,027 | $ | 183,289 | $ | 397,316 | | | | | | | | Present value of expected future policy benefits | | | | | | | | | | | | | | Balance, beginning of year | $ | 530,938 | $ | 210,054 | $ | 740,992 | Beginning balance at original discount rate | $ | 533,688 | $ | 226,510 | $ | 760,198 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experiences | | (565) | | (4,215) | | (4,780) | Adjusted beginning of year balance | $ | 533,123 | $ | 222,295 | $ | 755,418 | Issuances | | 5,211 | | 77 | | 5,288 | Interest accrual | | 13,166 | | 4,402 | | 17,568 | Benefit payments | | (27,720) | | (16,162) | | (43,882) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 523,780 | $ | 210,612 | $ | 734,392 | Effect of changes in discount rate assumptions (AOCI) | | 949 | | (14,760) | | (13,811) | Balance, end of period | $ | 524,729 | $ | 195,852 | $ | 720,581 | End of period, LFPB net | | | | | | 323,265 | Payout annuities and market risk benefits | | | | | | 30,685 | Life and annuity ICOS and IBNR / Reinsurance losses payable | | | | | | 10,101 | Life DPL / Other life and health | | | | | | 26,556 | Oxford end of period balance | | | | | | 390,607 | Moving and Storage balance | | | | | | 324,642 | Property and Casualty balance | | | | | | 150,148 | Policy benefit and losses, claims and loss expense balance, end of period | | | | | $ | 865,397 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES From time to time, new accounting pronouncements are issued by the FASB or the SEC that are adopted by us as of the specified effective date. Unless otherwise discussed, these ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore will have minimal, if any, impact on our financial position or results of operations upon adoption.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Six Months Ended September 30, 2022 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands) | Present value of expected net premiums | | | | | | | | | | | | | | Balance, beginning of year | $ | 280,371 | $ | 280,732 | $ | 561,103 | Beginning balance at original discount rate | $ | 242,741 | $ | 253,307 | $ | 496,048 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experience | | 748 | | 1,026 | | 1,774 | Adjusted beginning of year balance | $ | 243,489 | $ | 254,333 | $ | 497,822 | Issuances | | 14,083 | | 2,453 | | 16,536 | Interest accrual | | 6,037 | | 5,062 | | 11,099 | Net premium collected | | (21,946) | | (15,041) | | (36,987) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 241,663 | $ | 246,807 | $ | 488,470 | Effect of changes in discount rate assumptions (AOCI) | | 7,814 | | (7,959) | | (145) | Balance, end of period | $ | 249,477 | $ | 238,848 | $ | 488,325 | | | | | | | | Present value of expected future policy benefits | | | | | | | | | | | | | | Balance, beginning of year | $ | 672,254 | $ | 299,628 | $ | 971,882 | Beginning balance at original discount rate | $ | 552,109 | $ | 269,177 | $ | 821,286 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experiences | | 1,031 | | 1,713 | | 2,744 | Adjusted beginning of year balance | $ | 553,140 | $ | 270,890 | $ | 824,030 | Issuances | | 14,083 | | 2,453 | | 16,536 | Interest accrual | | 13,714 | | 5,391 | | 19,105 | Benefit payments | | (29,783) | | (17,653) | | (47,436) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 551,154 | $ | 261,081 | $ | 812,235 | Effect of changes in discount rate assumptions (AOCI) | | 25,907 | | (7,779) | | 18,128 | Balance, end of period | $ | 577,061 | $ | 253,302 | $ | 830,363 | End of period, LFPB net | | | | | | 342,038 | Payout annuities and market risk benefits | | | | | | 33,157 | Life and annuity ICOS and IBNR / Reinsurance losses payable | | | | | | 11,226 | Life DPL / Other life and health | | | | | | 37,130 | Oxford end of period balance | | | | | | 423,551 | Moving and Storage balance | | | | | | 348,854 | Property and Casualty balance | | | | | | 156,998 | Policy benefit and losses, claims and loss expense balance, end of period | | | | | $ | 929,403 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Six Months Ended September 30, 2023 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands, except for percentages and weighted average information) | | | | | | | | Expected gross premiums | | | | | | | Undiscounted balance | $ | 387,141 | $ | 331,852 | $ | 718,993 | Discounted balance at original discount rate | $ | 299,161 | $ | 256,658 | $ | 555,819 | Discounted balance at current discount rate | $ | 296,505 | $ | 239,939 | $ | 536,444 | | | | | | | | Expected policy benefits | | | | | | | Undiscounted balance | $ | 761,261 | $ | 273,079 | $ | 1,034,340 | Discounted balance at original discount rate | $ | 523,777 | $ | 210,612 | $ | 734,389 | Discounted balance at current discount rate | $ | 524,726 | $ | 195,852 | $ | 720,578 | | | | | | | | Mortality, lapses and morbidity | | | | | | | Mortality actual experience | | 5.02 | % | – | % | | Mortality expected experience | | 5.06 | % | – | % | | Lapses actual experience | | 1.87 | % | – | % | | Lapses expected experience | | 2.65 | % | – | % | | Morbidity actual experience | | – | % | 85.53 | % | | Morbidity expected experience | | – | % | 73.50 | % | | | | | | | | | Premiums and interest expense | | | | | | | Gross premiums | $ | 26,667 | $ | 18,432 | $ | 45,099 | Other premiums | | | | | | – | Total premiums | | | | | $ | 45,099 | Interest expense | $ | 7,612 | $ | 306 | $ | 7,918 | | | | | | | | Expected duration (persistency) of policies in-force (years) | | 6.9 | | 6.5 | | | | | | | | | | Weighted average original interest rate of the liability for future policy benefits | | 5.00 | % | 4.00 | % | | | | | | | | | Weighted average current interest rate of the liability for future policy benefits | | 5.00 | % | 5.00 | % | |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Six Months Ended September 30, 2022 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands, except for percentages and weighted average information) | | | | | | | | Expected gross premiums | | | | | | | Undiscounted balance | $ | 427,457 | $ | 434,063 | $ | 861,520 | Discounted balance at original discount rate | $ | 329,233 | $ | 333,001 | $ | 662,234 | Discounted balance at current discount rate | $ | 339,434 | $ | 325,323 | $ | 664,757 | | | | | | | | Expected policy benefits | | | | | | | Undiscounted balance | $ | 807,725 | $ | 342,371 | $ | 1,150,096 | Discounted balance at original discount rate | $ | 551,153 | $ | 261,081 | $ | 812,234 | Discounted balance at current discount rate | $ | 577,060 | $ | 253,302 | $ | 830,362 | | | | | | | | Mortality, lapses and morbidity | | | | | | | Mortality actual experience | | 5.07 | % | – | % | | Mortality expected experience | | 4.78 | % | – | % | | Lapses actual experience | | 2.04 | % | – | % | | Lapses expected experience | | 2.53 | % | – | % | | Morbidity actual experience | | – | % | 79.25 | % | | Morbidity expected experience | | – | % | 71.30 | % | | | | | | | | | Premiums and interest expense | | | | | | | Gross premiums | $ | 29,158 | $ | 21,703 | $ | 50,861 | Other premiums | | | | | | – | Total premiums | | | | | $ | 50,861 | Interest expense | $ | 7,677 | $ | 329 | $ | 8,006 | | | | | | | | Expected duration (persistency) of policies in-force (years) | | 7.1 | | 6.8 | | | | | | | | | | Weighted average original interest rate of the liability for future policy benefits | | 5.00 | % | 4.00 | % | | | | | | | | | Weighted average current interest rate of the liability for future policy benefits | | 1.00 | % | 1.00 | % | |
44
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables present the balances and changes in Liabilities from investment contracts account balances:
| | Six Months Ended September 30, 2023 | | | | | Deferred Annuities | | | (Unaudited) | | | (In thousands, except for the average credited rate) | Policyholder contract deposits account balance | | Beginning of year | $ | 2,398,884 | Deposits received | | 125,122 | Surrenders and withdrawals | | (146,647) | Benefit payments | | (20,761) | Interest credited | | 36,992 | Other | | – | End of period | $ | 2,393,590 | Weighted average credited rate | | 3.09 | Cash surrender value | $ | 2,062,233 |
| | Six Months Ended September 30, 2022 | | | | | Deferred Annuities | | | (Unaudited) | | | (In thousands, except for the average credited rate) | Policyholder contract deposits account balance | | Beginning of year | $ | 2,336,238 | Deposits received | | 169,008 | Surrenders and withdrawals | | (122,450) | Benefit payments | | (18,334) | Interest credited | | 25,566 | Other | | – | End of period | $ | 2,390,028 | Weighted average credited rate | | 2.16 | Cash surrender value | $ | 2,082,936 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations General We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with the overall strategy of AMERCO,U-Haul Holding Company, followed by a description of, and strategy related to, our operating segments to give the reader an overview of the goals of our businesses and the direction in which our businesses and products are moving. We then discuss our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Next, we discuss our results of operations for the second quarter and first six months of fiscal 2023,2024, compared with the second quarter and first six months of fiscal 2022,2023, which is followed by an analysis of liquidity changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources - Summary and Disclosures about Contractual Obligations and Commercial Commitments. We conclude this MD&A by discussing our current outlook for the remainder of fiscal 2023.2024. This MD&A should be read in conjunction with the other sections of this Quarterly Report, including the Notes to Condensed Consolidated Financial Statements. The various sections of this MD&A contain a number of forward-looking statements, as discussed under the caption, Cautionary Statements Regarding Forward-Looking Statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing or in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2022.2023. Many of these risks and uncertainties are beyond our control and our actual results may differ materially from these forward-looking statements. AMERCO,U-Haul Holding Company, a Nevada corporation, has a second fiscal quarter that ends on the 30thof September for each year that is referenced. Our insurance company subsidiaries have a second quarter that ends on the 30th of June for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 20222023 and 20212022 correspond to fiscal 2024 and 2023 and 2022 for AMERCO.U-Haul Holding Company.
Overall Strategy Our overall strategy is to maintain our leadership position in the United States and Canada “do-it-yourself” moving and storage industry. We accomplish this by providing a seamless and integrated supply chain to the “do-it-yourself” moving and storage market. As part of executing this strategy, we leverage the brand recognition of U-Haul®with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence. Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers and company operated locations in our network and expanding and taking advantage of our eMove®capabilities.network. Property and Casualty Insurance is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates. Life Insurance is focused on long term capital growth through direct writing and reinsuring of life insurance, Medicare supplement and annuity products in the senior marketplace. Description of Operating Segments AMERCO’sU-Haul Holding Company’s three reportable segments are:
- Moving and Storage, comprised of
AMERCO,U-Haul Holding Company, U-Haul, and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate; - Property and Casualty Insurance, comprised of Repwest and its wholly owned subsidiaries and ARCOA; and
- Life Insurance, comprised of Oxford and its wholly owned subsidiaries.
Moving and Storage Moving and Storage consists of the rental of trucks, trailers, portable moving and storage units, specialty rental items and self-storage spaces primarily to the household mover as well as sales of moving supplies, towing accessories and propane. Operations are conducted under the registered trade name U-Haul®throughout the United States and Canada. With respect to our truck, trailer, specialty rental items and self-storage rental business, we are focused on expanding our dealer and center network, which provides added convenience for our customers, and expands the selection and availability of rental equipment to satisfy the needs of our customers. U-Haul®branded self-moving related products and services, such as boxes, pads and tape, allow our customers to, among other things, protect their belongings from potential damage during the moving process. We are committed to providing a complete line of products selected with the “do-it-yourself” moving and storage customer in mind. uhaul.com®is an online marketplace that connects consumers to our operations as well as independent Moving Help®service providers and thousands of independent Self-Storage Affiliates. Our network of customer-rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services throughout the United States and Canada. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market. U-Haul’s mobile app, Truck Share 24/7, Skip-the-Counter Self-Storage rentals and Self-checkout for moving supplies provide our customers methods for conducting business with us directly via their mobile devices and also limiting physical exposure. Since 1945, U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the inventory of total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations has helped us to reduce our impact on the environment. Property and Casualty Insurance Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove®, Safetow®, Safemove Plus®, Safestor®andSafestor Mobile®protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haulrelated programs. Life Insurance Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies. Cybersecurity Incident On September 9, 2022, we announced that the Company was made aware of a data security incident involving U-Haul‘s information technology network. U-Haul detected a compromise of two unique passwords used to access U-Haul customers‘ information. U-Haul took immediate steps to contain the incident and promptly enhanced its security measures to prevent any further unauthorized access. U-Haul retained cybersecurity experts and incident response counsel to investigate the incident and implement additional security safeguards. The investigation determined that between November 5, 2021 and April 8, 2022, the threat actor accessed customer contracts containing customers’ names, dates of birth, and driver’s license or state identification numbers. None of U-Haul’s financial, payment processing or email systems were involved. U-Haul has notified impacted customers and relevant governmental authorities. Several class action lawsuits related to the incident have been filed against U-Haul. The lawsuits arehave been consolidated into one action in their early consolidation phasethe U.S. District Court for the District of Arizona and will be vigorously defended by the Company; however the outcome of such lawsuits cannot be predicted or guaranteed with any certainty.
Critical Accounting Policies and Estimates Please refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022,2023, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Impairment of Investments
Under the current expected credit loss model, a valuation allowance is recognized in earnings for credit losses. If we intend to sell a debt security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.
There was a $1.9 million net impairment charge associated with this allowance recorded for the first six months ended September 30, 2022.
Results of Operations AMERCOU-Haul Holding Company and Consolidated Entities
Quarter Ended September 30, 20222023 compared with the Quarter Ended September 30, 20212022 Listed below, on a consolidated basis, are revenues for our major product lines for the second quarter of fiscal 20232024 and the second quarter of fiscal 2022:2023: | | Quarter Ended September 30, | | Quarter Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Self-moving equipment rentals | $ | 1,162,025 | $ | 1,179,061 | $ | 1,069,405 | $ | 1,162,025 | Self-storage revenues | | 185,586 | | 153,485 | | 208,890 | | 185,586 | Self-moving and self-storage products and service sales | | 96,864 | | 92,191 | | 91,571 | | 96,864 | Property management fees | | 9,277 | | 8,747 | | 9,267 | | 9,277 | Life insurance premiums | | 25,456 | | 28,913 | | 22,498 | | 25,456 | Property and casualty insurance premiums | | 25,718 | | 22,499 | | 25,571 | | 25,718 | Net investment and interest income | | 30,509 | | 36,780 | | 64,738 | | 30,509 | Other revenue | | 167,429 | | 142,578 | | 157,920 | | 167,429 | Consolidated revenue | $ | 1,702,864 | $ | 1,664,254 | $ | 1,649,860 | $ | 1,702,864 |
Self-moving equipment rental revenues decreased $17.0$92.6 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022. 2023.Transactions, revenue and revenueaverage miles driven per transaction decreased.The declines were more pronounced for In-Town business increased but were offset by declines inour one-way business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet. Self-storage revenues increased $32.1$23.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. The average monthly number of occupied units increased by 14%7%, or 64,50038,046 units, during the second quarter of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelve months,quarter, we added approximately 5.40.9 million of new net rentable square feet, or an 11% increase, with approximately 1.5 million of that coming on during the second quarter of fiscal 2023.feet. Sales of self-moving and self-storage products and services increased $4.7decreased $5.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane offset by decreasespropane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Life insurance premiums decreased $3.5$3.0 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 20222023 due primarily to decreased life and Medicare supplement premiums.
Property and casualty insurance premiums increased $3.2decreased $0.1 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions.2023. Net investment and interest income decreased $6.3increased $34.2 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. Moving and Storage accounted for $13.6 million of the improvement due to an increase in interest rates on short-term deposits. Changes in the market value of unaffiliated equitycommon stocks held at our Property and Casualty Insurance subsidiary accounted for $8.5$6.7 million of the decrease for the second quarter.increase. Our Life Insurance subsidiaries investment income decreased $11.9increased $12.6 million primarily from lossesgains on derivatives used as hedges to fixed indexed annuities. This was partially offset by a $14.3 million increase from Moving and Storage due to an increase in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $24.9decreased $9.5 million during the first six monthssecond quarter of fiscal 2024, compared with the second quarter of fiscal 2023, compared with the same six months of fiscal 2022,caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program.
Listed below are revenues and earnings from operations at each of our operating segments for the second quarter of fiscal 20232024 and the second quarter of fiscal 2022.2023. The insurance companies’ second quarters ended June 30, 20222023 and 2021.2022. | | Quarter Ended September 30, | | Quarter Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Moving and storage | | | | | | | | | Revenues | $ | 1,636,858 | $ | 1,576,999 | $ | 1,565,578 | $ | 1,636,858 | Earnings from operations before equity in earnings of subsidiaries | | 514,943 | | 555,988 | | 401,704 | | 514,943 | Property and casualty insurance | | | | | | | | | Revenues | | 23,363 | | 29,539 | | 31,852 | | 23,363 | Earnings from operations | | 5,686 | | 15,189 | | 15,419 | | 5,686 | Life insurance | | | | | | | | | Revenues | | 45,696 | | 60,985 | | 55,522 | | 45,696 | Earnings from operations | | 1,852 | | 7,913 | | Earnings (losses) from operations | | | 5,608 | | (297) | Eliminations | | | | | | | | | Revenues | | (3,053) | | (3,269) | | (3,092) | | (3,053) | Earnings from operations before equity in earnings of subsidiaries | | (386) | | (389) | | (376) | | (386) | Consolidated results | | | | | | | | | Revenues | | 1,702,864 | | 1,664,254 | | 1,649,860 | | 1,702,864 | Earnings from operations | | 522,095 | | 578,701 | | 422,355 | | 519,946 |
Total costs and expenses increased $95.2$44.6 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. Operating expenses for Moving and Storage increased $114.2$24.1 million. Repair costsexpenses associated with the rental fleet experienced a $33.7$17.2 million increase during the quarter due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet.The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers.selling more retired trucks. Other increases included personnel, liability costs, non-rental equipmentproperty taxes, building maintenance and shippingutilities.Other operating costs including freight and payment processing decreased $20.5 million during the quarter. Depreciation expense associated with U-Box transactions.our rental fleet increased $11.1 million for the second quarter of fiscal 2024 compared with the second quarter of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment increased $28.3decreased $17.5 million from an increase inas resale values.values have decreased while the average cost of units being sold has increased. Depreciation expense associated with our rental fleet was $129.2 million and $125.4 million forWe increased the secondnumber of retired trucks sold compared to the same quarter of fiscal 2023 and 2022, respectively.last year. Depreciation expense on all other assets, largely from buildings and improvements, increased $6.0 million to $52.4$8.1 million. Net losses on the disposal or retirement of land and buildings increased $1.3decreased $0.2 million. Additional details are available in the following Moving and Storage section. As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased $56.6$97.6 million to $522.1$422.4 million for the second quarter of fiscal 2023,2024, compared with $578.7$519.9 million for the second quarter of fiscal 2022.2023. Interest expense for the second quarter of fiscal 20232024 was $57.2$63.9 million, compared with $39.5$57.2 million for the second quarter of fiscal 2022,2023, due to an increase in our outstanding debtaverage cost of $972.3debt. Income tax expense was $85.2 million infor the second quarter of fiscal 20232024, compared with the second quarter of fiscal 2022.
Income tax expense was $111.6 million for the second quarter of fiscal 2023, compared with $129.0 million for the second quarter of fiscal 2022.2023.
As a result of the above-mentioned items, earnings available to common stockholders were $352.0$273.5 million for the second quarter of fiscal 2023,2024, compared with $409.9$349.9 million for the second quarter of fiscal 2022.2023. Basic and diluted earnings per share for the second quarter of fiscal 2023 were $17.95, compared with $20.90 for the second quarter of fiscal 2022.61
The weighted average common shares outstanding basic and diluted were 19,607,788 for both the second quarter of fiscal 2023 and fiscal 2022.
Moving and Storage Quarter Ended September 30, 20222023 compared with the Quarter Ended September 30, 20212022 Listed below are revenues for our major product lines at Moving and Storage for the second quarter of fiscal 20232024 and the second quarter of fiscal 2022:2023: | | Quarter Ended September 30, | | Quarter Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Self-moving equipment rentals | $ | 1,163,376 | $ | 1,180,329 | $ | 1,070,688 | $ | 1,163,376 | Self-storage revenues | | 185,586 | | 153,485 | | 208,890 | | 185,586 | Self-moving and self-storage products and service sales | | 96,864 | | 92,191 | | 91,571 | | 96,864 | Property management fees | | 9,277 | | 8,747 | | 9,267 | | 9,277 | Net investment and interest income | | 15,077 | | 675 | | 28,520 | | 15,077 | Other revenue | | 166,678 | | 141,572 | | 156,642 | | 166,678 | Moving and Storage revenue | $ | 1,636,858 | $ | 1,576,999 | $ | 1,565,578 | $ | 1,636,858 |
Self-moving equipment rental revenues decreased $17.0$92.7 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022. 2023.Transactions, revenue and revenueaverage miles driven per transaction decreased.The declines were more pronounced for In-Town business increased but were offset by declines inour one-way business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet. Self-storage revenues increased $32.1$23.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. The average monthly number of occupied units increased by 14%7%, or 64,50038,046 units, during the second quarter of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelve months,quarter, we added approximately 5.40.9 million of new net rentable square feet, or an 11% increase, with approximately 1.5 million of that coming on during the second quarter of fiscal 2023.feet. We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 638 | | 568 | Square footage as of September 30 | | 53,303 | | 47,903 | Average monthly number of units occupied | | 540 | | 476 | Average monthly occupancy rate based on unit count | | 85.4% | | 84.3% | Average monthly square footage occupied | | 46,538 | | 41,743 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 691 | | 638 | Square footage as of September 30 | | 58,402 | | 53,303 | Average monthly number of units occupied | | 578 | | 540 | Average monthly occupancy rate based on unit count | | 84.2% | | 85.4% | End of September occupancy rate based on unit count | | 83.5% | | 84.8% | Average monthly square footage occupied | | 49,931 | | 46,538 |
Over the last twelve months we added approximately 5.45.1 million net rentable square feet of new storage to the system. This was a mix of approximately 1.4 million square feet of existing storage locations we acquired and 3.7 million square feet of new development. Sales of self-moving and self-storage products and services increased $4.7decreased $5.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane offset by decreasespropane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Net investment and interest income increased $14.4$13.4 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022,2023, due to increases in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $25.1decreased $10.0 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 20222023, caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program.
Total costs and expenses increased $100.9$42.0 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. Operating expenses increased $114.2$24.1 million. Repair costs associated with the rental fleet experienced a $33.7$17.2 million increase during the quarter due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet.The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers.selling more retired trucks. Other increases included personnel, liability costs, non-rental equipmentproperty taxes, building maintenance and shippingutilities.Other operating costs including freight and payment processing decreased $20.5 million during the quarter. Depreciation expense associated with U-Box transactions.our rental fleet increased $11.1 million for the second quarter of fiscal 2024 compared with the second quarter of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment increased $28.3decreased $17.5 million from an increase inas resale values.values have decreased while the average cost of units being sold has increased. Depreciation expense associated with our rental fleet was $129.2 million and $125.4 million forWe increased the secondnumber of retired trucks sold compared to the same quarter of fiscal 2023 and 2022, respectively.last year. Depreciation expense on all other assets, largely from buildings and improvements, increased $6.0 million to $52.4$8.1 million. Net losses on the disposal or retirement of land and buildings increased $1.3decreased $0.2 million. Additional details are available in the following Moving and Storage section. The components of depreciation, net of gains on disposals are as follows: | | Quarter Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Depreciation expense - rental equipment | $ | 140,341 | $ | 129,220 | Depreciation expense - non rental equipment | | 23,392 | | 21,546 | Depreciation expense - real estate | | 37,192 | | 30,895 | Total depreciation expense | $ | 200,925 | $ | 181,661 | | | | | | Gains on disposals of rental equipment | | (46,928) | $ | (64,312) | (Gain) loss on disposals of non-rental equipment | | 125 | | (31) | Total gains on disposals equipment | $ | (46,803) | $ | (64,343) | | | | | | Depreciation, net of gains on disposals | $ | 154,122 | $ | 117,318 | | | | | | Losses on disposals of real estate | $ | 1,715 | $ | 1,872 |
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage, before consolidation of the equity in the earnings of the insurance subsidiaries, decreased $41.1$113.2 million to $401.7 million for the second quarter of fiscal 2024, compared with $514.9 million for the second quarter of fiscal 2023, compared with $556.02023. Equity in the earnings of U-Haul Holding Company’s insurance subsidiaries was $16.9 million for the second quarter of fiscal 2022. Equity in the earnings of AMERCO’s insurance subsidiaries was $6.12024, compared with $3.9 million for the second quarter of fiscal 2023, compared with $18.3 million for the second quarter of fiscal 2022.2023.
As a result of the above-mentioned changes in revenues and expenses, consolidated earnings from operations for Moving and Storage decreased to $521.0$418.6 million for the second quarter of fiscal 2023,2024, compared with $574.3$518.8 million for the second quarter of fiscal 2022.2023. Property and Casualty Insurance Quarter Ended June 30, 20222023 compared with the Quarter Ended June 30, 20212022 Net premiums were $26.0$26.4 million and $23.4$26.0 million for the second quarters ended June 30, 20222023 and 2021,2022, respectively. A significant portion of Repwest’s premiums arewere from policies sold in conjunction with U-Haul rental transactions. The premium increasewritten corresponded with the increasedchange in moving and storage transactions at U-Haul during the same period. Net investment and interest income (loss) was ($2.6)$5.5 million and $6.2$(2.6) million for the second quarters ended June 30, 20222023 and 2021,2022, respectively. The main driver forof the decreasechange in net investment income was the $8.5 million decreaseincrease in the market value of unaffiliated equitycommon stocks. Net operatingOperating expenses were $11.6$12.1 million and $10.8$11.6 million for the second quarters ended June 30, 2023 and 2022, and 2021, respectively,respectively. The change was due to an increase in commissions offset by a decrease in loss adjusting fees.commissions.
Benefits and losses incurred were $6.1$4.2 million and $3.6$6.1 million for the second quarters ended June 30, 2023 and 2022, respectively. Benefits and 2021, respectively. The increase was due to unfavorable loss experience.losses incurred corresponded with the change in moving and storage transactions at U-Haul during the same period. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $5.7$15.4 million and $15.2$5.7 million for the second quarters ended June 30, 20222023 and 2021,2022, respectively.
Life Insurance Quarter Ended June 30, 20222023 compared with the Quarter Ended June 30, 20212022 Net premiums were $25.5$22.5 million and $28.9$25.5 million for the quarters ended June 30, 2023 and 2022, and 2021, respectively. Medicare Supplementsupplement premiums decreased $1.9$1.6 million from the policy decrements offset by premium rate increases. Life premiums decreased $1.5$1.2 million primarily from the decrease in sales of single premium life and final expense. Both decreases are due to policyholder lapses currently outweighing sales levels. Deferred annuity deposits were $83.2$81.4 million or $2.4$1.9 million below prior year and are accounted for on the balance sheet as deposits rather than premiums. Net investment income was $19.0$31.6 million and $30.9$19.0 million for the quarters ended June 30, 2023 and 2022, and 2021, respectively. The decrease was primarily due to $8.2 million of realized lossesRealized gain on derivatives used as economic hedges to fixed indexed annuities along with thewas $9.9 million. The change in the provision for expected credit losses that resulted in a decrease of $2.5 million. Additionally, net interest income and realized gains on invested assets decreased $1.2 million.$1.7 million additional increase to investment income. Net operatingOperating expenses were $5.6$4.7 million and $5.2$5.6 million for the quarters ended June 30, 20222023 and 2021,2022, respectively. The increase wasdecrease is primarily due to the increasereduction in administrative expenses offset by the decreased commissions on single premium lifefinal expense products due to decreased premiums.
Benefits and losses incurred were $31.3$38.3 million and $41.1$33.4 million for the quarters ended June 30, 20222023 and 2021,2022, respectively. Interest credited to policyholders decreased $6.9increased $10.1 million due to a reductionan increase in the interest credited rates on equity - indexed annuities driven by market fluctuations.annuities. Life benefits decreased $1.4 million$0.5 due to lower death claims related to COVID-19 and lower sales due to premium adjustments that took place in late 2021.sales. Medicare supplement benefits decreased by $1.3$2.0 million from the declined policies in force.in-force. Benefits on the annuities decreased $0.2$0.7 million. Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $7.0 million and $6.8 million for the quarters ended June 30, 2022 and 2021, respectively.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings (losses) from operations were $1.7$5.5 million and $7.8($0.4) million for the quarters ended June 30, 20222023 and 2021,2022, respectively. AMERCOU-Haul Holding Company and Consolidated Entities
Six Months Ended September 30, 20222023 compared with the Six Months Ended September 30, 20212022 Listed below on a consolidated basis are revenues for our major product lines for the first six months of fiscal 20232024 and the first six months of fiscal 2022:2023: | | Six Months Ended September 30, | | Six Months Ended September 30, | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Self-moving equipment rentals | $ | 2,252,800 | $ | 2,214,438 | $ | 2,068,611 | $ | 2,252,800 | Self-storage revenues | | 358,763 | | 290,878 | | 407,851 | | 358,763 | Self-moving and self-storage products and service sales | | 206,215 | | 197,076 | | 192,443 | | 206,215 | Property management fees | | 18,416 | | 17,196 | | 18,444 | | 18,416 | Life insurance premiums | | 51,237 | | 57,618 | | 45,629 | | 51,237 | Property and casualty insurance premiums | | 45,690 | | 39,368 | | 45,893 | | 45,690 | Net investment and interest income | | 64,082 | | 71,779 | | 129,330 | | 64,082 | Other revenue | | 303,501 | | 248,757 | | 281,967 | | 303,501 | Consolidated revenue | $ | 3,300,704 | $ | 3,137,110 | $ | 3,190,168 | $ | 3,300,704 |
Self-moving equipment rental revenues increased $38.4decreased $184.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Transactions, revenue and average miles driven per transaction decreased.The declines were more pronounced for both our In-Town and one-way markets increased as did revenue per transaction.business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet.
Self-storage revenues increased $67.9$49.1 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. The average monthly number of occupied units increased by 16%8%, or 73,20041,501 units, during the first six months of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelvefirst six months, we added approximately 5.42.0 million of new net rentable square feet, or an 11% increase, with approximately 2.2 million of that coming on during the first six months of fiscal 2023.feet. Sales of self-moving and self-storage products and services increased $9.1decreased $13.8 million for the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Life insurance premiums decreased $6.4$5.6 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 20222023 due primarily to decreased Medicare supplement premiums. Property and casualty insurance premiums increased $6.3$0.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period.2023. Net investment and interest income decreased $7.7increased $65.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Moving and Storage accounted for $36.0 million of the improvement due to an increase in interest rates on short-term deposits. Changes in the market value of unaffiliated equitycommon stocks held at our Property and Casualty Insurance subsidiary accounted for $12.3$10.7 million of the decrease for the six months. increase.Our Life Insurance subsidiaries investment income decreased $13.9increased $16.7 million primarily from a net loss of $9.7 milliongains on derivatives used as hedges to fixed indexindexed annuities. In addition, the change in the provision for expected credit losses resulted in a $3.0 million decrease to the investment income. This was partially offset by a $18.7 million increase from Moving and Storage due to an increase in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $54.7decreased $21.5 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022,2023, caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program. Listed below are revenues and earnings from operations at each of our operating segments for the first six months of fiscal 20232024 and the first six months of fiscal 2022.2023. The insurance companies’ first six months ended June 30, 20222023 and 2021.2022. | | Six Months Ended September 30 | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 3,160,456 | $ | 2,970,253 | Earnings from operations before equity in earnings of subsidiaries | | 996,560 | | 1,038,983 | Property and casualty insurance | | | | | Revenues | | 46,445 | | 52,995 | Earnings from operations | | 14,037 | | 24,421 | Life insurance | | | | | Revenues | | 99,799 | | 119,644 | Earnings from operations | | 3,425 | | 10,279 | Eliminations | | | | | Revenues | | (5,996) | | (5,782) | Earnings from operations before equity in earnings of subsidiaries | | (768) | | (774) | Consolidated results | | | | | Revenues | | 3,300,704 | | 3,137,110 | Earnings from operations | | 1,013,254 | | 1,072,909 |
| | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 3,025,091 | $ | 3,160,456 | Earnings from operations before equity in earnings of subsidiaries | | 788,395 | | 996,560 | Property and casualty insurance | | | | | Revenues | | 59,691 | | 46,445 | Earnings from operations | | 27,401 | | 14,037 | Life insurance | | | | | Revenues | | 111,203 | | 99,799 | Earnings from operations | | 6,964 | | 5,619 | Eliminations | | | | | Revenues | | (5,817) | | (5,996) | Earnings from operations before equity in earnings of subsidiaries | | (747) | | (768) | Consolidated results | | | | | Revenues | | 3,190,168 | | 3,300,704 | Earnings from operations | | 822,013 | | 1,015,448 |
Total costs and expenses increased $223.2$82.9 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Operating expenses for Moving and Storage increased $232.1$52.6 million. Repair costs associated with the rental fleet experienced a $65.8$46.8 million increase during the first six months of fiscal 20232024 due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet.The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers.selling more retired trucks. Other increases included personnel, liabilityproperty taxes, utilities and building maintenance.Other operating costs non-rental equipment maintenanceincluding freight and shippingpayment processing decreased $42.3 million during the quarter.
Depreciation expense associated with U-Box transactions.our rental fleet increased $19.8 million for the first six months of fiscal 2024 compared with the first six months of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment decreased $26.2 million as resale values have decreased while the average cost of units being sold has increased. We increased $42.3 million from an increase in resale values.Depreciation expense associated with our rental fleet was $255.7 million and $251.9 million for the first six monthsnumber of fiscal 2023 and 2022, respectively.retired trucks sold compared to the same quarter last year. Depreciation expense on all other assets, largely from buildings and improvements, increased $12.1 million to $104.1$14.8 million. Net losses on the disposal or retirement of land and buildings increased $8.1 million asdecreased $1.4 million. Additional details are available in the first six months of fiscal 2022 included a condemnation gain of $4.9 million.following Moving and Storage section. As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased $59.6$193.4 million to $1,013.3$822.0 million for the first six months of fiscal 2023,2024, as compared with $1,072.9$1,015.4 million for the first six months of fiscal 2022.2023. Interest expense for the first six months of fiscal 20232024 was $107.0$124.5 million, compared with $78.7$107.0 million for the first six months of fiscal 2022,2023, due to an increase in our outstanding debtaverage cost of $972.3debt. Income tax expense was $167.0 million infor the first six months of fiscal 20232024, compared with the first six months of fiscal 2022. Income tax expense was $218.7 million for the first six months of fiscal 2023, compared with $238.6 million for the first six months of fiscal 2022.2023.
As a result of the above-mentioned items, earnings available to common shareholdersstockholders were $686.0$530.3 million for the first six months of fiscal 2023,2024, compared with $755.1$688.3 million for the first six months of fiscal 2022. Basic and diluted earnings per common share for the first six months of fiscal 2023 were $34.99, compared with $38.51 for the first six months of fiscal 2022.
The weighted average common shares outstanding basic and diluted were 19,607,788 for both the first six months of fiscal 2023 and fiscal 2022.2023.
Moving and Storage Six Months Ended September 30, 20222023 compared with the Six Months Ended September 30, 20212022 Listed below are revenues for the major product lines at our Moving and Storage operating segment for the first six months of fiscal 20232024 and the first six months of fiscal 2022:2023: | | Six Months Ended September 30 | | Six Months Ended September 30 | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Self-moving equipment rentals | $ | 2,255,086 | $ | 2,216,542 | $ | 2,070,767 | $ | 2,255,086 | Self-storage revenues | | 358,763 | | 290,878 | | 407,851 | | 358,763 | Self-moving and self-storage products and service sales | | 206,215 | | 197,076 | | 192,443 | | 206,215 | Property management fees | | 18,416 | | 17,196 | | 18,444 | | 18,416 | Net investment and interest income | | 20,017 | | 1,355 | | 55,815 | | 20,017 | Other revenue | | 301,959 | | 247,206 | | 279,771 | | 301,959 | Moving and Storage revenue | $ | 3,160,456 | $ | 2,970,253 | $ | 3,025,091 | $ | 3,160,456 |
Self-moving equipment rental revenues increased $38.5decreased $184.3 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Transactions, revenue and average miles driven per transaction decreased. TransactionsThe declines were more pronounced for both our In-Town and one-way markets increased as did revenue per transaction.business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet.
Self-storage revenues increased $67.9$49.1 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. The average monthly number of occupied units increased by 16%8%, or 73,20041,501 units, during the first six months of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelvefirst six months, we added approximately 5.42.0 million of new net rentable square feet, or an 11% increase, with approximately 2.2 million of that coming on during the first six months of fiscal 2023.feet.
We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows: | | Six Months Ended September 30 | | Six Months Ended September 30 | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands, except occupancy rate) | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 638 | | 568 | | 691 | | 638 | Square footage as of September 30 | | 53,303 | | 47,903 | | 58,402 | | 53,303 | Average monthly number of units occupied | | 529 | | 456 | | 529 | | 529 | Average monthly occupancy rate based on unit count | | 85.0% | | 82.1% | | 83.5% | | 85.0% | End of September occupancy rate based on unit count | | | 83.5% | | 84.8% | Average monthly square footage occupied | | 45,692 | | 40,207 | | 49,279 | | 45,692 |
Over the last twelve months we added approximately 5.45.1 million net rentable square feet of new storage to the system. This was a mix of approximately 1.4 million square feet of existing storage locations we acquired and 3.7 million square feet of new development. Sales of self-moving and self-storage products and services increased $9.1decreased $13.8 million for the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Net investment and interest income increased $18.7$35.8 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022,2023, due to increases in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $54.8decreased $22.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022,2023, caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program. Total costs and expenses increased $232.6$72.8 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Operating expenses increased $232.1$52.6 million.Repair costs associated with the rental fleet experienced a $65.8$46.8 million increase during the first six months of fiscal 20232024 due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers. selling more retired trucks.Other increases included personnel, liabilityproperty taxes, utilities and building maintenance.Other operating costs non-rental equipment maintenanceincluding freight and shippingpayment processing decreased $42.3 million during the quarter. Depreciation expense associated with U-Box transactions.our rental fleet increased $19.8 million for the first six months of fiscal 2024 compared with the first six months of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment decreased $26.2 million as resale values have decreased while the average cost of units being sold has increased. We increased $42.3 million from an increase in resale values. Depreciation expense associated with our rental fleet was $255.7 million and $251.9 million for the first six monthsnumber of fiscal 2023 and 2022, respectively. retired trucks sold compared to the same quarter last year.Depreciation expense on all other assets, largely from buildings and improvements, increased $12.1 million to $104.1$14.8 million. Net losses on the disposal or retirement of land and buildings increased $8.1 million asdecreased $1.4 million. Additional details are available in the following Moving and Storage section.
The components of depreciation, net of gains on disposals for the first six months of fiscal 2022 included a condemnation gain of $4.9 million.2024 were as follows: | | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Depreciation expense - rental equipment | $ | 275,533 | $ | 255,741 | Depreciation expense - non rental equipment | | 45,694 | | 43,167 | Depreciation expense - real estate | | 73,173 | | 60,897 | Total depreciation expense | $ | 394,400 | $ | 359,805 | | | | | | Gains on disposals of rental equipment | $ | (102,735) | $ | (128,313) | (Gain) loss on disposals of non-rental equipment | | 271 | | (378) | Total gains on disposals equipment | $ | (102,464) | $ | (128,691) | | | | | | Depreciation, net of gains on disposals | $ | 291,936 | $ | 231,114 | | | | | | Losses on disposals of real estate | $ | 2,736 | $ | 4,179 |
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries decreased to $788.4 million for the first six months of fiscal 2024, compared with $996.6 million for the first six months of fiscal 2023, compared with $1,039.02023. Equity in the earnings of U-Haul Holding Company’s insurance subsidiaries was $27.1 million for the first six months of fiscal 2022. Equity in the earnings of AMERCO’s insurance subsidiaries was $13.72024, compared with $15.9 million for the first six months of fiscal 2023, compared with $27.4 million for the first six months of fiscal 2022.2023.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $1,010.3$815.5 million for the first six months of fiscal 2023,2024, compared with $1,066.4$1,012.5 million for the first six months of fiscal 2022.2023.
Property and Casualty Insurance Six Months Ended June 30, 20222023 compared with the Six Months Ended June 30, 20212022 Net premiums were $46.8$47.4 million and $40.8$46.8 million for the six months ended June 30, 20222023 and 2021,2022, respectively. A significant portion of Repwest’s premiums arecome from policies sold in conjunction with U-Haul rental transactions. The premium increasewritten corresponded with the increasedchange in moving and storage transactions at U-Haul during the same period. Net investment and interest income (loss) was ($0.3)$12.3 million and $12.2$(0.3) million for the six months ended June 30, 20222023 and 2021,2022, respectively. The main driver of the change in net investment income was the decreaseincrease in valuationthe market value of unaffiliated common stock of $12.3 million.stock. Net operatingOperating expenses were $21.8$23.4 million and $19.6$21.8 million for the six months ended June 30, 20222023 and 2021,2022, respectively. The change was due to an increase in commissions offset by a decrease inand loss adjusting fees.
Benefits and losses incurred were $10.5$8.7 million and $8.8$10.5 million for the six months ended June 30, 2023 and 2022, respectively. Benefits and 2021, respectively. The increase was due to unfavorable loss experience.losses incurred corresponded with the change in moving and storage transactions at U-Haul during the same period. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $14.0$27.4 million and $24.4$14.0 million for the six months ended June 30, 20222023 and 2021,2022, respectively. Life Insurance Six Months Ended June 30, 20222023 compared with the Six Months Ended June 30, 20212022 Net premiums were $51.2$45.6 million and $57.6$51.2 million for the six months ended June 30, 20222023 and 2021,2022, respectively. Medicare Supplementsupplement premiums decreased $3.8$3.3 million from the policy decrements offset by premium rate increases.decrements. Life premiums decreased $2.6$2.2 million primarily from the decrease in sales of single premium life and final expense. Deferred annuity deposits were $169.0$125.1 million or $15.4$43.9 million below prior year and are accounted for on the balance sheet as deposits rather than premiums.
Net investment income was $46.4$63.1 million and $60.3$46.4 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. The decrease was primarily due to $9.7 million of realized lossesRealized gain on derivatives used as economic hedges to fixed indexed annuities along with thewas $12.0 million current year-to-date. The change in the provision for expected credit losses that resulted in a decrease of $2.7 million. Additionally, netcurrent year-to-date $2.0 million additional increase to the investment income. Net interest income and realized gainsgain on the invested assets decreased $1.5 million.increased $2.6 million, primarily on bonds, and $1.2 million on mortgage loans. Benefits and losses incurredOperating expenses were $71.0$10.1 million and $83.1$10.7 million for the six months ended June 30, 2023 and 2022, respectively.
Benefits and 2021,losses incurred were $79.2 million and $68.8 million for the six months ended June 30, 2023 and 2022, respectively. Interest credited to policyholders decreased $7.4increased $13.4 million due to a reductionan increase in the interest credited rates on equity - indexed annuities driven by stock market fluctuations.annuities. Life benefits decreased $2.8$2.5 million due to lower death claims related to COVID-19 and lower sales due to premium adjustments that took place in late 2021.of new policies. Medicare supplement benefits decreased by $1.9$2.1 million from the declineddeclining policies in force.in-force. Amortization of DAC, SIA and VOBA were $14.6$14.9 million and $15.6$14.6 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. The decrease in DAC amortization was primarily associated with annuities.In addition, there was a steady decrease in Medicare supplement DAC Amortization from a decline in the in-force. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $3.2$6.7 million and $10.2$5.5 million for the six months ended June 30, 20222023 and 2021,2022, respectively. Liquidity and Capital Resources We believe our current capital structure is a positive factor that will enable us to pursue our operational plans and goals and provide us with sufficient liquidity for the foreseeable future. There are many factors that could affect our liquidity, including some of which are beyond our control, and there is no assurance that future cash flows and liquidity resources will be sufficient to meet our outstanding debt obligations and our other future capital needs.
As of September 30, 2022,2023, cash and cash equivalents totaled $3,065.1$2,145.6 million, compared with $2,704.1$2,060.5 million as of March 31, 2022.2023. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of September 30, 20222023 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were: | | Moving & Storage | | Property & Casualty Insurance (a) | | Life Insurance (a) | | Moving & Storage | | Property & Casualty Insurance (a) | | Life Insurance (a) | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Cash and cash equivalents | $ | 3,025,390 | $ | 11,196 | $ | 28,529 | $ | 2,068,790 | $ | 44,272 | $ | 32,069 | Other financial assets | | 204,671 | | 444,990 | | 2,803,275 | | 314,005 | | 436,100 | | 2,722,737 | Debt obligations | | 6,298,831 | | – | | – | | 6,436,800 | | – | | – | | | | | | | | | | | | | | (a) As of June 30, 2022 | | | | | | | | (a) As of June 30, 2023 | | | | | | | | (b) Excludes ($35,901) of debt issuance costs | | | | | | | |
As of September 30, 2022,2023, Moving and Storage had additional cash available under existing credit facilities of $150.0$486.1 million. The majority of invested cash at the Moving and Storage segment is held in government money market funds. Net cash provided by operating activities decreased $331.0$250.7 million in the first six months of fiscal 20232024 compared with the first six months of fiscal 2022. The decrease was primarily2023 due to reduced net earningsa decrease in operating profits combined with an increase in claim payments at Moving and the payment of $42.0 million in federal income tax in fiscal 2023 compared with the receipt of $243 million of federal income tax refunds in fiscal 2022.Storage. Net cash used in investing activities increased $92.5decreased $18.5 million in the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Purchases of property, plant and equipment increased $295.8$328.9 million, with fleet spending accounting for $256.2 million and real estate $49.0 million. Reinvestment in the rental fleet was less than our projection due to delays in receiving new equipment from our original equipment manufacturers during the first six months of fiscal 2023; however, the level of reinvestment in the rental fleet has increased in comparison to the first six months of fiscal 2022. Cash from the sales of property, plant and equipment increased $22.7$78.7 million largely due to fleet sales. For our insurance subsidiaries, net cash usedprovided in investing activities decreased $168.6increased $150.1 million due to a decrease in purchases in fixed maturity investments.investments and net cash provided by investing activities for Moving and Storage increased $127.7 million on short-term Treasury notes.
Net cash provided by financing activities decreased $442.8$57.7 million in the first six months of fiscal 2023,2024, as compared with the first six months of fiscal 2022.2023. This was due to a combination of increaseddecreased debt payments of $213.9$89.1 million, decreased finance lease repayments of $21.7$6.1 million, a decrease in cash from borrowings of $194.4$87.7 million, and a decrease in dividend payments of $5.5 million and an increase in net annuity depositswithdrawals from Life Insurance of $54.3$70.7 million. Liquidity and Capital Resources and Requirements of Our Operating Segments Moving and Storage To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. U-Haul estimates that during fiscal 2023,2024, the Company will reinvest in its rental equipment fleet approximately $760$870 million, net of equipment sales and excluding any lease buyouts. Through the first six months of fiscal 2023,2024, the Company invested, net of sales, approximately $393$569 million before any lease buyouts in its rental equipment fleet. Fleet investments in fiscal 20232024 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment, the availability of equipment from our original equipment manufacturers and the used-truck sales market. We anticipate that the fiscal 20232024 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options.
The Company has traditionally financedfunded the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations. The Company’s plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. For the first six months of fiscal 2023,2024, the Company invested $584$633 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2023,2024, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, and the identification and successful acquisition of target properties.properties and the availability of labor and materials.We are likely to maintain a high level of real estate capital expenditures in fiscal 2024. U-Haul's growth plan in self-storage also includes the expansion of the U-Haul Storage Affiliate program, which does not require significant capital. Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) at Moving and Storage were $1,005.9$1,256.1 million and $732.7$1,005.9 million for the first six months of fiscal 20232024 and 2022,2023, respectively. The components of our net capital expenditures are provided in the following table: | | Six Months Ended September 30 | | Six Months Ended September 30 | | | 2022 | | 2021 | | 2023 | | 2022 | | | (Unaudited) | | (Unaudited) | | | (In thousands) | | (In thousands) | Purchases of rental equipment | $ | 718,231 | $ | 564,331 | $ | 974,436 | $ | 718,231 | Purchases of real estate, construction and renovations | | 583,889 | | 444,334 | | 632,902 | | 583,889 | Other capital expenditures | | 33,408 | | 31,023 | | 57,049 | | 33,408 | Gross capital expenditures | | 1,335,528 | | 1,039,688 | | 1,664,387 | | 1,335,528 | Less: Sales of property, plant and equipment | | (329,611) | | (306,946) | | (408,279) | | (329,611) | Net capital expenditures | $ | 1,005,917 | $ | 732,742 | $ | 1,256,108 | $ | 1,005,917 |
Moving and Storage continues to hold significant cash and we believe has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage marketplace, pay dividends, repurchase shares of common stock or reduce existing indebtedness where possible.
Property and Casualty Insurance State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance’s assets are generally not available to satisfy the claims of AMERCOU-Haul Holding Company or its legal subsidiaries. We believe that stockholders’ equity at Property and Casualty Insurance remains sufficient, and we do not believe that its ability to pay ordinary dividends to AMERCOU-Haul Holding Company will be restricted per state regulations. Property and Casualty Insurance’s stockholder’s equity was $282.8$317.5 million and $296.1$294.5 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The decreaseincrease resulted from net earnings of $11.1$21.7 million and a decreasean increase in other comprehensive income of $24.4$1.2 million due to the decrease in the market value of its investment portfolio. Property and Casualty Insurance does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio. Life Insurance Life Insurance manages its financial assets to meet policyholder and other obligations, including investment contract withdrawals and deposits. Life Insurance’s net depositswithdrawals as of June 30, 20222023 were $29.1$41.6 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s assets are generally not available to satisfy the claims of AMERCOU-Haul Holding Company or its legal subsidiaries.
Life Insurance’s stockholder’s equity was $219.5$145.0 million and $440.9$132.2 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The decreaseincrease resulted from net earnings of $2.6$5.3 million and a decreasean increase in other comprehensive income of $224.0$7.5 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio. Outside of its membership in the Federal Home Loan Bank (“FHLB”) system, Life Insurance has not historically used debt or equity issues to increase capital and therefore has not had any significant direct exposure to capital market conditions other than through its investment portfolio. As of June 30, 2022,2023, Oxford had outstanding deposits of $60.0million in the FHLB.For a more detailed discussionFHLB with an availability of this deposit, please see Note 3, Borrowings,$76.7 million, for which Oxford pays fixed interest rates between 0.49% and 4.30% with maturities between March 30, 2024 and September 30, 2027. As of June 30, 2023, available-for-sale-investments held with the NotesFHLB totaled $93.9 million, of which $62.8 million were pledged as collateral to Condensed Consolidated Financial Statements.secure the outstanding advances. The balances of these advances are included within liabilities from investment contracts on the consolidated balance sheets. Cash Provided from Operating Activities by Operating Segments Moving and Storage Net cash provided from operating activities were $1,129.9$887.3 million and $1,472.3$1,129.9 million for the first six months of fiscal 2024 and 2023, and 2022, respectively. The decrease was primarilyrespectively, due to reduced net earnings and the payment of $42.0 milliona decrease in federal income taxoperating profits combined with an increase in fiscal 2023 compared with the receipt of $243 million of federal income tax refunds in fiscal 2022.claim payments. Property and Casualty Insurance Net cash provided by operating activities were $16.2$18.1 million and $13.9$16.2 million for the first six months ended June 30, 20222023 and 2021,2022, respectively. The increase was the result of changes in intercompany balances anddue to the timing of payables activity.activity within the normal course of business. Property and Casualty Insurance’s cash and cash equivalents and short-term investment portfolios amounted to $44.7$44.3 million and $41.7$27.2 million atas of June 30, 20222023 and December 31, 2021,2022, respectively. These balances reflect funds in transition from maturity proceeds to long termlong-term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow Property and Casualty Insurance to schedule cash needs in accordance with investment and underwriting proceeds. Life Insurance Net cash provided by operating activities were $42.1$32.1 million and $32.9$42.1 million for the first six months ended June 30, 20222023 and 2021,2022, respectively. The increasedecrease in operating cash flows was primarily due to timing of settlement of receivables for securities. This was offset by the decrease in premiums net of benefits and commissions.
In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through Life Insurance’s short-term portfolio and its membership in the FHLB. As of June 30, 20222023 and December 31, 2021,2022, cash and cash equivalents and short-term investments amounted to $28.5$32.1 million and $50.1$15.0 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs. Liquidity and Capital Resources - Summary We believe we have the financial resources needed to meet our business plans, including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs. As a result of the federal income tax provisions of the Coronavirus Aid, Relief and Economic Security Act, we have filed applicable forms with the Internal Revenue Service to carryback net operating losses. These refund claims total approximately $366 million, of which we have received approximately $243 million and arewith the remaining amount reflected in Prepaidprepaid expense. These amounts are expected to provide us additional liquidity whenever received. It is possible future legislation could negatively impact our ability to receive these tax refunds.
Our borrowing strategy has primarily focused on asset-backed financing, rental equipment leases and private placement borrowings limited by the amount of unencumbered assets available. As part of this strategy, we seek to ladder maturities and fix interest rates. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. As of September 30, 2022,2023, we had available borrowing capacity under existing credit facilities of $150.0$486.1 million. Effective in October 2022, we have increased borrowing capacity under existing credit facilities to $465.0 million. ItWhile it is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit. Wecredit, we believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long term debt and borrowing capacity, please see Note 3, Borrowings,4, Notes, Loans and Finance Lease Payable, net, of the Notes to Condensed Consolidated Financial Statements. Disclosures about Contractual Obligations and Commercial Commitments Our estimates as to future contractual obligations have not materially changed from the disclosure included under the subheading Disclosures about Contractual Obligations and Commercial Commitments in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.2023. Fiscal 20232024 Outlook We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals and is likely to increase in fiscal 2023.2024. Revenue in the U-Move®program could be adversely impacted should we fail to execute in any of these areas. Should we be unable to acquire enough new rental equipment to properly rotate our fleet, repair and maintenance costs will continue to increase. Even if we execute our plans, we could see declines in revenues primarily due to unforeseen events including adverse economic conditions or heightened competition that is beyond our control. With respect to our storage business, we have added new locations and expanded existing locations. In fiscal 2023,2024, we are actively looking to complete current projects, increase occupancy in our existing portfolio of locations and acquire new locations. New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. It is likely spending on acquisitions and new development will increase in fiscal 2023.2024. We will continue to invest capital and resources in the U-Box®program throughout fiscal 2023.2024. Inflationary pressures may challenge our ability to maintain or improve upon our operating margin. Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove®, Safetow®, Safemove Plus®, Safestor®and Safestor Mobile®protection packages to U-Haul customers.
Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes. Interest Rate Risk The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations and one variable rate operating lease. We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in interest rates. We enter into these arrangements with counterparties that are significant financial institutions with whom we generally have other financial arrangements. We are exposed to credit risk should these counterparties not be able to perform on their obligations. Following is a summary of our interest rate swap agreements as of September 30, 2022:2023: | Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 61,587 | | $ | 2,957 | | 7/15/2022 | | 7/15/2032 | | 2.86% | | 1 Month SOFR | | 74,750 | | | 2,806 | | 8/1/2022 | | 8/1/2026 | | 2.72% | | 1 Month SOFR | | 74,250 | | | 2,745 | | 8/1/2022 | | 8/31/2026 | | 2.75% | | 1 Month SOFR |
| Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 59,107 | | $ | 5,083 | | 7/15/2022 | | 7/15/2032 | | 2.86% | | 1 Month SOFR | | 71,750 | | | 3,468 | | 8/1/2022 | | 8/1/2026 | | 2.72% | | 1 Month SOFR | | 71,250 | | | 3,399 | | 8/1/2022 | | 8/31/2026 | | 2.75% | | 1 Month SOFR | | 100,000 | | | 378 | | 8/31/2023 | | 8/31/2025 | | 4.71% | | 1 Month SOFR |
As of September 30, 2022,2023, we had $975.6$707.1 million of variable rate debt obligations. obligations, of this amount, $405.0 million is not fixed through interest rate swaps.If SOFRSecured Overnight Funding Rate (“SOFR”) were to increase 100 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by $7.7$4.9 million annually (after consideration of the effect of the above derivative contracts). Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Additionally, our insurance subsidiaries’ fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies’ asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates. We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholdercontract holder based on the change in the value of the S&P 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair market value on our balance sheet. AtAs of June 30, 20222023 and December 31, 2021,2022, these derivative hedges had a net market value of $1.7$10.5 million and $7.5$4.3 million, with notional amounts of $502.5$509.5 million and $416.7$465.7 million, respectively. These derivative instruments are included in Investments, other, on the condensed consolidated balance sheets. Although the call options are employed to be effective hedges against our policyholder obligations from an economic standpoint, they do not meet the requirements for hedge accounting under GAAP. Accordingly, the call options are marked to fair value on each reporting date with the change in fair value, plus or minus, included as a component of net investment and interest income. The change in fair value of the call options includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open contracts.
Foreign Currency Exchange Rate Risk The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 5.5%5.3% and 5.2%5.5% of our revenue was generated in Canada during the first six months of fiscal 20232024 and 2022,2023, respectively. The result of a 10.0%10% change in the value of the U.S. dollar relative to the Canadian dollar would not be material to net income. We typically do not hedge any foreign currency risk since the exposure is not considered material.
Cautionary Statements Regarding Forward-Looking Statements This Quarterly Report contains “forward-looking statements” regarding future events and our future results of operations. We may make additional written or oral forward-looking statements from time to time in filings with the SEC or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements may include, but are not limited to, the risk associated with COVID-19 or similar events on employeessystem members or customers,customers; the impact onof the economic environment oron demand offor our products and the cost and availability of debt and capital,capital; estimates of capital expenditures,expenditures; plans for future operations, products or services, financing needs, plans and strategies,strategies; our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us,us; liquidity and the availability of financial resources to meet our needs, goals and strategies,strategies; plans for new business, storage occupancy, growth rate assumptions, pricing, costs, and access to capital and leasing markets,markets; the impact of our compliance with environmental laws and cleanup costs,costs; our beliefs regarding our sustainable practices,sustainability practices; our used vehicle disposition strategy,strategy; the sources and availability of funds for our rental equipment and self-storage expansion and replacement strategies and plans,plans; our plan to expand our U-Haul® storage affiliate program,program; that additional leverage can be supported by our operations and business,business; the availability of alternative vehicle manufacturers,manufacturers; the availability and economics of electric vehicles for our rental fleet; our estimates of the residual values of our equipment fleet,fleet; our plans with respect to off-balance sheet arrangements,arrangements; our plans to continue to invest in the U-Box®program, program; the impact of interest rate and foreign currency exchange rate changes on our operations,operations; the sufficiency of our capital resources,resources; the sufficiency of capital of our insurance subsidiaries,subsidiaries; inflationary pressures that may challenge our ability to maintain or improve upon our operating margin,margin; and expectations regarding the potential impact to our information technology infrastructure and on our financial performance and business operations of technology, cybersecurity or data security breaches, including any related costs, fines or lawsuits, and our ability to continue ongoing operations and safeguard the integrity of our information technology infrastructure, data, and employee, customer and vendor information, as well as assumptions relating to the foregoing. The words “believe,” “expect,” “anticipate,” “plan,” “may,” “will,” “could,” “estimate,” “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could significantly affect results include, without limitation, the degree and nature of our competition; our leverage; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; the limited number of manufacturers that supply our rental trucks; our ability to effectively hedge our variable interest rate debt; that we are controlled by a small contingent of stockholders; fluctuations in quarterly results and seasonality; changes in, and our compliance with, government regulations, particularly environmental regulations and regulations relating to motor carrier operations; outcomes of litigation; our reliance on our third party dealer network; liability claims relating to our rental vehicles and equipment; our ability to attract, motivate and retain key employees; reliance on our automated systems and the internet; our credit ratings; our ability to recover under reinsurance arrangements and other factors described in our Annual Report on Form 10-K in Item 1A, Risk Factors, and in this Quarterly Report or the other documents we file with the SEC. The above factors, as well as other statements in this Quarterly Report and in the Notes to Condensed Consolidated Financial Statements, could contribute to or cause such risks or uncertainties, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized. We assume no obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by law.
Item 4. Controls and Procedures Attached as exhibits to this Quarterly Report are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented in the section titled Evaluation of Disclosure Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our "disclosuredisclosure controls and procedures"procedures (as such term is defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (“Disclosure Controls”) as of the end of the most recently completed fiscal quarter covered by this Quarterly Report. Our Disclosure Controls are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.September 30, 2023. Based upon the controlsthat evaluation, our CEO and CFO have concluded that as of September 30, 2023, our disclosure controls and procedures were not effective due to the endmaterial weakness in internal control over financial reporting described below.
Previously Disclosed Material Weaknesses and Remediation Plan
Two-Class Method of Earnings per Share. As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the period covered by this Quarterly Report, our Disclosure Controls were effective atfiscal year ended March 31, 2023, we implemented a reasonable assurance levelplan to address the material weakness related to the above stated design purposes.accounting for the two-class method of earnings per share associated with the recently issued UHAL.B common stock, including: Inherent Limitations on
- Redesigning the
Effectiveness of Controlsrelated control
- Conducting relevant training for personnel involved in the process and control functions
- Enhancing the procedures and control activity documentation
These actions were completed in advance of our year end close process as of March 31, 2023, and the redesigned control operated as planned as part of our March 31, 2023, year-end close process.
In conjunction with our interim period close process as of June 30, 2023, the redesigned control again operated as designed. Therefore, based upon our testing of the redesigned control over these instances, we have concluded that the material weakness related to the calculation of earnings per share using the two-class method associated with the recently issued UHAL.B common stock, has been remediated.
General Information Technology Controls. As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, we determined a material weakness existed as management did not fully design, implement and monitor general information technology controls in the areas of program change management, user access, segregation of duties, and cyber security for systems supporting substantially all of the Company’s internal control processes. A substantial portion of the Company’s controls are dependent upon the information derived from the information technology systems and therefore the dependent controls were concluded to be ineffective. Our management, includingunder the oversight of our CEOAudit Committee, has begun evaluating and CFO, does not expectimplementing new controls or redesigning controls to remediate the control deficiencies giving rise to this material weakness. These remediations measures have included:
- Assessing and formalizing the design of certain information technology policies
- Implementing controls and procedures relating to program change management, user access, segregation of duties and cyber security for systems supporting substantially all of the Company’s internal control processes
- Developing monitoring controls and protocols that will allow us to timely assess the design and operating effectiveness of the new and redesigned controls
- Strengthening of password policies
- Conducting more frequent end-user access reviews
- Enhancing the process for timely review of program management changes
We are committed to maintaining a strong internal control environment, and believe that these remediation actions represent significant improvements in our Disclosure Controls orcontrols under the Internal Control – Integrated Framework Issued by the Committee of Sponsoring Organizations of the Treadway Commission. As we continue to evaluate and work to improve our internal control over financial reporting, additional remediation measures may be required, which may require additional implementation time, or we may modify certain of our remediation measures. The material weakness related to the general information technology controls will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, becauseremediated, until the applicable controls operate for a sufficient
period of the inherent limitations in all control systems, no evaluation oftime and management has concluded, through testing, that these controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of our controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.operating effectively.
Changes in Internal Control Over Financial Reporting There
Other than the material weakness described above, there have not been any changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recently completed fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II Other information Item 1. Legal Proceedings The information regarding our legal proceedings in Note 8,9, Contingencies, of the Notes to Condensed Consolidated Financial Statements is incorporated by reference herein. Item 1A. Risk Factors We refer youThe following discussion of potential risks under the caption ‘We are highly dependent upon our automated systems and the Internet for managing our business’ contains material updates to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” of our most recent annual reportrisk factor described under the same heading in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022, which identify important2023.Other than the following updated risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” in our MD&A of this quarterly report on Form 10-Q. MD&A and the consolidated financial statements and related notes should be read in conjunction with such risks and other factors for a full understanding of our operations and financial conditions. The risks described in our Form 10-K and hereinfactor, we are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Below we set forthaware of any material updates to the risk factors containeddescribed in “Item 1A. Risk Factors” of our most recently filed Form 10-K:
The trading price for our outstanding Common Stock may continue to be volatile and the trading price for our newly distributed Series N Non-Voting Common Stock may also be volatile.
An Independent Special Committee of the Board of Directors authorized the creation of a new Series of Common Stock, designated as Series N Non-Voting Common Stock, par value of $0.001 per share (the “Non-Voting Common Stock”). This series of stock is in addition to our outstanding common stock, $0.25 par value (the “Voting Common Stock”). On November 9, 2022, each holder of our Voting Common Stock as of November 3, 2022 received nine shares of Non-Voting Common Stock for every outstanding share of Voting Common Stock through a stock dividend. The stock dividend is intended to have the same general effects as a 10-for-1 stock split. that Annual Report.
We expect thatare highly dependent upon our automated systems and the market priceInternet for the shares ofmanaging our Voting Common Stock will generally reflect the effect of a stock split once the dividend is distributed.Although we plan to list the Non-Voting Common Stock on the NASDAQ Global Select Market, we cannot predict whether, or to what extent, a liquid trading market will develop for the Non-Voting Common Stock. If a liquid trading market does not develop or if the Non-Voting Common Stock is not attractive to retail investors, including team members and customers of the Company, we may not achieve our objectives in creating this new class.business. The trading priceOur information systems are largely Internet-based, including our point-of-sale reservation system, payment processing and telephone systems. While our reliance on this technology lowers our cost of providing service and expands our stock has at times experienced substantial price volatility and may continueabilities to be volatile, including as a result of the distribution of shares of Non-Voting Common Stock. The market prices of our two series of stock and the allocation of value between the two may be volatile and their respective values may decline. The trading price of our Voting Common Stock and Non-Voting Common Stock may fluctuate widely in responsebetter serve customers, it exposes us to various factors, somerisks, including natural and man-made disasters, terrorist attacks and cyber-attacks. We have put into place extensive security protocols, backup systems and alternative procedures to mitigate these risks. However, disruptions or breaches, detected or undetected by us, for any period of which are beyond our control. These factors include, among others:
•Quarterly variationstime in any portion of these systems could adversely affect our results of operations or thoseand financial condition and inflict reputational damage.
In addition, the provision of service to our customers and the operation of our competitors. •Announcementsnetworks and systems involve the storage and transmission of proprietary information and sensitive or confidential data, including personal information of customers, system members and others. Our information technology systems may be susceptible to computer viruses, attacks by uscomputer hackers, malicious insiders or our competitorscatastrophic events. Hackers, acting individually or in coordinated groups, may also launch distributed denial of acquisitions, new products, significant contracts, commercial relationships,service attacks or capital commitments.
•Recommendations by securities analystsransom or changesother coordinated attacks that may cause service outages or other interruptions in earnings estimates.
•Announcements about our earnings that are not in line with analyst expectations.
•Announcements by our competitors of their earnings that are not in line with analyst expectations.
•Commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardlessaccess to our data. In addition, breaches in security could expose us, our customers, or the individuals affected, to a risk of its accuracy.loss or misuse of proprietary information and sensitive or confidential data.
•In 2022 and 2021, we experienced a cybersecurity incident, which is described in this Form 10-Q under the heading “Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operation – Cybersecurity Incident”. We have also experienced and continue to experience a significant increase in the number of attempted attacks on our technology systems, which could increase the likelihood that any of the risks described in this risk factor may be realized.The volume of shares of Voting Common Stocktechniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be difficult to detect for a long time and Non-Voting Common Stock available for public sale.often are not recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative or remedial measures.
Any of these occurrences could result in disruptions in our operations, the loss of existing or potential customers, damage to our brand and reputation, and litigation and potential liability for the Company. In addition, the cost and operational consequences of implementing further data or system protection measures could be significant, and our efforts to deter, identify, mitigate and/or eliminate any security breaches may not be successful.
Sales of Voting Common Stock and Non-Voting Common Stock by us or by our stockholders (including sales by our directors, executive officers, and other employees). •Short sales, hedging, and other derivative transactions on shares of our Voting Common Stock and Non-Voting Common Stock.
•The perceived values of Voting Common Stock and Non-Voting Common Stock relative to one another.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information Not applicable.During the quarter ended September 30, 2023, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as those terms are defined in Item 408 of Regulation S-K.
Item 6. Exhibits
The following documents are filed as part of this report: Exhibit Number | Description | Page or Method of Filing | 3.1 | Amended and Restated Articles of Incorporation of AMERCOU-Haul Holding Company | Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K, filed on June 9, 2016, file no. 1-11255 | 3.2 | Restated BylawsU-Haul Holding Company Certificate of AMERCODesignation of Series N Non-Voting Common Stock
| Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K,8-A, filed on September 5, 2013,October 24, 2022, file no. 1-11255 | 4.13.3
| Series UIC-9K, 10K, 11K, 12K, 13K, 14K, 15K, 18K, 19K, 20K and 21K Amendment to the Amended and Restated Forty-Second Supplemental Indenture, dated July 19, 2022, by and between AMERCO and U.S. Bank TrustBylaws of U-Haul Holding Company National Association as successor in interest to U.S. Bank National Association, as trustee.
| Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K filed on JulyDecember 19, 2022, file no. 1-11255.1-11255 | 4.23.4
| Series UIC-1L Amendment to the Amended and Restated Forty-Third Supplemental Indenture, dated July 19, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee.
Articles of Conversion/Exchange/Merger | Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K filed on JulyDecember 19, 2022, file no. 1-11255. | 4.3
| Series UIC-9L, 10L, and 11L Forty-Fifth Supplemental Indenture and Pledge and Security Agreement dated July 19, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee.
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on July 19, 2022 file no. 1-11255.
| 4.4
| Series UIC-9K, 10K, 11K, 12K, 13K, 14K and 15K Amendment to the Amendment to the Amended and Restated Forty-Second Supplement Indenture and Pledge and Security Agreement dated September 27, 2022 by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U. S Bank National Association, as trustee
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 27, 2022 file no. 1-11255.
| 4.5
| Series 12L, 13L, 14L, 15L, 16L, 17L, 18L, 19L, 20L and 21L Forty-Sixth Supplemental Indenture and Pledge and Security Agreement dated September 27, 2022, by and between AMERCO and U.S Bank Trust Company, National Association as successor in interest to U.S Bank National Association, as trustee
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 27, 2022 file no. 1-11255.1-11255
| 31.1 | Rule 13a-14(a)/15d-14(a) Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCOU-Haul Holding Company | Filed herewith |
31.2 | Rule 13a-14(a)/15d-14(a) Certificate of Jason A. Berg, Chief Financial Officer of AMERCOU-Haul Holding Company | Filed herewith | 32.1 | Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCOU-Haul Holding Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished herewith | 32.2 | Certificate of Jason A. Berg, Chief Financial Officer of AMERCOU-Haul Holding Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished herewith | 101.INS | Inline XBRL Instance Document | Filed herewith | 101.SCH | Inline XBRL Taxonomy Extension Schema | Filed herewith |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | Filed herewith | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | Filed herewith | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | Filed herewith | 104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101) | Filed herewith | | | |
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. AMERCOU-Haul Holding Company
Date: November 9, 20228, 2023 | | /s/ Edward J. Shoen | | | Edward J. Shoen | | | President and Chairman of the Board | | | (Principal Executive Officer) | | | | | | | | | | Date: November 9, 20228, 2023 | | /s/ Jason A. Berg | | | Jason A. Berg | | | Chief Financial Officer | | | (Principal Financial Officer) | | | | | | | | | | Date: November 9, 20228, 2023 | | /s/ Maria L. Bell | | | Maria L. Bell | | | Chief Accounting Officer | | | (Principal Accounting Officer) |
| | (All amounts are in thousands of U.S.
| | United States | | Canada | | Consolidated | | | (Unaudited) | | | (All amounts are in thousands of U.S. $'s) | Six Months Ended September 30, 2023 | | | | | | | Total revenues | $ | 3,020,489 | $ | 169,679 | $ | 3,190,168 | Depreciation and amortization, net of (gains) on disposals | | 309,398 | | 145 | | 309,543 | Interest expense | | 123,128 | | 1,413 | | 124,541 | Pretax earnings | | 675,514 | | 21,229 | | 696,743 | Income tax expense | | 160,630 | | 5,767 | | 166,397 | Identifiable assets | | 18,279,234 | | 742,216 | | 19,021,450 | | | | | | | | Six Months Ended September 30, 2022 | | | | | | | Total revenues | $ | 3,120,453 | $ | 180,251 | $ | 3,300,704 | Depreciation and amortization, net of (gains) on disposals | | 245,721 | | 4,216 | | 249,937 | Interest expense | | 105,425 | | 1,567 | | 106,992 | Pretax earnings | | 876,101 | | 30,788 | | 906,889 | Income tax expense | | 210,867 | | 7,811 | | 218,678 | Identifiable assets | | 17,515,009 | | 628,334 | | 18,143,343 |
amerco and consolidated subsidiariesU-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
notes to condensed consolidated financial statements – (continued)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12.13. Employee Benefit Plans
The components of the net periodic benefit costs with respect to postretirement benefits were as follows: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 331 | $ | 351 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 287 | | 227 | Other components | | 17 | | 53 | Total other components of net periodic benefit costs | | 304 | | 280 | Net periodic postretirement benefit cost | $ | 635 | $ | 631 |
| | Six Months Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 663 | $ | 701 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 574 | | 454 | Other components | | 34 | | 106 | Total other components of net periodic benefit costs | | 608 | | 560 | Net periodic postretirement benefit cost | $ | 1,271 | $ | 1,261 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 297 | $ | 331 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 368 | | 287 | Other components | | (4) | | 17 | Total other components of net periodic benefit costs | | 364 | | 304 | Net periodic postretirement benefit cost | $ | 661 | $ | 635 |
13.
| | Six Months Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | | | | | | Service cost for benefits earned during the period | $ | 594 | $ | 663 | Other components of net periodic benefit costs: | | | | | Interest cost on accumulated postretirement benefit | | 735 | | 574 | Other components | | (6) | | 34 | Total other components of net periodic benefit costs | | 729 | | 608 | Net periodic postretirement benefit cost | $ | 1,323 | $ | 1,271 |
14. Fair Value Measurements Certain assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three-tiered approach to valuation. Financial assets and liabilities are recorded at fair value and are classified and disclosed in one of the following three categories: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short-term investments are based on quoted market prices. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair values of investments available-for-sale long-term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values on interest rate swap contracts are based on using pricing valuation models which include broker quotes. Fair values of long-term investment and mortgage loans and notes on real estate are based on quoted market prices, dealer quotes or discounted cash flows.Fair values of reinsurance recoverables and trade receivables approximate their recorded value.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution. We have mortgage receivables,loans, which potentially expose us to credit risk. The portfolio of notesloans is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notesloans from individual or groups of notesloans in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings. Other investments, including short-term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value. The carrying values and estimated fair values for the financial instruments stated above and their placement in the fair value hierarchy are as follows: | | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | As of September 30, 2022 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (Unaudited) | Assets | | (In thousands) | Reinsurance recoverables and trade receivables, net | $ | 203,202 | $ | – | $ | – | $ | 203,202 | $ | 203,202 | Mortgage loans, net | | 424,633 | | – | | – | | 424,633 | | 417,894 | Other investments | | 123,565 | | – | | – | | 123,565 | | 123,565 | Total | $ | 751,400 | $ | – | $ | – | $ | 751,400 | $ | 744,661 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance leases payable | | 6,336,570 | | – | | 6,336,570 | | – | | 5,930,507 | Total | $ | 6,336,570 | $ | – | $ | 6,336,570 | $ | – | $ | 5,930,507 |
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | As of September 30, 2023 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (Unaudited) | Assets | | (In thousands) | Reinsurance recoverables and trade receivables, net | $ | 212,565 | $ | – | $ | – | $ | 212,565 | $ | 212,565 | Mortgage loans, net | | 550,913 | | – | | – | | 521,831 | | 521,831 | Other investments | | 88,712 | | – | | – | | 88,712 | | 88,712 | Total | $ | 852,190 | $ | – | $ | – | $ | 823,108 | $ | 823,108 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance leases payable | $ | 6,436,800 | $ | – | $ | 5,961,511 | $ | – | $ | 5,961,511 | Total | $ | 6,436,800 | $ | – | $ | 5,961,511 | $ | – | $ | 5,961,511 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | As of March 31, 2022 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (In thousands) | Assets | | | | | | | | | | | Reinsurance recoverables and trade receivables, net | $ | 229,343 | $ | – | $ | – | $ | 229,343 | $ | 229,343 | Mortgage loans, net | | 423,163 | | – | | – | | 423,163 | | 450,347 | Other investments | | 120,592 | | – | | – | | 120,592 | | 120,592 | Total | $ | 773,098 | $ | – | $ | – | $ | 773,098 | $ | 800,282 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance leases payable | | 6,059,713 | | – | | 6,059,713 | | – | | 5,875,781 | Total | $ | 6,059,713 | $ | – | $ | 6,059,713 | $ | – | $ | 5,875,781 |
| | Fair Value Hierarchy | | | Carrying | | | | | | | | Total Estimated | As of March 31, 2023 | | Value | | Level 1 | | Level 2 | | Level 3 | | Fair Value | | | (In thousands) | Assets | | | | | | | | | | | Reinsurance recoverables and trade receivables, net | $ | 189,498 | $ | – | $ | – | $ | 189,498 | $ | 189,498 | Mortgage loans, net | | 466,531 | | – | | – | | 444,957 | | 444,957 | Other investments | | 109,009 | | – | | – | | 109,009 | | 109,009 | Total | $ | 765,038 | $ | – | $ | – | $ | 743,464 | $ | 743,464 | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Notes, loans and finance leases payable | | 6,143,350 | | – | | 5,710,735 | | – | | 5,710,735 | Total | $ | 6,143,350 | $ | – | $ | 5,710,735 | $ | – | $ | 5,710,735 |
37
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
The following tables represent the financial assets and liabilities on the condensed consolidated balance sheets as of September 30, 20222023 and March 31, 20222023 that are measured at fair value on a recurring basis and the level within the fair value hierarchy. As of September 30, 2022 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (Unaudited) | Assets | | (In thousands) | Short-term investments | $ | 2,823,208 | $ | 2,821,751 | $ | 1,457 | $ | – | Fixed maturities - available for sale | | 2,552,311 | | 24,803 | | 2,527,416 | | 92 | Preferred stock | | 22,921 | | 22,921 | | – | | – | Common stock | | 40,526 | | 40,526 | | – | | – | Derivatives | | 10,167 | | 1,659 | | 8,508 | | – | Total | $ | 5,449,133 | $ | 2,911,660 | $ | 2,537,381 | $ | 92 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | Derivatives | | – | | – | | – | | – | Total | $ | – | $ | – | $ | – | $ | – |
As of March 31, 2022 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | Assets | | | | | | | | | Short-term investments | $ | 2,482,154 | $ | 2,482,154 | $ | – | $ | – | Fixed maturities - available for sale | | 2,821,092 | | 26,914 | | 2,794,086 | | 92 | Preferred stock | | 26,095 | | 26,095 | | – | | – | Common stock | | 46,212 | | 46,212 | | – | | – | Derivatives | | 7,474 | | 7,474 | | – | | – | Total | $ | 5,383,027 | $ | 2,588,849 | $ | 2,794,086 | $ | 92 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | Derivatives | | 587 | | – | | 587 | | – | Total | $ | 587 | $ | – | $ | 587 | $ | – |
As of September 30, 2023 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (Unaudited) | Assets | | (In thousands) | Short-term investments | $ | 1,808,130 | $ | 1,807,142 | $ | 988 | $ | – | Fixed maturities - available for sale | | 2,472,128 | | 168,287 | | 2,303,782 | | 59 | Preferred stock | | 19,991 | | 19,991 | | – | | – | Common stock | | 42,045 | | 42,045 | | – | | – | Derivatives | | 22,854 | | 10,526 | | 12,328 | | – | Total | $ | 4,365,148 | $ | 2,047,991 | $ | 2,317,098 | $ | 59 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | Embedded derivatives | $ | 9,630 | $ | – | $ | – | $ | 9,630 | Total | $ | 9,630 | $ | – | $ | – | $ | 9,630 |
As of March 31, 2023 | | Total | | Level 1 | | Level 2 | | Level 3 | | | (In thousands) | Assets | | | | | | | | | Short-term investments | $ | 1,809,441 | $ | 1,808,797 | $ | 644 | $ | – | Fixed maturities - available for sale | | 2,709,037 | | 251,832 | | 2,457,146 | | 59 | Preferred stock | | 21,982 | | 21,982 | | – | | – | Common stock | | 39,375 | | 39,375 | | – | | – | Derivatives | | 9,606 | | 4,295 | | 5,311 | | – | Total | $ | 4,589,441 | $ | 2,126,281 | $ | 2,463,101 | $ | 59 |
The fair value measurements for our assets using significant unobservable inputs (Level 3) were $0.1 million for both September 30, 2022 and March 31, 2022.42
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES 14.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Revenue Recognition Revenue Recognized in Accordance with Topic 606 ASC Topic 606, Revenue from Contracts with Customers (Topic 606), outlines a five-step model for entities to use in accounting for revenue arising from contracts with customers. The standard applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchanges and certain guarantees. The standard also requires disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
We enter into contracts that may include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of amounts collected from customers for taxes, such as sales tax, and remitted to the applicable taxing authorities. We account for a contract under Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For contracts scoped into this standard, revenue is recognized when (or as) the performance obligations are satisfied by means of transferring goods or services to the customer as applicable to each revenue stream as discussed below. There were no material contract assets or liabilities as of September 30, 20222023 and March 31, 2022.2023. Sales of self-moving and self-storage related products are recognized at the time that title passes and the customer accepts delivery. The performance obligations identified for this portfolio of contracts include moving and storage product sales, installation services and/or propane sales. Each of these performance obligations has an observable stand-alone selling price. We concluded that the performance obligations identified are satisfied at a point in time. The basis for this conclusion is that the customer does not receive the product/propane or benefit from the installation services until the related performance obligation is satisfied. These products/services being provided have an alternative use as they are not customized and can be sold/provided to any customer. In addition, we only have the right to receive payment once the products have been transferred to the customer or the installation services have been completed. Although product sales have a right of return policy, our estimated obligation for future product returns is not material to the financial statements at this time. Property management fees are recognized over the period that agreed-upon services are provided. The performance obligation for this portfolio of contracts is property management services, which represents a series of distinct days of service, each of which is comprised of activities that may vary from day to day. However, those tasks are activities to fulfill the property management services and are not separate promises in the contract. We determined that each increment of the promised service is distinct. This is because the customer can benefit from each increment of service on its own and each increment of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly affects either the entity’s ability to fulfill another day of service or the benefit to the customer of another day of service. As such, we concluded that the performance obligation is satisfied over time. Additionally, in certain contracts the Company has the ability to earn an incentive fee based on operational results. We measure and recognize the progress toward completion of the performance obligation on a quarterly basis using the most likely amount method to determine an accrual for the incentive fee portion of the compensation received in exchange for the property management service. The variable consideration recognized is subject to constraints due to a range of possible consideration amounts based on actual operational results. The amount accrued in the second quarter of fiscal 20232024 did not have a material effect on our financial statements. Other revenue consists of numerous services or rentals, of which U-Box contracts and service fees from Moving Help are the main components. The performance obligations identified for U-Box contracts are fees for rental, storage and shipping of U-Box containers to a specified location, each of which are distinct. A contract may be partially within the scope of Topic 606 and partially within the scope of other topics. The rental and storage obligations in U-Box contracts meet the definition of a lease in Topic 842, while the shipping obligation represents a contract with a customer accounted for under Topic 606. Therefore, we allocate the total transaction price between the performance obligations of storage fees and rental fees and the shipping fees on a standalone selling price basis. U-Box shipping fees are collected once the shipment U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS is in transit. Shipping fees in U-Box contracts are set at the initiation of the contract based on the shipping origin and destination, and the performance obligation is satisfied over time. U-Box shipping contracts span over a relatively short period of time, and the majority of these contracts begin and end within the same fiscal year. Moving HelpHelp® services fees are recognized in accordance with Topic 606. Moving HelpHelp® services are generated as we provide a neutral venue for the connection between the service provider and the customer for agreed upon services. We do not control the specified services provided by the service provider before that service is transferred to the customer.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Revenue Recognized in Accordance with Topic 842 TheASC Topic 842, Leases (Topic 842), the Company’s self-moving rental revenues meet the definition of a lease pursuant to the guidance in Topic 842 because those substitution rights do not provide an economic benefit to the Company that would exceed the cost of exercising the right. Please see Note 7,8, Leases, of the Notes to the Condensed Consolidated Financial Statements.
Self-moving equipment rentals are recognized over the contract period that trucks and moving equipment are rented. We offer two types of self-moving rental contracts, one-way rentals and in-town rentals, which have varying payment terms. Customer payment is received at the initiation of the contract for one-way rentals which covers an allowable limit for equipment usage. An estimated fee in the form of a deposit is received at the initiation of the contract for in-town rentals, and final payment is received upon the return of the equipment based on actual fees incurred. The contract price is estimated at the initiation of the contract, as there is variable consideration associated with ratable fees incurred based on the number of days the equipment is rented and the number of miles driven. Variable consideration is estimated using the most likely amount method which is based on the intended use of the rental equipment by the customer at the initiation of the contract. Historically, the variability in estimated transaction pricing compared to actual is not significant due to the relatively short duration of rental contracts. Each performance obligation has an observable stand-alone selling price. The input method of passage of time is appropriate as there is a direct relationship between our inputs and the transfer of benefit to the customer over the life of the contract. Self-moving rental contracts span a relatively short period of time, and the majority of these contracts began and ended within the same fiscal year. Self-storage revenues are recognized as earned over the contract period based upon the number of paid storage contract days. We lease portions of our operating properties to tenants under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers. The following table summarizes the minimum lease payments due from our customers and operating property tenants on leases for the next five years and thereafter: | | Years Ending March 31, | | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | | (Unaudited) | | | (In thousands) | | | | | | | | | | | | | | Self-moving equipment rentals | $ | 6,605 | $ | – | $ | – | $ | – | $ | – | $ | – | Property lease revenues | | 17,916 | | 11,354 | | 8,694 | | 6,937 | | 4,884 | | 39,491 | Total | $ | 24,521 | $ | 11,354 | $ | 8,694 | $ | 6,937 | $ | 4,884 | $ | 39,491 |
| | Years Ending September 30, | | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter | | | (Unaudited) | | | (In thousands) | | | | | | | | | | | | | | Self-moving equipment rentals | $ | 7,139 | $ | – | $ | – | $ | – | $ | – | $ | – | Property lease revenues | | 20,722 | | 14,491 | | 11,509 | | 8,275 | | 5,678 | | 37,972 | Total | $ | 27,861 | $ | 14,491 | $ | 11,509 | $ | 8,275 | $ | 5,678 | $ | 37,972 |
The amounts above do not reflect future rental revenue from the renewal or replacement of existing leases. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognized in Accordance with Other Topics Traditional life and Medicare supplement insurance premiums are recognized as revenue over the premium-paying periods of the contracts when due from the policyholders. For products where premiums are due over a significantly shorter duration than the period over which benefits are provided, such as our single premium whole life product, premiums are recognized when received and excess profits are deferred and recognized in relation to the insurance in force.in-force. Property and casualty insurance premiums are recognized as revenue over the policy periods. Interest and investment income are recognized as earned.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Net investment and interest income has multiple components. Interest income from bonds and mortgage notes are recognized when earned. Dividends on common and preferred stocks are recognized on the ex-dividend dates. Realized gains and losses on the sale or exchange of investments are recognized at the trade date. In the following tables, revenue is disaggregated by timing of revenue recognition: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Revenues recognized over time: | $ | 127,091 | $ | 108,038 | Revenues recognized at a point in time: | | 118,966 | | 110,924 | Total revenues recognized under ASC 606 | | 246,057 | | 218,962 | | | | | | Revenues recognized under ASC 842 | | 1,373,925 | | 1,355,934 | Revenues recognized under ASC 944 | | 52,373 | | 52,578 | Revenues recognized under ASC 320 | | 30,509 | | 36,780 | Total revenues | $ | 1,702,864 | $ | 1,664,254 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | | | | | | Revenues recognized over time: | $ | 118,368 | $ | 127,091 | Revenues recognized at a point in time: | | 111,759 | | 118,966 | Total revenues recognized under ASC 606 | | 230,127 | | 246,057 | | | | | | Revenues recognized under ASC 842 | | 1,305,523 | | 1,373,925 | Revenues recognized under ASC 944 | | 49,472 | | 52,373 | Revenues recognized under ASC 320 | | 64,738 | | 30,509 | Total revenues | $ | 1,649,860 | $ | 1,702,864 |
| | Six Months Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Revenues recognized over time: | $ | 230,285 | $ | 187,853 | Revenues recognized at a point in time: | | 245,321 | | 231,642 | Total revenues recognized under ASC 606 | | 475,606 | | 419,495 | | | | | | Revenues recognized under ASC 842 | | 2,661,956 | | 2,546,944 | Revenues recognized under ASC 944 | | 99,060 | | 98,892 | Revenues recognized under ASC 320 | | 64,082 | | 71,779 | Total revenues | $ | 3,300,704 | $ | 3,137,110 |
| | Six Months Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | | | | | | Revenues recognized over time: | $ | 209,683 | $ | 230,285 | Revenues recognized at a point in time: | | 229,352 | | 245,321 | Total revenues recognized under ASC 606 | | 439,035 | | 475,606 | | | | | | Revenues recognized under ASC 842 | | 2,527,839 | | 2,661,956 | Revenues recognized under ASC 944 | | 93,964 | | 99,060 | Revenues recognized under ASC 320 | | 129,330 | | 64,082 | Total revenues | $ | 3,190,168 | $ | 3,300,704 |
In the above tables, the revenues recognized over time include property management fees, the shipping fees associated with U-Box container rentals and a portion of other revenues. Revenues recognized at a point in time include self-moving equipment rentals, self-moving and self-storage products and service sales and a portion of other revenues. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We recognized liabilities resulting from contracts with customers for self-moving equipment rentals, self-storage revenues, U-Box revenues and tenant revenues, in which the length of the contract goes beyond the reported period end, although rental periods of the equipment, storage and U-Box contract are generally short-term in nature. The timing of revenue recognition results in liabilities that are reflected in deferred income on the balance sheet.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
15.16. Allowance for Credit Losses
Trade Receivables Moving and Storage has two ( 2 )(2) primary components of trade receivables, receivables from corporate customers and credit card receivables from customer sales and rental of equipment. For credit card receivables, the Company uses a trailing 13 monthsmonth average historical chargeback percentage of total credit card receivables to estimate a credit loss reserve. The Company rents equipment to corporate customers in which payment terms are 30 days. The Company performs ongoing credit evaluations of its customers and assesses each customer’s credit worthiness. In addition, the Company monitors collections and payments from its customers and maintains an allowance based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high-risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. Management believes that the historical loss information it has compiled is a reasonable base on which to determine expected credit losses for trade receivables because the composition of trade receivables as of that date is consistent with that used in developing the historical credit loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time). To adjust the historical loss rates to reflect the effects of these differences in current conditions and forecasted changes, management assigns a rating to each corporate customer which varies depending on the assessment of risk. Management estimated the loss rate at approximately 2.5% and 6%4% as of September 30, 20222023 and March 31, 2022,2023, respectively. Management developed this estimate based on its knowledge of past experience for which there were similar improvements in the economy. As a result, management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly, the allowance for expected credit losses as of September 30, 2022,2023 and March 31, 2023 was $ 3.1 million.$4.4 million and $3.8 million, respectively. Accrued Interest Receivable Accrued interest receivables on available for sale securities totaled $ 28.5$28.7 million, and $29.6 million as of June 30, 2023 and December 31, 2022, respectively and are excluded from the estimate of credit losses. As outlined in subtopic 326-20-30-5A, weWe have elected not to measure an allowance on accrued interest receivables as our practice is to write off the uncollectible balance in a timely manner. Furthermore, we have elected to write off accrued interest receivables by reversing interest income (in accordance with subtopic 326-20-35-8A).income.
Mortgage loans, netLoans, Net Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at amortized cost. Modeling for the Company’s mortgage loans is based on inputs most highly correlated to defaults, including loan-to-value, occupancy, and payment history. Historical credit loss experience provides additional support for the estimation of expected credit losses. In assessing the credit losses, the portfolio is reviewed on a collective basis, using loan-specific cash flows to determine the fair value of the collateral in the event of default. Adjustments to this analysis are made to assess loans with a loan-to-value of 65% or greater. These loans are evaluated on an individual basis and loan specific risk characteristics such as occupancy levels, expense, income growth and other relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS When management determines that credit losses are expected to occur, an allowance for expected credit losses based on the fair value of the collateral is recorded. Reinsurance recoverablesRecoverables Reinsurance recoverables on paid and unpaid benefits was less than 1% of the total assets as of June 30, 20222023 which is immaterial based on historical loss experience and high credit rating of the reinsurers.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Premium receivablesReceivables Premium receivables were $ 4.3$7.0 million and $4.1 million as of June 30, 2023 and December 31, 2022, respectively, in which the credit loss allowance is immaterial based on our ability to cancel the policy if the policyholder does not pay premiums. The following details the changes in the Company’s reserve allowance for credit losses for trade receivables, fixed maturities and investments, other: | | Allowance for Credit Losses | | | Trade Receivables | | Investments, Fixed Maturities | | Investments, other | | Total | | | (Unaudited) | | | (in thousands) | Balance as of March 31, 2021 | $ | 4,421 | $ | 1,320 | $ | 501 | $ | 6,242 | Provision for (reversal of) credit losses | | 4,228 | | (1,260) | | – | | 2,968 | Write-offs against allowance | | – | | – | | – | | – | Recoveries | | – | | – | | – | | – | Balance as of March 31, 2022 | $ | 8,649 | $ | 60 | $ | 501 | $ | 9,210 | Provision for (reversal of) credit losses | | (5,506) | | 1,948 | | 4 | | (3,554) | Write-offs against allowance | | – | | – | | – | | – | Recoveries | | – | | – | | – | | – | Balance as of September 30, 2022 | $ | 3,143 | $ | 2,008 | $ | 505 | $ | 5,656 |
| | Allowance for Credit Losses | | | Trade Receivables | | Investments, Fixed Maturities | | Investments, other | | Total | | | (Unaudited) | | | (in thousands) | Balance as of March 31, 2022 | $ | 8,649 | $ | 60 | $ | 501 | $ | 9,210 | Provision for (reversal of) credit losses | | (4,860) | | 2,041 | | 16 | | (2,803) | Write-offs against allowance | | – | | – | | – | | – | Recoveries | | – | | – | | – | | – | Balance as of March 31, 2023 | $ | 3,789 | $ | 2,101 | $ | 517 | $ | 6,407 | Provision for (reversal of) credit losses | | 578 | | (429) | | 300 | | 449 | Write-offs against allowance | | – | | – | | – | | – | Recoveries | | – | | – | | – | | – | Balance as of September 30, 2023 | $ | 4,367 | $ | 1,672 | $ | 817 | $ | 6,856 |
16. Subsequent Events
Background of the Independent Special Committee
The Board of Directors (the “Board”) created an Independent Special Committee (the “Committee”) to consider various matters and actions. The Committee retained outside advisors to help examine multiple options aimed at enhancing the marketability and liquidity of the Company’s stock. The Committee paid particular attention to actions intended to make stock ownership more inclusive and accessible for retail investors, including team members and customers of the Company. The Committee approved the following actions.
Creation of the Series N Non-Voting Common Stock
The Committee authorized the creation of a new series of Common Stock, designated as Series N Non-Voting Common Stock (the “Series N Common Stock”). The Series N Common Stock will have a par value of $ 0.001 per share. Application to the Nasdaq Global Select Market has been made to list the new Series N Common Stock under the ticker symbol “Nasdaq: UHALB”.Shares of the Company’s outstanding common stock, $ 0.25 par value (the “Voting Common Stock”) will continue to trade under the symbol “Nasdaq: UHAL.”
9-for-1 Stock Dividend Involving Non-Voting Common Stock
The Committee approved issuance of shares of the Non-Voting Common Stock through a stock dividend, on a 9-for-1 basis , to all existing holders of the Company’s Voting Common Stock. The stock dividend is intended to have the same general effects as a 10-for-1 stock split.
The shares of Non-Voting Common Stock will be distributed after the close of trading on, or about, November 9, 2022 to stockholders of record of Voting Common Stock at the close of business on November 3, 2022. We anticipate trading of the 176,470,092 shares of Non-Voting Common Stock to begin on November 10, 2022.
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements – (continued)
Name Change
The Committee approved changing the company name of AMERCO to U-Haul Holding Company to help alleviate any perceived disconnect by institutional or retail investors alike. We intend to make this name change by the end of the calendar year 2022.
Dividend Policy
In response to the Committee’s recommendation to consider a dividend policy, the Board adopted a dividend policy for the new Series N Common Stock.
Series N Non-Voting Common Stock: Unless the Board in its sole discretion determines otherwise, it shall be the policy of the Company to declare and pay a quarterly cash dividend on each share of the Company’s Series N Non-Voting Common Stock, in the amount of $ 0.04 per share, commencing with the third quarter of fiscal year 2023.
17. Accounting Pronouncements Adoption of new Accounting Pronouncements On April 1, 2023, the Company adopted ASU 2018-12 which is applicable to Oxford. The Company adopted ASU 2018-12 effective April 1, 2023 and used the modified retrospective method with a transition date of April 1, 2021. The updated accounting guidance required changes to the measurement and disclosure of long-duration contracts. For the Company, this includes all life insurance products, annuities, Medicare supplement products and our long-term care business. Entities will be required to review, and update if there is a change to cash flow assumptions (including morbidity and persistency) at least annually, and to update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in the Company's results of operations and the effect of changes in discount rate assumptions will be recorded in other comprehensive income. The most significant impact will be the effect of updating the discount rate assumption quarterly to reflect an upper-medium grade fixed-income instrument yield, rather than Oxford Life’s expected investment portfolio yield. This will be partially offset by the de-recognition of cumulative adjustments to DAC associated with unrealized gains and losses associated with long-duration contracts. The Company uses a published spot rate curve constructed from “A”-rated U.S. dollar denominated corporate bonds matched to the duration of the corresponding insurance liabilities, to calculate discount rates. The Company groups its long-duration contracts into calendar year cohorts based on the contract issue date. U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DAC and other capitalized costs such as unearned revenue are amortized on a constant level or straight-line basis over the expected term of the contracts. Under ASU 2018-12, the annual amortization of DAC in our Consolidated Statements of Operations will differ from previous trends due to: (1) the requirement to no longer defer renewal commissions until such year as the commissions are actually incurred, (2) the requirement to no longer accrue and amortize interest on our DAC balances, and (3) the modification of the method for amortizing DAC including the updating of assumptions. For business with deferrals of renewal commissions, as is the case with our final expense life insurance policies, the expected amortization rate, as a percentage of premium, for certain blocks of business will no longer be level but will increase over the period of time during which commissions are deferred. The decrease in amortization in the near term will primarily impact our life insurance line of business. Upon adoption, the Company made adjustments to AOCI for the removal of cumulative adjustments to DAC associated with unrealized gains and losses previously recorded in AOCI. In total, we expect the impact on net earnings, largely from the decrease in amortization, to be immaterial during fiscal 2024, but could become material with a large increase in sales. Market risk benefits, which are contracts or contract features that provide protection to the policyholder from capital market risk and expose the Company to other-than-nominal capital market risk, are measured at fair value.Market risk benefits are contracts or contract features that guarantee benefits, such as guaranteed life withdrawal benefits, in addition to an account balance which expose insurance companies to other than nominal capital market risk and protect the contract holder from the same risk. Certain contracts or contract features to be identified as market risk benefits were accounted for as embedded derivatives and measured at fair value, while others transitioned to fair value measurement upon the adoption of ASU 2018-12. Also in consideration of market risk benefits, upon adoption, there were impacts to (1) AOCI for the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date and (2) retained earnings for the difference between fair value and carrying value at the transition date, excluding the changes in the instrument-specific credit risk. The requirement to review, and update if there is a change, cash flow assumptions at least annually is expected to change the pattern of earnings being recognized. Adoption significantly expanded the Company’s disclosures, and will impact systems, processes, and controls. While the requirements of the new guidance represent a material change from existing GAAP, the accounting adoption had no economic impact on the cash flows of our business nor influence on our business model of providing basic mortality and longevity protection-oriented products to the underserved senior market. In addition, it did not impact our statutory earnings, statutory capital, or capital management philosophies. The following tables present the effect of the adoption of ASU 2018-12 on selected consolidated balance sheet data for the fiscal years ended March 31, 2023 and 2022. | | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Total Assets | | | | | Prior to adoption | $ | 18,124,648 | $ | 17,299,581 | Effect of adoption: | | | | | Derecognition of shadow DAC | | (25,141) | | 26,131 | Re-measurement due to discount rate | | – | | – | Other adjustments | | 1,227 | | 1,471 | Subtotal | $ | (23,914) | $ | 27,602 | | | | | | After adoption | $ | 18,100,734 | $ | 17,327,183 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Total Liabilities | | | | | Prior to adoption | $ | 11,596,313 | $ | 11,347,089 | Effect of adoption: | | | | | Deferred income tax adjustment on Shadow removal | | (5,280) | | 5,488 | Re-measurement due to discount rate | | (1,626) | | 87,258 | Deferred income tax adjustment on discount rate | | 342 | | (18,324) | Other adjustments | | 6,794 | | 8,511 | Subtotal | $ | 230 | $ | 82,933 | | | | | | After adoption | $ | 11,596,543 | $ | 11,430,022 |
| | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Accumulated other comprehensive income (loss) | | | | | Prior to adoption | $ | (267,046) | $ | 46,384 | Effect of adoption: | | | | | Derecognition on shadow DAC (tax effect) | | (19,861) | | 20,644 | Re-measurement due to discount rate | | 1,626 | | (87,258) | Re-measurement due to discount rate (tax effect) | | (342) | | 18,324 | Other adjustments | | – | | – | Subtotal | $ | (18,577) | $ | (48,290) | | | | | | After adoption | $ | (285,623) | $ | (1,906) |
| | Year Ended March 31, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Total Stockholders' equity | | | | | Prior to adoption | $ | 6,528,335 | $ | 5,952,492 | Effect of adoption: | | | | | Derecognition on shadow DAC (tax effect) | | (19,861) | | 20,644 | Re-measurement due to discount rate (tax effect) | | 1,284 | | (68,934) | Other adjustments | | (5,567) | | (7,042) | Subtotal | $ | (24,144) | $ | (55,332) | | | | | | After adoption | $ | 6,504,191 | $ | 5,897,160 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | Year Ended March 31, 2023 | | | As previously reported | | Adoption impact | | As adjusted | | | (Unaudited) | | | (In thousands) | | | | | | | | Deferred policy acquisition costs, net | $ | 152,377 | | (23,914) | $ | 128,463 | Total assets | | 18,124,648 | | (23,914) | | 18,100,734 | Policy benefits and losses, claims and loss expenses payable | | 875,034 | | 5,168 | | 880,202 | Deferred income taxes, net | | 1,334,427 | | (4,938) | | 1,329,489 | Total liabilities | | 11,596,313 | | 230 | | 11,596,543 | Accumulated other comprehensive loss | | (267,046) | | (18,577) | | (285,623) | Retained earnings | | 7,008,715 | | (5,567) | | 7,003,148 | Total stockholders' equity | | 6,528,335 | | (24,144) | | 6,504,191 | Total liabilities and stockholders' equity | | 18,124,648 | | (23,914) | | 18,100,734 |
| | April 1, 2021 | | March 31, 2021 | | | (Unaudited) | | | (In thousands) | | | | | | Deferred policy acquisition costs, net | $ | 131,187 | $ | 89,749 | Total assets | | 14,693,044 | | 14,651,606 | Policy benefits and losses, claims and loss expenses payable | | 1,040,951 | | 909,701 | Deferred income taxes, net | | 1,182,123 | | 1,199,280 | Total liabilities | | 9,846,608 | | 9,732,515 | Accumulated other comprehensive income | | 42,319 | | 106,857 | Retained earnings | | 5,017,451 | | 5,025,568 | Total stockholders' equity | | 4,846,436 | | 4,919,091 | Total liabilities and stockholders' equity | | 14,693,044 | | 14,651,606 |
The following tables present the balances of and changes in deferred acquisition costs, future policy benefits and market risk benefits and balances amortized on a basis consistent with DAC on April 1, 2021 due to the adoption of ASU 2018-12 by Oxford. Deferred Policy Acquisition Costs | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, end of year March 31, 2021 | $ | 15,654 | $ | 64,552 | $ | 9,543 | $ | 89,749 | Adjustments for removal of related balances in accumulated other comprehensive income | | 41,438 | | – | | – | | 41,438 | Adjusted balance, beginning of year April 1, 2021 | $ | 57,092 | $ | 64,552 | $ | 9,543 | $ | 131,187 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future Policy Benefit | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, end of year March 31, 2021 | $ | 8,370 | $ | 310,311 | $ | 18,341 | $ | 337,022 | Change in discount rate assumptions | | 2,307 | | 115,978 | | 4,847 | | 123,132 | Change in cash flow assumptions, effect of net premiums exceeding gross premiums | | – | | 1,747 | | – | | 1,747 | Change in cash flow assumptions, effect of decrease of the deferred profit liability | | – | | 2,580 | | – | | 2,580 | Adjusted balance, beginning of year April 1, 2021 | $ | 10,677 | $ | 430,616 | $ | 23,188 | $ | 464,481 |
Market Risk Benefits | | | | | | | | Deferred Annuities | | | | | | | | | (Unaudited) | | | | | | | | | (In thousands) | | | | | | | | | | Balance, end of year March 31, 2021 | | | | | | | $ | 7,339 | Adjustment for the difference between carrying amount and fair value, except for the difference due to instrument-specific credit risk | | | | | | | | 3,791 | Adjusted balance, beginning of year April 1, 2021 | | | | | | | $ | 11,130 |
| | | | | | Retained Earnings | | Accumulated Other Comprehensive Loss | | | | | | | (Unaudited) | | | | | | | (In thousands) | | | | | | | | | | Liability for future policy benefits | | | | | $ | (4,327) | $ | (123,132) | Market risk benefits | | | | | | (3,791) | | – | Deferred acquisition costs and related asset balances | | | | | | – | | 41,438 | Tax effect | | | | | | – | | 17,156 | Total | | | | | $ | (8,118) | $ | (64,538) |
Recent Accounting Pronouncements In August 2018,March 2023, the Financial Accounting Standards Board (“FASB”)FASB issued ASU 2018-12,2023-01, Targeted Improvements to the Accounting for Long-Duration ContractsLeases (Topic 842 – Common Control Arrangements (“ASU 2018-12”2023-01”). The amendmentsASU 2023-01, accounting for leasehold improvements, requires a lessee in this update require insurance companiesa common-control lease arrangement to annually review and updateamortize leasehold improvements that it owns over the assumptions used for measuringimprovements’ useful life to the liability under long-duration contracts, such as life insurance, disability income, and annuities. common control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The amendment prescribes standardized liability discount rate, consistency in measurement of market risk benefits, simplified amortization of deferred acquisition costs and enhanced disclosures. The amendments areis effective for fiscal years, and interim periods within those fiscal years beginning after December 31, 2020. In November 2020, FASB issued ASU 2020-11, Financial Services – Insurance (Topic 944), which deferred the effective date of ASU 2018-12 to years beginning after December 15, 2022.2023. We are currently in the process of evaluating the impact if any of the adoption of ASU 2018-12 2023-01 U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS on our financial statements; however,statements. 18. Deferred Policy Acquisition Costs, Net The following tables present a rollforward of deferred policy acquisition costs related to long-duration contracts for the adoptionsix-month periods ended September 30, 2023 and 2022.
| | Six Months Ended September 30, 2023 | | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, beginning of year | $ | 55,396 | $ | 66,954 | $ | 6,113 | $ | 128,463 | Capitalization | | 5,441 | | 2,212 | | 120 | | 7,773 | Amortization expense | | (9,631) | | (4,515) | | (725) | | (14,871) | Balance, end of period | $ | 51,206 | $ | 64,651 | $ | 5,508 | $ | 121,365 |
| | Six Months Ended September 30, 2022 | | | Payout Annuities | | Life Insurance | | Health Insurance | | Total | | | (Unaudited) | | | (In thousands) | | | | | | | | | | Balance, beginning of year | $ | 56,175 | $ | 68,676 | $ | 8,718 | $ | 133,569 | Capitalization | | 10,468 | | 4,212 | | 220 | | 14,900 | Amortization expense | | (9,457) | | (3,872) | | (1,315) | | (14,644) | Balance, end of period | $ | 57,186 | $ | 69,016 | $ | 7,623 | $ | 133,825 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. Policy Benefits and Losses, Claims and Loss Expenses Payable The following tables present the balances and changes in the policy benefitsand a reconciliation of ASU 2018-12 will impact the statements of operations because the effect of any updatenet liability for future policy benefits to the assumptions we used at the inception of the contracts will be recorded in net income.liability for future policy benefits for Oxford. | Six Months Ended September 30, 2023 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands) | Present value of expected net premiums | | | | | | | | | | | | | | Balance, beginning of year | $ | 223,118 | $ | 196,569 | $ | 419,687 | Beginning balance at original discount rate | $ | 225,071 | $ | 212,454 | $ | 437,525 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experience | | (187) | | (5,644) | | (5,831) | Adjusted beginning of year balance | $ | 224,884 | $ | 206,810 | $ | 431,694 | Issuances | | 5,072 | | 77 | | 5,149 | Interest accrual | | 5,554 | | 4,096 | | 9,650 | Net premium collected | | (19,833) | | (13,357) | | (33,190) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 215,677 | $ | 197,626 | $ | 413,303 | Effect of changes in discount rate assumptions (AOCI) | | (1,650) | | (14,337) | | (15,987) | Balance, end of period | $ | 214,027 | $ | 183,289 | $ | 397,316 | | | | | | | | Present value of expected future policy benefits | | | | | | | | | | | | | | Balance, beginning of year | $ | 530,938 | $ | 210,054 | $ | 740,992 | Beginning balance at original discount rate | $ | 533,688 | $ | 226,510 | $ | 760,198 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experiences | | (565) | | (4,215) | | (4,780) | Adjusted beginning of year balance | $ | 533,123 | $ | 222,295 | $ | 755,418 | Issuances | | 5,211 | | 77 | | 5,288 | Interest accrual | | 13,166 | | 4,402 | | 17,568 | Benefit payments | | (27,720) | | (16,162) | | (43,882) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 523,780 | $ | 210,612 | $ | 734,392 | Effect of changes in discount rate assumptions (AOCI) | | 949 | | (14,760) | | (13,811) | Balance, end of period | $ | 524,729 | $ | 195,852 | $ | 720,581 | End of period, LFPB net | | | | | | 323,265 | Payout annuities and market risk benefits | | | | | | 30,685 | Life and annuity ICOS and IBNR / Reinsurance losses payable | | | | | | 10,101 | Life DPL / Other life and health | | | | | | 26,556 | Oxford end of period balance | | | | | | 390,607 | Moving and Storage balance | | | | | | 324,642 | Property and Casualty balance | | | | | | 150,148 | Policy benefit and losses, claims and loss expense balance, end of period | | | | | $ | 865,397 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES From time to time, new accounting pronouncements are issued by the FASB or the SEC that are adopted by us as of the specified effective date. Unless otherwise discussed, these ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore will have minimal, if any, impact on our financial position or results of operations upon adoption.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Six Months Ended September 30, 2022 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands) | Present value of expected net premiums | | | | | | | | | | | | | | Balance, beginning of year | $ | 280,371 | $ | 280,732 | $ | 561,103 | Beginning balance at original discount rate | $ | 242,741 | $ | 253,307 | $ | 496,048 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experience | | 748 | | 1,026 | | 1,774 | Adjusted beginning of year balance | $ | 243,489 | $ | 254,333 | $ | 497,822 | Issuances | | 14,083 | | 2,453 | | 16,536 | Interest accrual | | 6,037 | | 5,062 | | 11,099 | Net premium collected | | (21,946) | | (15,041) | | (36,987) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 241,663 | $ | 246,807 | $ | 488,470 | Effect of changes in discount rate assumptions (AOCI) | | 7,814 | | (7,959) | | (145) | Balance, end of period | $ | 249,477 | $ | 238,848 | $ | 488,325 | | | | | | | | Present value of expected future policy benefits | | | | | | | | | | | | | | Balance, beginning of year | $ | 672,254 | $ | 299,628 | $ | 971,882 | Beginning balance at original discount rate | $ | 552,109 | $ | 269,177 | $ | 821,286 | Effect of changes in cash flow assumptions | | – | | – | | – | Effect of actual variances from expected experiences | | 1,031 | | 1,713 | | 2,744 | Adjusted beginning of year balance | $ | 553,140 | $ | 270,890 | $ | 824,030 | Issuances | | 14,083 | | 2,453 | | 16,536 | Interest accrual | | 13,714 | | 5,391 | | 19,105 | Benefit payments | | (29,783) | | (17,653) | | (47,436) | Other | | – | | – | | – | Ending balance at original discount rate | $ | 551,154 | $ | 261,081 | $ | 812,235 | Effect of changes in discount rate assumptions (AOCI) | | 25,907 | | (7,779) | | 18,128 | Balance, end of period | $ | 577,061 | $ | 253,302 | $ | 830,363 | End of period, LFPB net | | | | | | 342,038 | Payout annuities and market risk benefits | | | | | | 33,157 | Life and annuity ICOS and IBNR / Reinsurance losses payable | | | | | | 11,226 | Life DPL / Other life and health | | | | | | 37,130 | Oxford end of period balance | | | | | | 423,551 | Moving and Storage balance | | | | | | 348,854 | Property and Casualty balance | | | | | | 156,998 | Policy benefit and losses, claims and loss expense balance, end of period | | | | | $ | 929,403 |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Six Months Ended September 30, 2023 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands, except for percentages and weighted average information) | | | | | | | | Expected gross premiums | | | | | | | Undiscounted balance | $ | 387,141 | $ | 331,852 | $ | 718,993 | Discounted balance at original discount rate | $ | 299,161 | $ | 256,658 | $ | 555,819 | Discounted balance at current discount rate | $ | 296,505 | $ | 239,939 | $ | 536,444 | | | | | | | | Expected policy benefits | | | | | | | Undiscounted balance | $ | 761,261 | $ | 273,079 | $ | 1,034,340 | Discounted balance at original discount rate | $ | 523,777 | $ | 210,612 | $ | 734,389 | Discounted balance at current discount rate | $ | 524,726 | $ | 195,852 | $ | 720,578 | | | | | | | | Mortality, lapses and morbidity | | | | | | | Mortality actual experience | | 5.02 | % | – | % | | Mortality expected experience | | 5.06 | % | – | % | | Lapses actual experience | | 1.87 | % | – | % | | Lapses expected experience | | 2.65 | % | – | % | | Morbidity actual experience | | – | % | 85.53 | % | | Morbidity expected experience | | – | % | 73.50 | % | | | | | | | | | Premiums and interest expense | | | | | | | Gross premiums | $ | 26,667 | $ | 18,432 | $ | 45,099 | Other premiums | | | | | | – | Total premiums | | | | | $ | 45,099 | Interest expense | $ | 7,612 | $ | 306 | $ | 7,918 | | | | | | | | Expected duration (persistency) of policies in-force (years) | | 6.9 | | 6.5 | | | | | | | | | | Weighted average original interest rate of the liability for future policy benefits | | 5.00 | % | 4.00 | % | | | | | | | | | Weighted average current interest rate of the liability for future policy benefits | | 5.00 | % | 5.00 | % | |
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Six Months Ended September 30, 2022 | | | Life Insurance | | Health Insurance | | Total | | (Unaudited) | | (In thousands, except for percentages and weighted average information) | | | | | | | | Expected gross premiums | | | | | | | Undiscounted balance | $ | 427,457 | $ | 434,063 | $ | 861,520 | Discounted balance at original discount rate | $ | 329,233 | $ | 333,001 | $ | 662,234 | Discounted balance at current discount rate | $ | 339,434 | $ | 325,323 | $ | 664,757 | | | | | | | | Expected policy benefits | | | | | | | Undiscounted balance | $ | 807,725 | $ | 342,371 | $ | 1,150,096 | Discounted balance at original discount rate | $ | 551,153 | $ | 261,081 | $ | 812,234 | Discounted balance at current discount rate | $ | 577,060 | $ | 253,302 | $ | 830,362 | | | | | | | | Mortality, lapses and morbidity | | | | | | | Mortality actual experience | | 5.07 | % | – | % | | Mortality expected experience | | 4.78 | % | – | % | | Lapses actual experience | | 2.04 | % | – | % | | Lapses expected experience | | 2.53 | % | – | % | | Morbidity actual experience | | – | % | 79.25 | % | | Morbidity expected experience | | – | % | 71.30 | % | | | | | | | | | Premiums and interest expense | | | | | | | Gross premiums | $ | 29,158 | $ | 21,703 | $ | 50,861 | Other premiums | | | | | | – | Total premiums | | | | | $ | 50,861 | Interest expense | $ | 7,677 | $ | 329 | $ | 8,006 | | | | | | | | Expected duration (persistency) of policies in-force (years) | | 7.1 | | 6.8 | | | | | | | | | | Weighted average original interest rate of the liability for future policy benefits | | 5.00 | % | 4.00 | % | | | | | | | | | Weighted average current interest rate of the liability for future policy benefits | | 1.00 | % | 1.00 | % | |
44
U-HAUL HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables present the balances and changes in Liabilities from investment contracts account balances:
| | Six Months Ended September 30, 2023 | | | | | Deferred Annuities | | | (Unaudited) | | | (In thousands, except for the average credited rate) | Policyholder contract deposits account balance | | Beginning of year | $ | 2,398,884 | Deposits received | | 125,122 | Surrenders and withdrawals | | (146,647) | Benefit payments | | (20,761) | Interest credited | | 36,992 | Other | | – | End of period | $ | 2,393,590 | Weighted average credited rate | | 3.09 | Cash surrender value | $ | 2,062,233 |
| | Six Months Ended September 30, 2022 | | | | | Deferred Annuities | | | (Unaudited) | | | (In thousands, except for the average credited rate) | Policyholder contract deposits account balance | | Beginning of year | $ | 2,336,238 | Deposits received | | 169,008 | Surrenders and withdrawals | | (122,450) | Benefit payments | | (18,334) | Interest credited | | 25,566 | Other | | – | End of period | $ | 2,390,028 | Weighted average credited rate | | 2.16 | Cash surrender value | $ | 2,082,936 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations General We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with the overall strategy of AMERCO,U-Haul Holding Company, followed by a description of, and strategy related to, our operating segments to give the reader an overview of the goals of our businesses and the direction in which our businesses and products are moving. We then discuss our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Next, we discuss our results of operations for the second quarter and first six months of fiscal 2023,2024, compared with the second quarter and first six months of fiscal 2022,2023, which is followed by an analysis of liquidity changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources - Summary and Disclosures about Contractual Obligations and Commercial Commitments. We conclude this MD&A by discussing our current outlook for the remainder of fiscal 2023.2024. This MD&A should be read in conjunction with the other sections of this Quarterly Report, including the Notes to Condensed Consolidated Financial Statements. The various sections of this MD&A contain a number of forward-looking statements, as discussed under the caption, Cautionary Statements Regarding Forward-Looking Statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing or in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2022.2023. Many of these risks and uncertainties are beyond our control and our actual results may differ materially from these forward-looking statements. AMERCO,U-Haul Holding Company, a Nevada corporation, has a second fiscal quarter that ends on the 30thof September for each year that is referenced. Our insurance company subsidiaries have a second quarter that ends on the 30th of June for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 20222023 and 20212022 correspond to fiscal 2024 and 2023 and 2022 for AMERCO.U-Haul Holding Company.
Overall Strategy Our overall strategy is to maintain our leadership position in the United States and Canada “do-it-yourself” moving and storage industry. We accomplish this by providing a seamless and integrated supply chain to the “do-it-yourself” moving and storage market. As part of executing this strategy, we leverage the brand recognition of U-Haul®with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence. Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers and company operated locations in our network and expanding and taking advantage of our eMove®capabilities.network. Property and Casualty Insurance is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates. Life Insurance is focused on long term capital growth through direct writing and reinsuring of life insurance, Medicare supplement and annuity products in the senior marketplace. Description of Operating Segments AMERCO’sU-Haul Holding Company’s three reportable segments are:
- Moving and Storage, comprised of
AMERCO,U-Haul Holding Company, U-Haul, and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate; - Property and Casualty Insurance, comprised of Repwest and its wholly owned subsidiaries and ARCOA; and
- Life Insurance, comprised of Oxford and its wholly owned subsidiaries.
Moving and Storage Moving and Storage consists of the rental of trucks, trailers, portable moving and storage units, specialty rental items and self-storage spaces primarily to the household mover as well as sales of moving supplies, towing accessories and propane. Operations are conducted under the registered trade name U-Haul®throughout the United States and Canada. With respect to our truck, trailer, specialty rental items and self-storage rental business, we are focused on expanding our dealer and center network, which provides added convenience for our customers, and expands the selection and availability of rental equipment to satisfy the needs of our customers. U-Haul®branded self-moving related products and services, such as boxes, pads and tape, allow our customers to, among other things, protect their belongings from potential damage during the moving process. We are committed to providing a complete line of products selected with the “do-it-yourself” moving and storage customer in mind. uhaul.com®is an online marketplace that connects consumers to our operations as well as independent Moving Help®service providers and thousands of independent Self-Storage Affiliates. Our network of customer-rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services throughout the United States and Canada. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market. U-Haul’s mobile app, Truck Share 24/7, Skip-the-Counter Self-Storage rentals and Self-checkout for moving supplies provide our customers methods for conducting business with us directly via their mobile devices and also limiting physical exposure. Since 1945, U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the inventory of total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations has helped us to reduce our impact on the environment. Property and Casualty Insurance Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove®, Safetow®, Safemove Plus®, Safestor®andSafestor Mobile®protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haulrelated programs. Life Insurance Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies. Cybersecurity Incident On September 9, 2022, we announced that the Company was made aware of a data security incident involving U-Haul‘s information technology network. U-Haul detected a compromise of two unique passwords used to access U-Haul customers‘ information. U-Haul took immediate steps to contain the incident and promptly enhanced its security measures to prevent any further unauthorized access. U-Haul retained cybersecurity experts and incident response counsel to investigate the incident and implement additional security safeguards. The investigation determined that between November 5, 2021 and April 8, 2022, the threat actor accessed customer contracts containing customers’ names, dates of birth, and driver’s license or state identification numbers. None of U-Haul’s financial, payment processing or email systems were involved. U-Haul has notified impacted customers and relevant governmental authorities. Several class action lawsuits related to the incident have been filed against U-Haul. The lawsuits arehave been consolidated into one action in their early consolidation phasethe U.S. District Court for the District of Arizona and will be vigorously defended by the Company; however the outcome of such lawsuits cannot be predicted or guaranteed with any certainty.
Critical Accounting Policies and Estimates Please refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022,2023, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Impairment of Investments
Under the current expected credit loss model, a valuation allowance is recognized in earnings for credit losses. If we intend to sell a debt security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.
There was a $1.9 million net impairment charge associated with this allowance recorded for the first six months ended September 30, 2022.
Results of Operations AMERCOU-Haul Holding Company and Consolidated Entities
Quarter Ended September 30, 20222023 compared with the Quarter Ended September 30, 20212022 Listed below, on a consolidated basis, are revenues for our major product lines for the second quarter of fiscal 20232024 and the second quarter of fiscal 2022:2023: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 1,162,025 | $ | 1,179,061 | Self-storage revenues | | 185,586 | | 153,485 | Self-moving and self-storage products and service sales | | 96,864 | | 92,191 | Property management fees | | 9,277 | | 8,747 | Life insurance premiums | | 25,456 | | 28,913 | Property and casualty insurance premiums | | 25,718 | | 22,499 | Net investment and interest income | | 30,509 | | 36,780 | Other revenue | | 167,429 | | 142,578 | Consolidated revenue | $ | 1,702,864 | $ | 1,664,254 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 1,069,405 | $ | 1,162,025 | Self-storage revenues | | 208,890 | | 185,586 | Self-moving and self-storage products and service sales | | 91,571 | | 96,864 | Property management fees | | 9,267 | | 9,277 | Life insurance premiums | | 22,498 | | 25,456 | Property and casualty insurance premiums | | 25,571 | | 25,718 | Net investment and interest income | | 64,738 | | 30,509 | Other revenue | | 157,920 | | 167,429 | Consolidated revenue | $ | 1,649,860 | $ | 1,702,864 |
Self-moving equipment rental revenues decreased $17.0$92.6 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022. 2023.Transactions, revenue and revenueaverage miles driven per transaction decreased.The declines were more pronounced for In-Town business increased but were offset by declines inour one-way business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet. Self-storage revenues increased $32.1$23.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. The average monthly number of occupied units increased by 14%7%, or 64,50038,046 units, during the second quarter of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelve months,quarter, we added approximately 5.40.9 million of new net rentable square feet, or an 11% increase, with approximately 1.5 million of that coming on during the second quarter of fiscal 2023.feet. Sales of self-moving and self-storage products and services increased $4.7decreased $5.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane offset by decreasespropane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Life insurance premiums decreased $3.5$3.0 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 20222023 due primarily to decreased life and Medicare supplement premiums.
Property and casualty insurance premiums increased $3.2decreased $0.1 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions.2023. Net investment and interest income decreased $6.3increased $34.2 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. Moving and Storage accounted for $13.6 million of the improvement due to an increase in interest rates on short-term deposits. Changes in the market value of unaffiliated equitycommon stocks held at our Property and Casualty Insurance subsidiary accounted for $8.5$6.7 million of the decrease for the second quarter.increase. Our Life Insurance subsidiaries investment income decreased $11.9increased $12.6 million primarily from lossesgains on derivatives used as hedges to fixed indexed annuities. This was partially offset by a $14.3 million increase from Moving and Storage due to an increase in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $24.9decreased $9.5 million during the first six monthssecond quarter of fiscal 2024, compared with the second quarter of fiscal 2023, compared with the same six months of fiscal 2022,caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program.
Listed below are revenues and earnings from operations at each of our operating segments for the second quarter of fiscal 20232024 and the second quarter of fiscal 2022.2023. The insurance companies’ second quarters ended June 30, 20222023 and 2021.2022. | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 1,636,858 | $ | 1,576,999 | Earnings from operations before equity in earnings of subsidiaries | | 514,943 | | 555,988 | Property and casualty insurance | | | | | Revenues | | 23,363 | | 29,539 | Earnings from operations | | 5,686 | | 15,189 | Life insurance | | | | | Revenues | | 45,696 | | 60,985 | Earnings from operations | | 1,852 | | 7,913 | Eliminations | | | | | Revenues | | (3,053) | | (3,269) | Earnings from operations before equity in earnings of subsidiaries | | (386) | | (389) | Consolidated results | | | | | Revenues | | 1,702,864 | | 1,664,254 | Earnings from operations | | 522,095 | | 578,701 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 1,565,578 | $ | 1,636,858 | Earnings from operations before equity in earnings of subsidiaries | | 401,704 | | 514,943 | Property and casualty insurance | | | | | Revenues | | 31,852 | | 23,363 | Earnings from operations | | 15,419 | | 5,686 | Life insurance | | | | | Revenues | | 55,522 | | 45,696 | Earnings (losses) from operations | | 5,608 | | (297) | Eliminations | | | | | Revenues | | (3,092) | | (3,053) | Earnings from operations before equity in earnings of subsidiaries | | (376) | | (386) | Consolidated results | | | | | Revenues | | 1,649,860 | | 1,702,864 | Earnings from operations | | 422,355 | | 519,946 |
Total costs and expenses increased $95.2$44.6 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. Operating expenses for Moving and Storage increased $114.2$24.1 million. Repair costsexpenses associated with the rental fleet experienced a $33.7$17.2 million increase during the quarter due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet.The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers.selling more retired trucks. Other increases included personnel, liability costs, non-rental equipmentproperty taxes, building maintenance and shippingutilities.Other operating costs including freight and payment processing decreased $20.5 million during the quarter. Depreciation expense associated with U-Box transactions.our rental fleet increased $11.1 million for the second quarter of fiscal 2024 compared with the second quarter of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment increased $28.3decreased $17.5 million from an increase inas resale values.values have decreased while the average cost of units being sold has increased. Depreciation expense associated with our rental fleet was $129.2 million and $125.4 million forWe increased the secondnumber of retired trucks sold compared to the same quarter of fiscal 2023 and 2022, respectively.last year. Depreciation expense on all other assets, largely from buildings and improvements, increased $6.0 million to $52.4$8.1 million. Net losses on the disposal or retirement of land and buildings increased $1.3decreased $0.2 million. Additional details are available in the following Moving and Storage section. As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased $56.6$97.6 million to $522.1$422.4 million for the second quarter of fiscal 2023,2024, compared with $578.7$519.9 million for the second quarter of fiscal 2022.2023. Interest expense for the second quarter of fiscal 20232024 was $57.2$63.9 million, compared with $39.5$57.2 million for the second quarter of fiscal 2022,2023, due to an increase in our outstanding debtaverage cost of $972.3debt. Income tax expense was $85.2 million infor the second quarter of fiscal 20232024, compared with the second quarter of fiscal 2022.
Income tax expense was $111.6 million for the second quarter of fiscal 2023, compared with $129.0 million for the second quarter of fiscal 2022.2023.
As a result of the above-mentioned items, earnings available to common stockholders were $352.0$273.5 million for the second quarter of fiscal 2023,2024, compared with $409.9$349.9 million for the second quarter of fiscal 2022.2023. Basic and diluted earnings per share for the second quarter of fiscal 2023 were $17.95, compared with $20.90 for the second quarter of fiscal 2022.61
The weighted average common shares outstanding basic and diluted were 19,607,788 for both the second quarter of fiscal 2023 and fiscal 2022.
Moving and Storage Quarter Ended September 30, 20222023 compared with the Quarter Ended September 30, 20212022 Listed below are revenues for our major product lines at Moving and Storage for the second quarter of fiscal 20232024 and the second quarter of fiscal 2022:2023: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 1,163,376 | $ | 1,180,329 | Self-storage revenues | | 185,586 | | 153,485 | Self-moving and self-storage products and service sales | | 96,864 | | 92,191 | Property management fees | | 9,277 | | 8,747 | Net investment and interest income | | 15,077 | | 675 | Other revenue | | 166,678 | | 141,572 | Moving and Storage revenue | $ | 1,636,858 | $ | 1,576,999 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 1,070,688 | $ | 1,163,376 | Self-storage revenues | | 208,890 | | 185,586 | Self-moving and self-storage products and service sales | | 91,571 | | 96,864 | Property management fees | | 9,267 | | 9,277 | Net investment and interest income | | 28,520 | | 15,077 | Other revenue | | 156,642 | | 166,678 | Moving and Storage revenue | $ | 1,565,578 | $ | 1,636,858 |
Self-moving equipment rental revenues decreased $17.0$92.7 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022. 2023.Transactions, revenue and revenueaverage miles driven per transaction decreased.The declines were more pronounced for In-Town business increased but were offset by declines inour one-way business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet. Self-storage revenues increased $32.1$23.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. The average monthly number of occupied units increased by 14%7%, or 64,50038,046 units, during the second quarter of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelve months,quarter, we added approximately 5.40.9 million of new net rentable square feet, or an 11% increase, with approximately 1.5 million of that coming on during the second quarter of fiscal 2023.feet. We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows: | | Quarter Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 638 | | 568 | Square footage as of September 30 | | 53,303 | | 47,903 | Average monthly number of units occupied | | 540 | | 476 | Average monthly occupancy rate based on unit count | | 85.4% | | 84.3% | Average monthly square footage occupied | | 46,538 | | 41,743 |
| | Quarter Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 691 | | 638 | Square footage as of September 30 | | 58,402 | | 53,303 | Average monthly number of units occupied | | 578 | | 540 | Average monthly occupancy rate based on unit count | | 84.2% | | 85.4% | End of September occupancy rate based on unit count | | 83.5% | | 84.8% | Average monthly square footage occupied | | 49,931 | | 46,538 |
Over the last twelve months we added approximately 5.45.1 million net rentable square feet of new storage to the system. This was a mix of approximately 1.4 million square feet of existing storage locations we acquired and 3.7 million square feet of new development. Sales of self-moving and self-storage products and services increased $4.7decreased $5.3 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane offset by decreasespropane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Net investment and interest income increased $14.4$13.4 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022,2023, due to increases in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $25.1decreased $10.0 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 20222023, caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program.
Total costs and expenses increased $100.9$42.0 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022.2023. Operating expenses increased $114.2$24.1 million. Repair costs associated with the rental fleet experienced a $33.7$17.2 million increase during the quarter due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet.The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers.selling more retired trucks. Other increases included personnel, liability costs, non-rental equipmentproperty taxes, building maintenance and shippingutilities.Other operating costs including freight and payment processing decreased $20.5 million during the quarter. Depreciation expense associated with U-Box transactions.our rental fleet increased $11.1 million for the second quarter of fiscal 2024 compared with the second quarter of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment increased $28.3decreased $17.5 million from an increase inas resale values.values have decreased while the average cost of units being sold has increased. Depreciation expense associated with our rental fleet was $129.2 million and $125.4 million forWe increased the secondnumber of retired trucks sold compared to the same quarter of fiscal 2023 and 2022, respectively.last year. Depreciation expense on all other assets, largely from buildings and improvements, increased $6.0 million to $52.4$8.1 million. Net losses on the disposal or retirement of land and buildings increased $1.3decreased $0.2 million. Additional details are available in the following Moving and Storage section. The components of depreciation, net of gains on disposals are as follows: | | Quarter Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Depreciation expense - rental equipment | $ | 140,341 | $ | 129,220 | Depreciation expense - non rental equipment | | 23,392 | | 21,546 | Depreciation expense - real estate | | 37,192 | | 30,895 | Total depreciation expense | $ | 200,925 | $ | 181,661 | | | | | | Gains on disposals of rental equipment | | (46,928) | $ | (64,312) | (Gain) loss on disposals of non-rental equipment | | 125 | | (31) | Total gains on disposals equipment | $ | (46,803) | $ | (64,343) | | | | | | Depreciation, net of gains on disposals | $ | 154,122 | $ | 117,318 | | | | | | Losses on disposals of real estate | $ | 1,715 | $ | 1,872 |
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage, before consolidation of the equity in the earnings of the insurance subsidiaries, decreased $41.1$113.2 million to $401.7 million for the second quarter of fiscal 2024, compared with $514.9 million for the second quarter of fiscal 2023, compared with $556.02023. Equity in the earnings of U-Haul Holding Company’s insurance subsidiaries was $16.9 million for the second quarter of fiscal 2022. Equity in the earnings of AMERCO’s insurance subsidiaries was $6.12024, compared with $3.9 million for the second quarter of fiscal 2023, compared with $18.3 million for the second quarter of fiscal 2022.2023.
As a result of the above-mentioned changes in revenues and expenses, consolidated earnings from operations for Moving and Storage decreased to $521.0$418.6 million for the second quarter of fiscal 2023,2024, compared with $574.3$518.8 million for the second quarter of fiscal 2022.2023. Property and Casualty Insurance Quarter Ended June 30, 20222023 compared with the Quarter Ended June 30, 20212022 Net premiums were $26.0$26.4 million and $23.4$26.0 million for the second quarters ended June 30, 20222023 and 2021,2022, respectively. A significant portion of Repwest’s premiums arewere from policies sold in conjunction with U-Haul rental transactions. The premium increasewritten corresponded with the increasedchange in moving and storage transactions at U-Haul during the same period. Net investment and interest income (loss) was ($2.6)$5.5 million and $6.2$(2.6) million for the second quarters ended June 30, 20222023 and 2021,2022, respectively. The main driver forof the decreasechange in net investment income was the $8.5 million decreaseincrease in the market value of unaffiliated equitycommon stocks. Net operatingOperating expenses were $11.6$12.1 million and $10.8$11.6 million for the second quarters ended June 30, 2023 and 2022, and 2021, respectively,respectively. The change was due to an increase in commissions offset by a decrease in loss adjusting fees.commissions.
Benefits and losses incurred were $6.1$4.2 million and $3.6$6.1 million for the second quarters ended June 30, 2023 and 2022, respectively. Benefits and 2021, respectively. The increase was due to unfavorable loss experience.losses incurred corresponded with the change in moving and storage transactions at U-Haul during the same period. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $5.7$15.4 million and $15.2$5.7 million for the second quarters ended June 30, 20222023 and 2021,2022, respectively.
Life Insurance Quarter Ended June 30, 20222023 compared with the Quarter Ended June 30, 20212022 Net premiums were $25.5$22.5 million and $28.9$25.5 million for the quarters ended June 30, 2023 and 2022, and 2021, respectively. Medicare Supplementsupplement premiums decreased $1.9$1.6 million from the policy decrements offset by premium rate increases. Life premiums decreased $1.5$1.2 million primarily from the decrease in sales of single premium life and final expense. Both decreases are due to policyholder lapses currently outweighing sales levels. Deferred annuity deposits were $83.2$81.4 million or $2.4$1.9 million below prior year and are accounted for on the balance sheet as deposits rather than premiums. Net investment income was $19.0$31.6 million and $30.9$19.0 million for the quarters ended June 30, 2023 and 2022, and 2021, respectively. The decrease was primarily due to $8.2 million of realized lossesRealized gain on derivatives used as economic hedges to fixed indexed annuities along with thewas $9.9 million. The change in the provision for expected credit losses that resulted in a decrease of $2.5 million. Additionally, net interest income and realized gains on invested assets decreased $1.2 million.$1.7 million additional increase to investment income. Net operatingOperating expenses were $5.6$4.7 million and $5.2$5.6 million for the quarters ended June 30, 20222023 and 2021,2022, respectively. The increase wasdecrease is primarily due to the increasereduction in administrative expenses offset by the decreased commissions on single premium lifefinal expense products due to decreased premiums.
Benefits and losses incurred were $31.3$38.3 million and $41.1$33.4 million for the quarters ended June 30, 20222023 and 2021,2022, respectively. Interest credited to policyholders decreased $6.9increased $10.1 million due to a reductionan increase in the interest credited rates on equity - indexed annuities driven by market fluctuations.annuities. Life benefits decreased $1.4 million$0.5 due to lower death claims related to COVID-19 and lower sales due to premium adjustments that took place in late 2021.sales. Medicare supplement benefits decreased by $1.3$2.0 million from the declined policies in force.in-force. Benefits on the annuities decreased $0.2$0.7 million. Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $7.0 million and $6.8 million for the quarters ended June 30, 2022 and 2021, respectively.
As a result of the above-mentioned changes in revenues and expenses, pretax earnings (losses) from operations were $1.7$5.5 million and $7.8($0.4) million for the quarters ended June 30, 20222023 and 2021,2022, respectively. AMERCOU-Haul Holding Company and Consolidated Entities
Six Months Ended September 30, 20222023 compared with the Six Months Ended September 30, 20212022 Listed below on a consolidated basis are revenues for our major product lines for the first six months of fiscal 20232024 and the first six months of fiscal 2022:2023: | | Six Months Ended September 30, | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 2,252,800 | $ | 2,214,438 | Self-storage revenues | | 358,763 | | 290,878 | Self-moving and self-storage products and service sales | | 206,215 | | 197,076 | Property management fees | | 18,416 | | 17,196 | Life insurance premiums | | 51,237 | | 57,618 | Property and casualty insurance premiums | | 45,690 | | 39,368 | Net investment and interest income | | 64,082 | | 71,779 | Other revenue | | 303,501 | | 248,757 | Consolidated revenue | $ | 3,300,704 | $ | 3,137,110 |
| | Six Months Ended September 30, | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 2,068,611 | $ | 2,252,800 | Self-storage revenues | | 407,851 | | 358,763 | Self-moving and self-storage products and service sales | | 192,443 | | 206,215 | Property management fees | | 18,444 | | 18,416 | Life insurance premiums | | 45,629 | | 51,237 | Property and casualty insurance premiums | | 45,893 | | 45,690 | Net investment and interest income | | 129,330 | | 64,082 | Other revenue | | 281,967 | | 303,501 | Consolidated revenue | $ | 3,190,168 | $ | 3,300,704 |
Self-moving equipment rental revenues increased $38.4decreased $184.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Transactions, revenue and average miles driven per transaction decreased.The declines were more pronounced for both our In-Town and one-way markets increased as did revenue per transaction.business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet.
Self-storage revenues increased $67.9$49.1 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. The average monthly number of occupied units increased by 16%8%, or 73,20041,501 units, during the first six months of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelvefirst six months, we added approximately 5.42.0 million of new net rentable square feet, or an 11% increase, with approximately 2.2 million of that coming on during the first six months of fiscal 2023.feet. Sales of self-moving and self-storage products and services increased $9.1decreased $13.8 million for the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Life insurance premiums decreased $6.4$5.6 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 20222023 due primarily to decreased Medicare supplement premiums. Property and casualty insurance premiums increased $6.3$0.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period.2023. Net investment and interest income decreased $7.7increased $65.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Moving and Storage accounted for $36.0 million of the improvement due to an increase in interest rates on short-term deposits. Changes in the market value of unaffiliated equitycommon stocks held at our Property and Casualty Insurance subsidiary accounted for $12.3$10.7 million of the decrease for the six months. increase.Our Life Insurance subsidiaries investment income decreased $13.9increased $16.7 million primarily from a net loss of $9.7 milliongains on derivatives used as hedges to fixed indexindexed annuities. In addition, the change in the provision for expected credit losses resulted in a $3.0 million decrease to the investment income. This was partially offset by a $18.7 million increase from Moving and Storage due to an increase in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $54.7decreased $21.5 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022,2023, caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program. Listed below are revenues and earnings from operations at each of our operating segments for the first six months of fiscal 20232024 and the first six months of fiscal 2022.2023. The insurance companies’ first six months ended June 30, 20222023 and 2021.2022. | | Six Months Ended September 30 | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 3,160,456 | $ | 2,970,253 | Earnings from operations before equity in earnings of subsidiaries | | 996,560 | | 1,038,983 | Property and casualty insurance | | | | | Revenues | | 46,445 | | 52,995 | Earnings from operations | | 14,037 | | 24,421 | Life insurance | | | | | Revenues | | 99,799 | | 119,644 | Earnings from operations | | 3,425 | | 10,279 | Eliminations | | | | | Revenues | | (5,996) | | (5,782) | Earnings from operations before equity in earnings of subsidiaries | | (768) | | (774) | Consolidated results | | | | | Revenues | | 3,300,704 | | 3,137,110 | Earnings from operations | | 1,013,254 | | 1,072,909 |
| | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Moving and storage | | | | | Revenues | $ | 3,025,091 | $ | 3,160,456 | Earnings from operations before equity in earnings of subsidiaries | | 788,395 | | 996,560 | Property and casualty insurance | | | | | Revenues | | 59,691 | | 46,445 | Earnings from operations | | 27,401 | | 14,037 | Life insurance | | | | | Revenues | | 111,203 | | 99,799 | Earnings from operations | | 6,964 | | 5,619 | Eliminations | | | | | Revenues | | (5,817) | | (5,996) | Earnings from operations before equity in earnings of subsidiaries | | (747) | | (768) | Consolidated results | | | | | Revenues | | 3,190,168 | | 3,300,704 | Earnings from operations | | 822,013 | | 1,015,448 |
Total costs and expenses increased $223.2$82.9 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Operating expenses for Moving and Storage increased $232.1$52.6 million. Repair costs associated with the rental fleet experienced a $65.8$46.8 million increase during the first six months of fiscal 20232024 due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet.The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers.selling more retired trucks. Other increases included personnel, liabilityproperty taxes, utilities and building maintenance.Other operating costs non-rental equipment maintenanceincluding freight and shippingpayment processing decreased $42.3 million during the quarter.
Depreciation expense associated with U-Box transactions.our rental fleet increased $19.8 million for the first six months of fiscal 2024 compared with the first six months of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment decreased $26.2 million as resale values have decreased while the average cost of units being sold has increased. We increased $42.3 million from an increase in resale values.Depreciation expense associated with our rental fleet was $255.7 million and $251.9 million for the first six monthsnumber of fiscal 2023 and 2022, respectively.retired trucks sold compared to the same quarter last year. Depreciation expense on all other assets, largely from buildings and improvements, increased $12.1 million to $104.1$14.8 million. Net losses on the disposal or retirement of land and buildings increased $8.1 million asdecreased $1.4 million. Additional details are available in the first six months of fiscal 2022 included a condemnation gain of $4.9 million.following Moving and Storage section. As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased $59.6$193.4 million to $1,013.3$822.0 million for the first six months of fiscal 2023,2024, as compared with $1,072.9$1,015.4 million for the first six months of fiscal 2022.2023. Interest expense for the first six months of fiscal 20232024 was $107.0$124.5 million, compared with $78.7$107.0 million for the first six months of fiscal 2022,2023, due to an increase in our outstanding debtaverage cost of $972.3debt. Income tax expense was $167.0 million infor the first six months of fiscal 20232024, compared with the first six months of fiscal 2022. Income tax expense was $218.7 million for the first six months of fiscal 2023, compared with $238.6 million for the first six months of fiscal 2022.2023.
As a result of the above-mentioned items, earnings available to common shareholdersstockholders were $686.0$530.3 million for the first six months of fiscal 2023,2024, compared with $755.1$688.3 million for the first six months of fiscal 2022. Basic and diluted earnings per common share for the first six months of fiscal 2023 were $34.99, compared with $38.51 for the first six months of fiscal 2022.
The weighted average common shares outstanding basic and diluted were 19,607,788 for both the first six months of fiscal 2023 and fiscal 2022.2023.
Moving and Storage Six Months Ended September 30, 20222023 compared with the Six Months Ended September 30, 20212022 Listed below are revenues for the major product lines at our Moving and Storage operating segment for the first six months of fiscal 20232024 and the first six months of fiscal 2022:2023: | | Six Months Ended September 30 | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 2,255,086 | $ | 2,216,542 | Self-storage revenues | | 358,763 | | 290,878 | Self-moving and self-storage products and service sales | | 206,215 | | 197,076 | Property management fees | | 18,416 | | 17,196 | Net investment and interest income | | 20,017 | | 1,355 | Other revenue | | 301,959 | | 247,206 | Moving and Storage revenue | $ | 3,160,456 | $ | 2,970,253 |
| | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Self-moving equipment rentals | $ | 2,070,767 | $ | 2,255,086 | Self-storage revenues | | 407,851 | | 358,763 | Self-moving and self-storage products and service sales | | 192,443 | | 206,215 | Property management fees | | 18,444 | | 18,416 | Net investment and interest income | | 55,815 | | 20,017 | Other revenue | | 279,771 | | 301,959 | Moving and Storage revenue | $ | 3,025,091 | $ | 3,160,456 |
Self-moving equipment rental revenues increased $38.5decreased $184.3 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Transactions, revenue and average miles driven per transaction decreased. TransactionsThe declines were more pronounced for both our In-Town and one-way markets increased as did revenue per transaction.business. Compared to the same period last year, we increased the number of Company operated retail locations independent dealers,as well as the number of box trucks, and trailers in the rental fleet.
Self-storage revenues increased $67.9$49.1 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. The average monthly number of occupied units increased by 16%8%, or 73,20041,501 units, during the first six months of fiscal 20232024 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains, at existing locations, the addition of new capacity to the portfolio and from ana 6% improvement in average revenue per occupied foot. OverDuring the last twelvefirst six months, we added approximately 5.42.0 million of new net rentable square feet, or an 11% increase, with approximately 2.2 million of that coming on during the first six months of fiscal 2023.feet.
We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows: | | Six Months Ended September 30 | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 638 | | 568 | Square footage as of September 30 | | 53,303 | | 47,903 | Average monthly number of units occupied | | 529 | | 456 | Average monthly occupancy rate based on unit count | | 85.0% | | 82.1% | Average monthly square footage occupied | | 45,692 | | 40,207 |
| | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands, except occupancy rate) | Unit count as of September 30 | | 691 | | 638 | Square footage as of September 30 | | 58,402 | | 53,303 | Average monthly number of units occupied | | 529 | | 529 | Average monthly occupancy rate based on unit count | | 83.5% | | 85.0% | End of September occupancy rate based on unit count | | 83.5% | | 84.8% | Average monthly square footage occupied | | 49,279 | | 45,692 |
Over the last twelve months we added approximately 5.45.1 million net rentable square feet of new storage to the system. This was a mix of approximately 1.4 million square feet of existing storage locations we acquired and 3.7 million square feet of new development. Sales of self-moving and self-storage products and services increased $9.1decreased $13.8 million for the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. This was due to increaseddecreased sales of hitches, moving supplies and propane. The decrease in self-moving transactions has negatively impacted the sales of moving supplies. Net investment and interest income increased $18.7$35.8 million during the second quarter of fiscal 2023,2024, compared with the second quarter of fiscal 2022,2023, due to increases in invested cash combined with higher interest rates on these short-term deposits. Other revenue increased $54.8decreased $22.2 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022,2023, caused primarily coming from increased moving and storage transactions withinby decreases in our U-Box®program. Total costs and expenses increased $232.6$72.8 million during the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Operating expenses increased $232.1$52.6 million.Repair costs associated with the rental fleet experienced a $65.8$46.8 million increase during the first six months of fiscal 20232024 due to the higher cost of preventative maintenance resulting from higher fleet activity combinedalong with the slower rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delayscosts associated with our original equipment manufacturers. selling more retired trucks.Other increases included personnel, liabilityproperty taxes, utilities and building maintenance.Other operating costs non-rental equipment maintenanceincluding freight and shippingpayment processing decreased $42.3 million during the quarter. Depreciation expense associated with U-Box transactions.our rental fleet increased $19.8 million for the first six months of fiscal 2024 compared with the first six months of fiscal 2023 due to an increase in the pace of new additions to the fleet combined with their higher cost. Net gains from the disposal of rental equipment decreased $26.2 million as resale values have decreased while the average cost of units being sold has increased. We increased $42.3 million from an increase in resale values. Depreciation expense associated with our rental fleet was $255.7 million and $251.9 million for the first six monthsnumber of fiscal 2023 and 2022, respectively. retired trucks sold compared to the same quarter last year.Depreciation expense on all other assets, largely from buildings and improvements, increased $12.1 million to $104.1$14.8 million. Net losses on the disposal or retirement of land and buildings increased $8.1 million asdecreased $1.4 million. Additional details are available in the following Moving and Storage section.
The components of depreciation, net of gains on disposals for the first six months of fiscal 2022 included a condemnation gain of $4.9 million.2024 were as follows: | | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Depreciation expense - rental equipment | $ | 275,533 | $ | 255,741 | Depreciation expense - non rental equipment | | 45,694 | | 43,167 | Depreciation expense - real estate | | 73,173 | | 60,897 | Total depreciation expense | $ | 394,400 | $ | 359,805 | | | | | | Gains on disposals of rental equipment | $ | (102,735) | $ | (128,313) | (Gain) loss on disposals of non-rental equipment | | 271 | | (378) | Total gains on disposals equipment | $ | (102,464) | $ | (128,691) | | | | | | Depreciation, net of gains on disposals | $ | 291,936 | $ | 231,114 | | | | | | Losses on disposals of real estate | $ | 2,736 | $ | 4,179 |
As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries decreased to $788.4 million for the first six months of fiscal 2024, compared with $996.6 million for the first six months of fiscal 2023, compared with $1,039.02023. Equity in the earnings of U-Haul Holding Company’s insurance subsidiaries was $27.1 million for the first six months of fiscal 2022. Equity in the earnings of AMERCO’s insurance subsidiaries was $13.72024, compared with $15.9 million for the first six months of fiscal 2023, compared with $27.4 million for the first six months of fiscal 2022.2023.
As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $1,010.3$815.5 million for the first six months of fiscal 2023,2024, compared with $1,066.4$1,012.5 million for the first six months of fiscal 2022.2023.
Property and Casualty Insurance Six Months Ended June 30, 20222023 compared with the Six Months Ended June 30, 20212022 Net premiums were $46.8$47.4 million and $40.8$46.8 million for the six months ended June 30, 20222023 and 2021,2022, respectively. A significant portion of Repwest’s premiums arecome from policies sold in conjunction with U-Haul rental transactions. The premium increasewritten corresponded with the increasedchange in moving and storage transactions at U-Haul during the same period. Net investment and interest income (loss) was ($0.3)$12.3 million and $12.2$(0.3) million for the six months ended June 30, 20222023 and 2021,2022, respectively. The main driver of the change in net investment income was the decreaseincrease in valuationthe market value of unaffiliated common stock of $12.3 million.stock. Net operatingOperating expenses were $21.8$23.4 million and $19.6$21.8 million for the six months ended June 30, 20222023 and 2021,2022, respectively. The change was due to an increase in commissions offset by a decrease inand loss adjusting fees.
Benefits and losses incurred were $10.5$8.7 million and $8.8$10.5 million for the six months ended June 30, 2023 and 2022, respectively. Benefits and 2021, respectively. The increase was due to unfavorable loss experience.losses incurred corresponded with the change in moving and storage transactions at U-Haul during the same period. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $14.0$27.4 million and $24.4$14.0 million for the six months ended June 30, 20222023 and 2021,2022, respectively. Life Insurance Six Months Ended June 30, 20222023 compared with the Six Months Ended June 30, 20212022 Net premiums were $51.2$45.6 million and $57.6$51.2 million for the six months ended June 30, 20222023 and 2021,2022, respectively. Medicare Supplementsupplement premiums decreased $3.8$3.3 million from the policy decrements offset by premium rate increases.decrements. Life premiums decreased $2.6$2.2 million primarily from the decrease in sales of single premium life and final expense. Deferred annuity deposits were $169.0$125.1 million or $15.4$43.9 million below prior year and are accounted for on the balance sheet as deposits rather than premiums.
Net investment income was $46.4$63.1 million and $60.3$46.4 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. The decrease was primarily due to $9.7 million of realized lossesRealized gain on derivatives used as economic hedges to fixed indexed annuities along with thewas $12.0 million current year-to-date. The change in the provision for expected credit losses that resulted in a decrease of $2.7 million. Additionally, netcurrent year-to-date $2.0 million additional increase to the investment income. Net interest income and realized gainsgain on the invested assets decreased $1.5 million.increased $2.6 million, primarily on bonds, and $1.2 million on mortgage loans. Benefits and losses incurredOperating expenses were $71.0$10.1 million and $83.1$10.7 million for the six months ended June 30, 2023 and 2022, respectively.
Benefits and 2021,losses incurred were $79.2 million and $68.8 million for the six months ended June 30, 2023 and 2022, respectively. Interest credited to policyholders decreased $7.4increased $13.4 million due to a reductionan increase in the interest credited rates on equity - indexed annuities driven by stock market fluctuations.annuities. Life benefits decreased $2.8$2.5 million due to lower death claims related to COVID-19 and lower sales due to premium adjustments that took place in late 2021.of new policies. Medicare supplement benefits decreased by $1.9$2.1 million from the declineddeclining policies in force.in-force. Amortization of DAC, SIA and VOBA were $14.6$14.9 million and $15.6$14.6 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. The decrease in DAC amortization was primarily associated with annuities.In addition, there was a steady decrease in Medicare supplement DAC Amortization from a decline in the in-force. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $3.2$6.7 million and $10.2$5.5 million for the six months ended June 30, 20222023 and 2021,2022, respectively. Liquidity and Capital Resources We believe our current capital structure is a positive factor that will enable us to pursue our operational plans and goals and provide us with sufficient liquidity for the foreseeable future. There are many factors that could affect our liquidity, including some of which are beyond our control, and there is no assurance that future cash flows and liquidity resources will be sufficient to meet our outstanding debt obligations and our other future capital needs.
As of September 30, 2022,2023, cash and cash equivalents totaled $3,065.1$2,145.6 million, compared with $2,704.1$2,060.5 million as of March 31, 2022.2023. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of September 30, 20222023 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were: | | Moving & Storage | | Property & Casualty Insurance (a) | | Life Insurance (a) | | | (Unaudited) | | | (In thousands) | Cash and cash equivalents | $ | 3,025,390 | $ | 11,196 | $ | 28,529 | Other financial assets | | 204,671 | | 444,990 | | 2,803,275 | Debt obligations | | 6,298,831 | | – | | – | | | | | | | | (a) As of June 30, 2022 | | | | | | |
| | Moving & Storage | | Property & Casualty Insurance (a) | | Life Insurance (a) | | | (Unaudited) | | | (In thousands) | Cash and cash equivalents | $ | 2,068,790 | $ | 44,272 | $ | 32,069 | Other financial assets | | 314,005 | | 436,100 | | 2,722,737 | Debt obligations (b) | | 6,436,800 | | – | | – | | | | | | | | (a) As of June 30, 2023 | | | | | | | (b) Excludes ($35,901) of debt issuance costs | | | | | | |
As of September 30, 2022,2023, Moving and Storage had additional cash available under existing credit facilities of $150.0$486.1 million. The majority of invested cash at the Moving and Storage segment is held in government money market funds. Net cash provided by operating activities decreased $331.0$250.7 million in the first six months of fiscal 20232024 compared with the first six months of fiscal 2022. The decrease was primarily2023 due to reduced net earningsa decrease in operating profits combined with an increase in claim payments at Moving and the payment of $42.0 million in federal income tax in fiscal 2023 compared with the receipt of $243 million of federal income tax refunds in fiscal 2022.Storage. Net cash used in investing activities increased $92.5decreased $18.5 million in the first six months of fiscal 2023,2024, compared with the first six months of fiscal 2022.2023. Purchases of property, plant and equipment increased $295.8$328.9 million, with fleet spending accounting for $256.2 million and real estate $49.0 million. Reinvestment in the rental fleet was less than our projection due to delays in receiving new equipment from our original equipment manufacturers during the first six months of fiscal 2023; however, the level of reinvestment in the rental fleet has increased in comparison to the first six months of fiscal 2022. Cash from the sales of property, plant and equipment increased $22.7$78.7 million largely due to fleet sales. For our insurance subsidiaries, net cash usedprovided in investing activities decreased $168.6increased $150.1 million due to a decrease in purchases in fixed maturity investments.investments and net cash provided by investing activities for Moving and Storage increased $127.7 million on short-term Treasury notes.
Net cash provided by financing activities decreased $442.8$57.7 million in the first six months of fiscal 2023,2024, as compared with the first six months of fiscal 2022.2023. This was due to a combination of increaseddecreased debt payments of $213.9$89.1 million, decreased finance lease repayments of $21.7$6.1 million, a decrease in cash from borrowings of $194.4$87.7 million, and a decrease in dividend payments of $5.5 million and an increase in net annuity depositswithdrawals from Life Insurance of $54.3$70.7 million. Liquidity and Capital Resources and Requirements of Our Operating Segments Moving and Storage To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. U-Haul estimates that during fiscal 2023,2024, the Company will reinvest in its rental equipment fleet approximately $760$870 million, net of equipment sales and excluding any lease buyouts. Through the first six months of fiscal 2023,2024, the Company invested, net of sales, approximately $393$569 million before any lease buyouts in its rental equipment fleet. Fleet investments in fiscal 20232024 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment, the availability of equipment from our original equipment manufacturers and the used-truck sales market. We anticipate that the fiscal 20232024 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options.
The Company has traditionally financedfunded the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations. The Company’s plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. For the first six months of fiscal 2023,2024, the Company invested $584$633 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2023,2024, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, and the identification and successful acquisition of target properties.properties and the availability of labor and materials.We are likely to maintain a high level of real estate capital expenditures in fiscal 2024. U-Haul's growth plan in self-storage also includes the expansion of the U-Haul Storage Affiliate program, which does not require significant capital. Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) at Moving and Storage were $1,005.9$1,256.1 million and $732.7$1,005.9 million for the first six months of fiscal 20232024 and 2022,2023, respectively. The components of our net capital expenditures are provided in the following table: | | Six Months Ended September 30 | | | 2022 | | 2021 | | | (Unaudited) | | | (In thousands) | Purchases of rental equipment | $ | 718,231 | $ | 564,331 | Purchases of real estate, construction and renovations | | 583,889 | | 444,334 | Other capital expenditures | | 33,408 | | 31,023 | Gross capital expenditures | | 1,335,528 | | 1,039,688 | Less: Sales of property, plant and equipment | | (329,611) | | (306,946) | Net capital expenditures | $ | 1,005,917 | $ | 732,742 |
| | Six Months Ended September 30 | | | 2023 | | 2022 | | | (Unaudited) | | | (In thousands) | Purchases of rental equipment | $ | 974,436 | $ | 718,231 | Purchases of real estate, construction and renovations | | 632,902 | | 583,889 | Other capital expenditures | | 57,049 | | 33,408 | Gross capital expenditures | | 1,664,387 | | 1,335,528 | Less: Sales of property, plant and equipment | | (408,279) | | (329,611) | Net capital expenditures | $ | 1,256,108 | $ | 1,005,917 |
Moving and Storage continues to hold significant cash and we believe has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage marketplace, pay dividends, repurchase shares of common stock or reduce existing indebtedness where possible.
Property and Casualty Insurance State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance’s assets are generally not available to satisfy the claims of AMERCOU-Haul Holding Company or its legal subsidiaries. We believe that stockholders’ equity at Property and Casualty Insurance remains sufficient, and we do not believe that its ability to pay ordinary dividends to AMERCOU-Haul Holding Company will be restricted per state regulations. Property and Casualty Insurance’s stockholder’s equity was $282.8$317.5 million and $296.1$294.5 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The decreaseincrease resulted from net earnings of $11.1$21.7 million and a decreasean increase in other comprehensive income of $24.4$1.2 million due to the decrease in the market value of its investment portfolio. Property and Casualty Insurance does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio. Life Insurance Life Insurance manages its financial assets to meet policyholder and other obligations, including investment contract withdrawals and deposits. Life Insurance’s net depositswithdrawals as of June 30, 20222023 were $29.1$41.6 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s assets are generally not available to satisfy the claims of AMERCOU-Haul Holding Company or its legal subsidiaries.
Life Insurance’s stockholder’s equity was $219.5$145.0 million and $440.9$132.2 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The decreaseincrease resulted from net earnings of $2.6$5.3 million and a decreasean increase in other comprehensive income of $224.0$7.5 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio. Outside of its membership in the Federal Home Loan Bank (“FHLB”) system, Life Insurance has not historically used debt or equity issues to increase capital and therefore has not had any significant direct exposure to capital market conditions other than through its investment portfolio. As of June 30, 2022,2023, Oxford had outstanding deposits of $60.0million in the FHLB.For a more detailed discussionFHLB with an availability of this deposit, please see Note 3, Borrowings,$76.7 million, for which Oxford pays fixed interest rates between 0.49% and 4.30% with maturities between March 30, 2024 and September 30, 2027. As of June 30, 2023, available-for-sale-investments held with the NotesFHLB totaled $93.9 million, of which $62.8 million were pledged as collateral to Condensed Consolidated Financial Statements.secure the outstanding advances. The balances of these advances are included within liabilities from investment contracts on the consolidated balance sheets. Cash Provided from Operating Activities by Operating Segments Moving and Storage Net cash provided from operating activities were $1,129.9$887.3 million and $1,472.3$1,129.9 million for the first six months of fiscal 2024 and 2023, and 2022, respectively. The decrease was primarilyrespectively, due to reduced net earnings and the payment of $42.0 milliona decrease in federal income taxoperating profits combined with an increase in fiscal 2023 compared with the receipt of $243 million of federal income tax refunds in fiscal 2022.claim payments. Property and Casualty Insurance Net cash provided by operating activities were $16.2$18.1 million and $13.9$16.2 million for the first six months ended June 30, 20222023 and 2021,2022, respectively. The increase was the result of changes in intercompany balances anddue to the timing of payables activity.activity within the normal course of business. Property and Casualty Insurance’s cash and cash equivalents and short-term investment portfolios amounted to $44.7$44.3 million and $41.7$27.2 million atas of June 30, 20222023 and December 31, 2021,2022, respectively. These balances reflect funds in transition from maturity proceeds to long termlong-term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow Property and Casualty Insurance to schedule cash needs in accordance with investment and underwriting proceeds. Life Insurance Net cash provided by operating activities were $42.1$32.1 million and $32.9$42.1 million for the first six months ended June 30, 20222023 and 2021,2022, respectively. The increasedecrease in operating cash flows was primarily due to timing of settlement of receivables for securities. This was offset by the decrease in premiums net of benefits and commissions.
In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through Life Insurance’s short-term portfolio and its membership in the FHLB. As of June 30, 20222023 and December 31, 2021,2022, cash and cash equivalents and short-term investments amounted to $28.5$32.1 million and $50.1$15.0 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs. Liquidity and Capital Resources - Summary We believe we have the financial resources needed to meet our business plans, including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs. As a result of the federal income tax provisions of the Coronavirus Aid, Relief and Economic Security Act, we have filed applicable forms with the Internal Revenue Service to carryback net operating losses. These refund claims total approximately $366 million, of which we have received approximately $243 million and arewith the remaining amount reflected in Prepaidprepaid expense. These amounts are expected to provide us additional liquidity whenever received. It is possible future legislation could negatively impact our ability to receive these tax refunds.
Our borrowing strategy has primarily focused on asset-backed financing, rental equipment leases and private placement borrowings limited by the amount of unencumbered assets available. As part of this strategy, we seek to ladder maturities and fix interest rates. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. As of September 30, 2022,2023, we had available borrowing capacity under existing credit facilities of $150.0$486.1 million. Effective in October 2022, we have increased borrowing capacity under existing credit facilities to $465.0 million. ItWhile it is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit. Wecredit, we believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long term debt and borrowing capacity, please see Note 3, Borrowings,4, Notes, Loans and Finance Lease Payable, net, of the Notes to Condensed Consolidated Financial Statements. Disclosures about Contractual Obligations and Commercial Commitments Our estimates as to future contractual obligations have not materially changed from the disclosure included under the subheading Disclosures about Contractual Obligations and Commercial Commitments in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.2023. Fiscal 20232024 Outlook We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals and is likely to increase in fiscal 2023.2024. Revenue in the U-Move®program could be adversely impacted should we fail to execute in any of these areas. Should we be unable to acquire enough new rental equipment to properly rotate our fleet, repair and maintenance costs will continue to increase. Even if we execute our plans, we could see declines in revenues primarily due to unforeseen events including adverse economic conditions or heightened competition that is beyond our control. With respect to our storage business, we have added new locations and expanded existing locations. In fiscal 2023,2024, we are actively looking to complete current projects, increase occupancy in our existing portfolio of locations and acquire new locations. New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. It is likely spending on acquisitions and new development will increase in fiscal 2023.2024. We will continue to invest capital and resources in the U-Box®program throughout fiscal 2023.2024. Inflationary pressures may challenge our ability to maintain or improve upon our operating margin. Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove®, Safetow®, Safemove Plus®, Safestor®and Safestor Mobile®protection packages to U-Haul customers.
Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes. Interest Rate Risk The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations and one variable rate operating lease. We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in interest rates. We enter into these arrangements with counterparties that are significant financial institutions with whom we generally have other financial arrangements. We are exposed to credit risk should these counterparties not be able to perform on their obligations. Following is a summary of our interest rate swap agreements as of September 30, 2022:2023: | Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 61,587 | | $ | 2,957 | | 7/15/2022 | | 7/15/2032 | | 2.86% | | 1 Month SOFR | | 74,750 | | | 2,806 | | 8/1/2022 | | 8/1/2026 | | 2.72% | | 1 Month SOFR | | 74,250 | | | 2,745 | | 8/1/2022 | | 8/31/2026 | | 2.75% | | 1 Month SOFR |
| Notional Amount | | | Fair Value | | Effective Date | | Expiration Date | | Fixed Rate | | Floating Rate | | (Unaudited) | | | | | | | | | | (In thousands) | | | | | | | | | $ | 59,107 | | $ | 5,083 | | 7/15/2022 | | 7/15/2032 | | 2.86% | | 1 Month SOFR | | 71,750 | | | 3,468 | | 8/1/2022 | | 8/1/2026 | | 2.72% | | 1 Month SOFR | | 71,250 | | | 3,399 | | 8/1/2022 | | 8/31/2026 | | 2.75% | | 1 Month SOFR | | 100,000 | | | 378 | | 8/31/2023 | | 8/31/2025 | | 4.71% | | 1 Month SOFR |
As of September 30, 2022,2023, we had $975.6$707.1 million of variable rate debt obligations. obligations, of this amount, $405.0 million is not fixed through interest rate swaps.If SOFRSecured Overnight Funding Rate (“SOFR”) were to increase 100 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by $7.7$4.9 million annually (after consideration of the effect of the above derivative contracts). Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Additionally, our insurance subsidiaries’ fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies’ asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates. We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholdercontract holder based on the change in the value of the S&P 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair market value on our balance sheet. AtAs of June 30, 20222023 and December 31, 2021,2022, these derivative hedges had a net market value of $1.7$10.5 million and $7.5$4.3 million, with notional amounts of $502.5$509.5 million and $416.7$465.7 million, respectively. These derivative instruments are included in Investments, other, on the condensed consolidated balance sheets. Although the call options are employed to be effective hedges against our policyholder obligations from an economic standpoint, they do not meet the requirements for hedge accounting under GAAP. Accordingly, the call options are marked to fair value on each reporting date with the change in fair value, plus or minus, included as a component of net investment and interest income. The change in fair value of the call options includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open contracts.
Foreign Currency Exchange Rate Risk The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 5.5%5.3% and 5.2%5.5% of our revenue was generated in Canada during the first six months of fiscal 20232024 and 2022,2023, respectively. The result of a 10.0%10% change in the value of the U.S. dollar relative to the Canadian dollar would not be material to net income. We typically do not hedge any foreign currency risk since the exposure is not considered material.
Cautionary Statements Regarding Forward-Looking Statements This Quarterly Report contains “forward-looking statements” regarding future events and our future results of operations. We may make additional written or oral forward-looking statements from time to time in filings with the SEC or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements may include, but are not limited to, the risk associated with COVID-19 or similar events on employeessystem members or customers,customers; the impact onof the economic environment oron demand offor our products and the cost and availability of debt and capital,capital; estimates of capital expenditures,expenditures; plans for future operations, products or services, financing needs, plans and strategies,strategies; our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us,us; liquidity and the availability of financial resources to meet our needs, goals and strategies,strategies; plans for new business, storage occupancy, growth rate assumptions, pricing, costs, and access to capital and leasing markets,markets; the impact of our compliance with environmental laws and cleanup costs,costs; our beliefs regarding our sustainable practices,sustainability practices; our used vehicle disposition strategy,strategy; the sources and availability of funds for our rental equipment and self-storage expansion and replacement strategies and plans,plans; our plan to expand our U-Haul® storage affiliate program,program; that additional leverage can be supported by our operations and business,business; the availability of alternative vehicle manufacturers,manufacturers; the availability and economics of electric vehicles for our rental fleet; our estimates of the residual values of our equipment fleet,fleet; our plans with respect to off-balance sheet arrangements,arrangements; our plans to continue to invest in the U-Box®program, program; the impact of interest rate and foreign currency exchange rate changes on our operations,operations; the sufficiency of our capital resources,resources; the sufficiency of capital of our insurance subsidiaries,subsidiaries; inflationary pressures that may challenge our ability to maintain or improve upon our operating margin,margin; and expectations regarding the potential impact to our information technology infrastructure and on our financial performance and business operations of technology, cybersecurity or data security breaches, including any related costs, fines or lawsuits, and our ability to continue ongoing operations and safeguard the integrity of our information technology infrastructure, data, and employee, customer and vendor information, as well as assumptions relating to the foregoing. The words “believe,” “expect,” “anticipate,” “plan,” “may,” “will,” “could,” “estimate,” “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could significantly affect results include, without limitation, the degree and nature of our competition; our leverage; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; the limited number of manufacturers that supply our rental trucks; our ability to effectively hedge our variable interest rate debt; that we are controlled by a small contingent of stockholders; fluctuations in quarterly results and seasonality; changes in, and our compliance with, government regulations, particularly environmental regulations and regulations relating to motor carrier operations; outcomes of litigation; our reliance on our third party dealer network; liability claims relating to our rental vehicles and equipment; our ability to attract, motivate and retain key employees; reliance on our automated systems and the internet; our credit ratings; our ability to recover under reinsurance arrangements and other factors described in our Annual Report on Form 10-K in Item 1A, Risk Factors, and in this Quarterly Report or the other documents we file with the SEC. The above factors, as well as other statements in this Quarterly Report and in the Notes to Condensed Consolidated Financial Statements, could contribute to or cause such risks or uncertainties, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized. We assume no obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by law.
Item 4. Controls and Procedures Attached as exhibits to this Quarterly Report are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented in the section titled Evaluation of Disclosure Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our "disclosuredisclosure controls and procedures"procedures (as such term is defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (“Disclosure Controls”) as of the end of the most recently completed fiscal quarter covered by this Quarterly Report. Our Disclosure Controls are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.September 30, 2023. Based upon the controlsthat evaluation, our CEO and CFO have concluded that as of September 30, 2023, our disclosure controls and procedures were not effective due to the endmaterial weakness in internal control over financial reporting described below.
Previously Disclosed Material Weaknesses and Remediation Plan
Two-Class Method of Earnings per Share. As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the period covered by this Quarterly Report, our Disclosure Controls were effective atfiscal year ended March 31, 2023, we implemented a reasonable assurance levelplan to address the material weakness related to the above stated design purposes.accounting for the two-class method of earnings per share associated with the recently issued UHAL.B common stock, including: Inherent Limitations on
- Redesigning the
Effectiveness of Controlsrelated control
- Conducting relevant training for personnel involved in the process and control functions
- Enhancing the procedures and control activity documentation
These actions were completed in advance of our year end close process as of March 31, 2023, and the redesigned control operated as planned as part of our March 31, 2023, year-end close process.
In conjunction with our interim period close process as of June 30, 2023, the redesigned control again operated as designed. Therefore, based upon our testing of the redesigned control over these instances, we have concluded that the material weakness related to the calculation of earnings per share using the two-class method associated with the recently issued UHAL.B common stock, has been remediated.
General Information Technology Controls. As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, we determined a material weakness existed as management did not fully design, implement and monitor general information technology controls in the areas of program change management, user access, segregation of duties, and cyber security for systems supporting substantially all of the Company’s internal control processes. A substantial portion of the Company’s controls are dependent upon the information derived from the information technology systems and therefore the dependent controls were concluded to be ineffective. Our management, includingunder the oversight of our CEOAudit Committee, has begun evaluating and CFO, does not expectimplementing new controls or redesigning controls to remediate the control deficiencies giving rise to this material weakness. These remediations measures have included:
- Assessing and formalizing the design of certain information technology policies
- Implementing controls and procedures relating to program change management, user access, segregation of duties and cyber security for systems supporting substantially all of the Company’s internal control processes
- Developing monitoring controls and protocols that will allow us to timely assess the design and operating effectiveness of the new and redesigned controls
- Strengthening of password policies
- Conducting more frequent end-user access reviews
- Enhancing the process for timely review of program management changes
We are committed to maintaining a strong internal control environment, and believe that these remediation actions represent significant improvements in our Disclosure Controls orcontrols under the Internal Control – Integrated Framework Issued by the Committee of Sponsoring Organizations of the Treadway Commission. As we continue to evaluate and work to improve our internal control over financial reporting, additional remediation measures may be required, which may require additional implementation time, or we may modify certain of our remediation measures. The material weakness related to the general information technology controls will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, becauseremediated, until the applicable controls operate for a sufficient
period of the inherent limitations in all control systems, no evaluation oftime and management has concluded, through testing, that these controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of our controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.operating effectively.
Changes in Internal Control Over Financial Reporting There
Other than the material weakness described above, there have not been any changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recently completed fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II Other information Item 1. Legal Proceedings The information regarding our legal proceedings in Note 8,9, Contingencies, of the Notes to Condensed Consolidated Financial Statements is incorporated by reference herein. Item 1A. Risk Factors We refer youThe following discussion of potential risks under the caption ‘We are highly dependent upon our automated systems and the Internet for managing our business’ contains material updates to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” of our most recent annual reportrisk factor described under the same heading in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022, which identify important2023.Other than the following updated risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” in our MD&A of this quarterly report on Form 10-Q. MD&A and the consolidated financial statements and related notes should be read in conjunction with such risks and other factors for a full understanding of our operations and financial conditions. The risks described in our Form 10-K and hereinfactor, we are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Below we set forthaware of any material updates to the risk factors containeddescribed in “Item 1A. Risk Factors” of our most recently filed Form 10-K:
The trading price for our outstanding Common Stock may continue to be volatile and the trading price for our newly distributed Series N Non-Voting Common Stock may also be volatile.
An Independent Special Committee of the Board of Directors authorized the creation of a new Series of Common Stock, designated as Series N Non-Voting Common Stock, par value of $0.001 per share (the “Non-Voting Common Stock”). This series of stock is in addition to our outstanding common stock, $0.25 par value (the “Voting Common Stock”). On November 9, 2022, each holder of our Voting Common Stock as of November 3, 2022 received nine shares of Non-Voting Common Stock for every outstanding share of Voting Common Stock through a stock dividend. The stock dividend is intended to have the same general effects as a 10-for-1 stock split. that Annual Report.
We expect thatare highly dependent upon our automated systems and the market priceInternet for the shares ofmanaging our Voting Common Stock will generally reflect the effect of a stock split once the dividend is distributed.Although we plan to list the Non-Voting Common Stock on the NASDAQ Global Select Market, we cannot predict whether, or to what extent, a liquid trading market will develop for the Non-Voting Common Stock. If a liquid trading market does not develop or if the Non-Voting Common Stock is not attractive to retail investors, including team members and customers of the Company, we may not achieve our objectives in creating this new class.business. The trading priceOur information systems are largely Internet-based, including our point-of-sale reservation system, payment processing and telephone systems. While our reliance on this technology lowers our cost of providing service and expands our stock has at times experienced substantial price volatility and may continueabilities to be volatile, including as a result of the distribution of shares of Non-Voting Common Stock. The market prices of our two series of stock and the allocation of value between the two may be volatile and their respective values may decline. The trading price of our Voting Common Stock and Non-Voting Common Stock may fluctuate widely in responsebetter serve customers, it exposes us to various factors, somerisks, including natural and man-made disasters, terrorist attacks and cyber-attacks. We have put into place extensive security protocols, backup systems and alternative procedures to mitigate these risks. However, disruptions or breaches, detected or undetected by us, for any period of which are beyond our control. These factors include, among others:
•Quarterly variationstime in any portion of these systems could adversely affect our results of operations or thoseand financial condition and inflict reputational damage.
In addition, the provision of service to our customers and the operation of our competitors. •Announcementsnetworks and systems involve the storage and transmission of proprietary information and sensitive or confidential data, including personal information of customers, system members and others. Our information technology systems may be susceptible to computer viruses, attacks by uscomputer hackers, malicious insiders or our competitorscatastrophic events. Hackers, acting individually or in coordinated groups, may also launch distributed denial of acquisitions, new products, significant contracts, commercial relationships,service attacks or capital commitments.
•Recommendations by securities analystsransom or changesother coordinated attacks that may cause service outages or other interruptions in earnings estimates.
•Announcements about our earnings that are not in line with analyst expectations.
•Announcements by our competitors of their earnings that are not in line with analyst expectations.
•Commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardlessaccess to our data. In addition, breaches in security could expose us, our customers, or the individuals affected, to a risk of its accuracy.loss or misuse of proprietary information and sensitive or confidential data.
•In 2022 and 2021, we experienced a cybersecurity incident, which is described in this Form 10-Q under the heading “Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operation – Cybersecurity Incident”. We have also experienced and continue to experience a significant increase in the number of attempted attacks on our technology systems, which could increase the likelihood that any of the risks described in this risk factor may be realized.The volume of shares of Voting Common Stocktechniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be difficult to detect for a long time and Non-Voting Common Stock available for public sale.often are not recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative or remedial measures.
Any of these occurrences could result in disruptions in our operations, the loss of existing or potential customers, damage to our brand and reputation, and litigation and potential liability for the Company. In addition, the cost and operational consequences of implementing further data or system protection measures could be significant, and our efforts to deter, identify, mitigate and/or eliminate any security breaches may not be successful.
Sales of Voting Common Stock and Non-Voting Common Stock by us or by our stockholders (including sales by our directors, executive officers, and other employees). •Short sales, hedging, and other derivative transactions on shares of our Voting Common Stock and Non-Voting Common Stock.
•The perceived values of Voting Common Stock and Non-Voting Common Stock relative to one another.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information Not applicable.During the quarter ended September 30, 2023, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as those terms are defined in Item 408 of Regulation S-K.
Item 6. Exhibits
The following documents are filed as part of this report: Exhibit Number | Description | Page or Method of Filing | 3.1 | Amended and Restated Articles of Incorporation of AMERCOU-Haul Holding Company | Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K, filed on June 9, 2016, file no. 1-11255 | 3.2 | Restated BylawsU-Haul Holding Company Certificate of AMERCODesignation of Series N Non-Voting Common Stock
| Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K,8-A, filed on September 5, 2013,October 24, 2022, file no. 1-11255 | 4.13.3
| Series UIC-9K, 10K, 11K, 12K, 13K, 14K, 15K, 18K, 19K, 20K and 21K Amendment to the Amended and Restated Forty-Second Supplemental Indenture, dated July 19, 2022, by and between AMERCO and U.S. Bank TrustBylaws of U-Haul Holding Company National Association as successor in interest to U.S. Bank National Association, as trustee.
| Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K filed on JulyDecember 19, 2022, file no. 1-11255.1-11255 | 4.23.4
| Series UIC-1L Amendment to the Amended and Restated Forty-Third Supplemental Indenture, dated July 19, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee.
Articles of Conversion/Exchange/Merger | Incorporated by reference to AMERCO’sU-Haul Holding Company’s Current Report on Form 8-K filed on JulyDecember 19, 2022, file no. 1-11255. | 4.3
| Series UIC-9L, 10L, and 11L Forty-Fifth Supplemental Indenture and Pledge and Security Agreement dated July 19, 2022, by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U.S. Bank National Association, as trustee.
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on July 19, 2022 file no. 1-11255.
| 4.4
| Series UIC-9K, 10K, 11K, 12K, 13K, 14K and 15K Amendment to the Amendment to the Amended and Restated Forty-Second Supplement Indenture and Pledge and Security Agreement dated September 27, 2022 by and between AMERCO and U.S. Bank Trust Company, National Association as successor in interest to U. S Bank National Association, as trustee
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 27, 2022 file no. 1-11255.
| 4.5
| Series 12L, 13L, 14L, 15L, 16L, 17L, 18L, 19L, 20L and 21L Forty-Sixth Supplemental Indenture and Pledge and Security Agreement dated September 27, 2022, by and between AMERCO and U.S Bank Trust Company, National Association as successor in interest to U.S Bank National Association, as trustee
| Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 27, 2022 file no. 1-11255.1-11255
| 31.1 | Rule 13a-14(a)/15d-14(a) Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCOU-Haul Holding Company | Filed herewith |
31.2 | Rule 13a-14(a)/15d-14(a) Certificate of Jason A. Berg, Chief Financial Officer of AMERCOU-Haul Holding Company | Filed herewith | 32.1 | Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCOU-Haul Holding Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished herewith | 32.2 | Certificate of Jason A. Berg, Chief Financial Officer of AMERCOU-Haul Holding Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished herewith | 101.INS | Inline XBRL Instance Document | Filed herewith | 101.SCH | Inline XBRL Taxonomy Extension Schema | Filed herewith |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | Filed herewith | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | Filed herewith | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | Filed herewith | 104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101) | Filed herewith | | | |
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. AMERCOU-Haul Holding Company
Date: November 9, 20228, 2023 | | /s/ Edward J. Shoen | | | Edward J. Shoen | | | President and Chairman of the Board | | | (Principal Executive Officer) | | | | | | | | | | Date: November 9, 20228, 2023 | | /s/ Jason A. Berg | | | Jason A. Berg | | | Chief Financial Officer | | | (Principal Financial Officer) | | | | | | | | | | Date: November 9, 20228, 2023 | | /s/ Maria L. Bell | | | Maria L. Bell | | | Chief Accounting Officer | | | (Principal Accounting Officer) |
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