U-Haul Holding Co /NV/ - Annual Report: 2004 (Form 10-K)

     U-Haul is the second largest operator of self-storage and has been a leader in the self-storage industry since 1974. U-Haul operates over 340,000 storage rooms, approximately 29 million square feet of storage space and locations in 49 states and 10 Canadian provinces. U-Haul’s self-storage facility locations range in size up to 152,000 square feet of storage space, with individual storage units in sizes ranging from 15 square feet to over 400 square feet.

     The primary market for storage rooms is the storage of household goods. We believe that our self-storage services provide a competitive advantage through such things as Maximum Security (“MAX”), an electronic system that monitors the storage facility 24 hours a day; climate control; individually alarmed rooms; extended hour access; and an internet based customer reservation and account management system.

eMove

     Our eMove.com web site connects independent providers of moving and self-storage services with “do-it-yourself” moving and storage customers. The eMove.com web site connects business to business, business to consumer and consumer to consumer to provide what we believe to be a compelling array of products and services as near as any internet portal.

     eMove.com is the largest self-move and self-storage online destination for consumers and businesses we know of. Shoppers can rent or reserve moving equipment, hire helpers to load, pack or unload, rent or reserve a storage room, and more without going to a store or using the yellow pages. eMove.com connects shoppers to the world’s largest network of customer rated moving and self-storage service providers. With over 12,000 unedited reviews of service providers, the marketplace has facilitated over 21,000 moves.

     eMove also targets independently owned self-storage facilities to connect into the eMove network to provide storage services. Over 900 independent self-storage facilities are connected with the eMove network channel, making eMove.com the only online destination in the self-storage industry to be able to connect consumers to self-storage facilities across North America. Over 1,900 self-storage facilities are now registered on the eMove network.

     Within 2 years of its inception, eMove.com has established itself as the only online destination in the “do-it-yourself” moving and storage industry that connects consumers to service providers in all 50 states and 11 Canadian provinces. Our goal is to further utilize our web-based technology platform to expand into additional markets and provide more value-added products and services to the moving and storage industry.

Property and Casualty Insurance

     Republic Western Insurance Company (“RepWest”) provides loss adjusting and claims handling for U-Haul through regional offices across North America. RepWest also provides components of the Safemove, Safetow and Safestor protection packages to U-Haul customers. The business plan for RepWest includes offering property and casualty products in other U-Haul related programs and completing its exit from non-U-Haul lines of business.

Life Insurance

     Oxford Life Insurance Company (“Oxford”) originates and reinsures annuities; credit life and disability; single premium whole life; group life and disability coverage; and Medicare supplement insurance. Oxford also administers the self-insured employee health and dental plans for our Company.

Employees

     As of March 31, 2004, we employed approximately 17,230 people throughout North America. Approximately 97% of these employees work within our self moving and storage segment. Approximately 94% of these employees are located in the United States.

Sales and Marketing

     As of March 31, 2004, our distinctive orange and white rental fleet consisted of approximately 92,000 trucks, 73,000 trailers and 33,000 towing devices. This equipment, and our U-Haul brand self moving and self storage products and services are distributed through a network of 1,351 U-Haul operated retail centers and 13,870 independent U-Haul dealers. Independent U-Haul dealers receive U-Haul rental equipment on a consignment basis and are paid a commission based on gross revenues generated from their U-Haul rentals.

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     Our self-storage operations consist of approximately 340,000 rentable rooms. These self-storage rooms are available for rent on a month-to-month basis through nearly 1,000 self-storage locations, and are comprised of approximately 29 million square feet of self-storage capacity.

     Our marketing plan includes maintaining our leadership position with U-Haul being synonymous with “do-it-yourself” moving and storage. We accomplish this by continually improving the ease of use and efficiency of our rental equipment, by providing added convenience to our retail centers through independent U-Haul dealers, and by expanding the capabilities of our eMove web site, connecting independent moving service providers with “do-it-yourself” household movers.

     We promote U-Haul brand awareness through direct and co-marketing arrangements. Our direct marketing activities consist of yellow pages, print and web based advertising as well as trade events, movie cameos of our rental fleet and boxes, and industry and consumer communications. We support our independent U-Haul dealers through advertising of U-Haul moving and self-storage rentals, products and services.

Competition

Self-Moving

     The moving truck and trailer rental industry is large and highly competitive.

     There are two distinct users of rental trucks: commercial and “do-it-yourself” users. We focus primarily on the “do-it-yourself” residential user. Within this segment, we believe the principal competitive factors are convenience of rental locations, availability of quality rental moving equipment, breadth of essential products and services, and price.

     Our major competitors in the moving equipment rental market are Budget Car and Truck Rental Company and Penske Truck Leasing.

Self-Storage

     The self-storage market is large and highly fragmented.

     We believe the principal competitive factors in this industry are convenience of storage rental locations, cleanliness, security and price.

     Our primary competitors in the self-storage market are Public Storage, Shurgard, Storage USA and others.

Insurance

     The highly competitive insurance industry includes a large number of life insurance companies and property and casualty insurance companies. In addition, the marketplace now includes financial services firms offering both insurance and financial products. Some of the insurance companies are owned by stockholders and others are owned by policyholders. Many competitors have been in business for a longer period of time or possess substantially greater financial resources and broader product portfolios. We compete in the insurance business based upon price, product design, and services rendered to producers and policyholders.

Corporate Governance

     Corporate governance is typically defined as the system that allocates duties and authority among a company’s stockholders, board of directors and management. The stockholders elect the board and vote on extraordinary matters; the board is the company’s governing body; and management runs the day-to-day operations of the company.

     Our current Board members are William E. Carty, John M. Dodds, Charles J. Bayer, John P. Brogan, James J. Grogan, M. Frank Lyons, James P. Shoen and Edward J. Shoen.

Board Responsibilities and Structure

     The primary responsibilities of the Board of Directors are oversight, counseling and direction to the management of the Company in the long-term interests of the Company and its stockholders.

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     The Board and its committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as needed. The Board has delegated various responsibilities and authority to different Board committees as generally described below. Committees regularly report on their activities and actions to the full Board.

Board Committees

     The Board currently has Audit, Executive Finance, Compensation, and Independent Corporate Governance Committees, as well as an Advisory Board.

     Audit Committee. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities as to financial reporting and audit functions and risk management. The Audit Committee monitors the financial information that is provided to stockholders and others, the independence and performance of the Company’s independent auditors and internal audit department and the systems of internal control established by management and the Board.

     In addition, the members of the Audit Committee of the Board each qualify as “independent” under special standards developed by the Securities and Exchange Commission (SEC) for members of audit committees, and the Audit Committee includes at least one member who is determined by the Board to meet the qualifications of an “audit committee financial expert” in accordance with SEC rules, including that the person meets the relevant definition of an “independent” director. Mr. John P. Brogan is the independent director who has been determined to be an audit committee financial expert. Stockholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Brogan’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose on Mr. Brogan any duties, obligations or liability that are greater than are generally imposed on him as a member of the Audit Committee and the Board of Directors, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.

     Executive Finance Committee. The Executive Finance Committee is authorized to act on behalf of the Board of Directors in approving any transaction involving the finances of the Company. It has the authority to give final approval for the borrowing of funds on behalf of the Company without further action or approval of the Board of Directors. The Executive Finance Committee is composed of Edward J. Shoen, John P. Brogan and Charles J. Bayer.

     Compensation Committee. The Compensation Committee reviews the Company’s executive compensation plans and policies, including benefits and incentives, to ensure that they are consistent with the goals and objectives of the Company. It reviews and makes recommendations to the Board of Directors regarding management recommendations for changes in executive compensation. The Compensation Committee also monitors management plans and programs for the retention, motivation and development of senior management. The Compensation Committee is composed of John P. Brogan and James J. Grogan, non-employee independent directors of the Company.

     Independent Governance Committee. The Independent Governance Committee is co-chaired by two independent members of the Board, James J. Grogan and John P. Brogan. Thomas W. Hayes, the former State Treasurer of California, and Paul A. Bible, a partner in the Reno-based law firm of Bible, Hoy & Trachok, are also members of this committee. Neither Mr. Hayes nor Mr. Bible are members of the Company’s Board of Directors. The Independent Governance Committee evaluates specific corporate governance principles and standards and proposes to the Board any modifications thereto as deemed appropriate. In addition, this committee reviews potential candidates for Board membership. The committee may review other matters as referred to it by the Board. The committee has the authority to and a budget from which to retain professionals. The committee membership term is one year and each member is determined by the Board to be free of any relationship that would interfere with his exercise of independent judgment as member of this committee.

     Advisory Board Members. In addition to the four committees described above the Board of Directors authorized up to two (2) Advisory Board Members. On June 4, 2003, the Board of Directors appointed Michael L. Gallagher as a member of the Advisory Board. Mr. Gallagher is a senior partner in the law firm Gallagher & Kennedy. Mr. Gallagher is also a director of Pinnacle West Capital Corporation and the Omaha World Herald Company. As of June 9, 2004 The Board appointed Daniel R. Mullen as a second Advisory Board member. Mr. Mullen is a retired financial executive with public company experience.

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Recent Developments

Emergence From Chapter 11 Restructuring

     On March 15, 2004, we emerged from Chapter 11 (less than nine months from our petition date) with full payment to our creditors while preserving the interests of our stockholders. In connection with our emergence from bankruptcy, we believe our balance sheet is strengthened, having restructured its debt and lease obligations. For a detailed description of our new financial structure, see footnote 9, “Borrowings” on page F-18.

     As background, on June 20, 2003, AMERCO filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Amerco Real Estate Company also filed a voluntary petition for relief under Chapter 11 on August 13, 2003. The other subsidiaries of AMERCO were not included in either of the filings. The Chapter 11 filing was undertaken to facilitate a restructuring of the debt of AMERCO in response to liquidity issues, which developed in the second half of 2002. These liquidity issues began when our prior independent auditors advised the Company in 2002 that its financial statements would have to be restated. This restatement, and the resulting lack of clarity regarding the operating results and financial condition of AMERCO, contributed substantially and directly to a series of significant developments adversely impacting the Company’s access to capital. The restatement, which involved the consolidation of SAC Holdings resulted in a material decrease in reported net worth and a corresponding increase in its reported leverage ratios. The restatement also required a costly and time-consuming restatement of prior periods’ results that led to the untimely filing of quarterly and annual reports with the Securities and Exchange Commission.

     As this situation was occurring, AMERCO was attempting to negotiate and replace its then existing revolving credit facility and complete a $275 million bond offering. Although we were able to replace our revolving credit facility, the amount of the facility was substantially reduced. We were not able to successfully complete the $275 million bond offering, exemplifying the significantly reduced access AMERCO had to the capital markets to meet its financial needs due to, among other things, the confusion and adverse perception resulting from the restatement. As a result of our failure to complete the $275 million bond offering, we did not have sufficient funds to meet our maturity obligations for our Series 1997-C Bond Backed Asset Trust (BBAT) and related SWAP agreements which were due on October 15, 2002. Our inability to meet these maturity obligations resulted in a default on BBAT obligations, which led to cross-defaults and an acceleration of substantially all of the other outstanding instruments in the Company’s debt structure. Although we worked diligently with our creditors to resolve and cure or restructure these defaults, we were left with no viable alternative but to seek Chapter 11 protection, which we did on June 20, 2003. On March 15, 2004 we emerged from Chapter 11.

Upgraded Ratings of AMERCO Life Insurance Subsidiaries

     A.M. Best Co. recently upgraded the financial strength ratings of Oxford Life Insurance Company and its subsidiaries, Christian Fidelity Life Insurance Company and North American Insurance Company from C+ (weak) to B- (fair). The rating outlook for all three companies is positive. Although our life insurance subsidiaries continue to face challenges to regain their marketing momentum, we believe these rating upgrades will favorably impact the operations of our life insurance subsidiaries.

AMERCO Chief Financial Officer

     On June 9, 2004, Jack A. Peterson was appointed Chief Financial Officer of AMERCO and U-Haul International, Inc.

ITEM 2. Properties

     The Company’s subsidiaries own property, plant and equipment that are utilized in the manufacture, repair and rental of U-Haul equipment and storage space as well as providing office space for the Company. Such facilities exist throughout the United States and Canada. The Company also manages storage facilities owned by others. The Company operates 1,351 U-Haul retail centers (including approximately 941 Company owned locations), and operates 11 manufacturing and assembly facilities. We also operate over 200 fixed site repair facilities located throughout the United States and Canada.

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SAC Holdings owns property, plant and equipment that are utilized in the rental of self-storage rooms and U-Haul equipment. Such facilities exist throughout the United States and Canada. We manage the storage facilities under management agreements whereby the management fees are consistent with management fees received by U-Haul for other properties owned by unrelated parties and managed by us.

ITEM 3. Legal Proceedings

Kocher

     On July 20, 2000, Charles Kocher (Kocher) filed suit in Wetzel County, West Virginia, Civil Action No. 00-C-51-K, entitled Charles Kocher v. Oxford Life Insurance Co. (Oxford) seeking compensatory and punitive damages for breach of contract, bad faith and unfair claims settlement practices arising from an alleged failure of Oxford to properly and timely pay a claim under a disability and dismemberment policy. On March 22, 2002, the jury returned a verdict of $5 million in compensatory damages and $34 million in punitive damages. On November 5, 2002, the trial court entered an Order (Order) affirming the $39 million jury verdict and denying Oxford’s motion for New Trial Or, in The Alternative, Remittitur. Oxford has perfected its appeal to the West Virginia Supreme Court. On January 27, 2004, the matter was argued before the West Virginia Supreme Court and taken under advisement. On June 17, 2004 the West Virginia Supreme Court reversed and vacated the punitive damages award and remanded the case for a new trial on punitive damages. The Company has accrued $725,000, which represents management’s best estimate of the costs associated with legal fees to appeal and re-try the case. The Company has a $5 million E&O policy and has notified the carrier of the West Virginia Supreme Court’s ruling. The E&O carrier is disputing coverage.

Shoen

     On September 24, 2002, Paul F. Shoen filed a derivative action in the Second Judicial District Court of the State of Nevada, Washoe County, captioned Paul F. Shoen vs. SAC Holding Corporation et al., CV02-05602, seeking damages and equitable relief on behalf of AMERCO from SAC Holdings and certain current and former members of the AMERCO Board of Directors, including Edward J. Shoen, Mark V. Shoen and James P. Shoen as defendants. AMERCO is named a nominal defendant for purposes of the derivative action. The complaint alleges breach of fiduciary duty, self-dealing, usurpation of corporate opportunities, wrongful interference with prospective economic advantage and unjust enrichment and seeks the unwinding of sales of self-storage properties by subsidiaries of AMERCO to SAC Holdings over the last several years. The complaint seeks a declaration that such transfers are void as well as unspecified damages. On October 28, 2002, AMERCO, the Shoen directors, the non-Shoen directors and SAC Holdings filed Motions to Dismiss the complaint. In addition, on October 28, 2002, Ron Belec filed a derivative action in the Second Judicial District Court of the State of Nevada, Washoe County, captioned Ron Belec vs. William E. Carty, et al., CV 02-06331 and on January 16, 2003, M.S. Management Company, Inc. filed a derivative action in the Second Judicial District Court of the State of Nevada, Washoe County, captioned M.S. Management Company, Inc. vs. William E. Carty, et al., CV 03-00386. Two additional derivative suits were also filed against these parties. These additional suits are substantially similar to the Paul F. Shoen derivative action. The five suits assert virtually identical claims. In fact, three of the five plaintiffs are parties who are working closely together and chose to file the same claims multiple times. The court consolidated all five complaints before dismissing them on May 28, 2003. Plaintiffs have filed a notice of appeal. These lawsuits falsely alleged that the AMERCO Board lacked independence. In reaching its decision to dismiss these claims, the court determined that the AMERCO Board of Directors had the requisite level of independence required in order to have these claims resolved by the Board.

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Article Four Trust

     AMERCO is a defendant in four putative class action lawsuits. Article Four Trust v. AMERCO, et al., District of Nevada, United States District Court, Case No. CV-N-03-0050-DWH-VPC. Article Four Trust, a purported AMERCO shareholder, commenced this action on January 28, 2003 on behalf of all persons and entities who purchased or acquired AMERCO securities between February 12, 1998 and September 26, 2002. The Article Four Trust action alleges one claim for violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Mates v. AMERCO, et al., United States District Court, District of Nevada, Case No. CV-N-03-0107. Maxine Mates, an AMERCO shareholder, commenced this putative class action on behalf of all persons and entities who purchased or acquired AMERCO securities between February 12, 1998 and September 26, 2002. The Mates action asserts claims under section 10(b) and Rule 10b-5, and section 20(a) of the Securities Exchange Act. Klug v. AMERCO, et al., United States District Court of Nevada, Case No. CV-S-03-0380. Edward Klug, an AMERCO shareholder, commenced this putative class action on behalf of all persons and entities who purchased or acquired AMERCO securities between February 12, 1998 and September 26, 2002. The Klug action asserts claims under section 10(b) and Rule 10b-5 and section 20(a) of the Securities Exchange Act. IG Holdings v. AMERCO, et al., United States District Court, District of Nevada, Case No. CV-N-03-0199. IG Holdings, an AMERCO bondholder, commenced this putative class action on behalf of all persons and entities who purchased, acquired, or traded AMERCO bonds between February 12, 1998 and September 26, 2002, alleging claims under section 11 and section 12 of the Securities Act of 1933 and section 10(b) and Rule 10b-5, and section 20(a) of the Securities Exchange Act. Each of these four securities class actions allege that AMERCO engaged in transactions with SAC entities that falsely improved AMERCO’s financial statements, and that AMERCO failed to disclose the transactions properly. The actions are at a very early stage. The Klug action has not been served. In the other three actions, AMERCO does not currently have a deadline by which it must respond to the complaints. Management has stated that it intends to defend these cases vigorously.

Department of Labor

     On May 18, 2004, the United States Department of Labor (“DOL”) completed its investigation of the AMERCO Employee Savings, Profit Sharing, and Employee Stock Ownership Plan (the “Plan”), its fiduciaries, and other third parties. The Company has remedied or resolved all issues raised by the DOL in the investigation.

Securities and Exchange Commission

     The Securities and Exchange Commission (“SEC”) has issued a formal order of investigation to determine whether the Company has violated the Federal Securities laws. On January 7, 2003, the Company received the first of several subpoenas issued by the SEC to the Company. SAC Holdings, the Company’s current and former auditors and others have also received one or more subpoenas relating to this matter. The Company is cooperating with the SEC and is facilitating the expeditious review of its financial statements and any other issues that may arise.

     The Company has produced well in excess of one million documents to the SEC and continues to respond to requests for additional documents. Notwithstanding the Company’s ongoing document production, on March 5, 2004, the SEC commenced an action against the Company in the United States District Court for the District of Nevada seeking an order compelling the Company to comply with the SEC’s document requests (“Subpoena Enforcement Action”). The Company disputed whether there was any basis for the Subpoena Enforcement Action. The Company obtained an order from the Bankruptcy Court overseeing the Company’s Chapter 11 proceedings that AMERCO complied with the SEC’s subpoenas at issue and, as a result of this order, the District Court denied the SEC’s application. The SEC recently filed a motion for reconsideration of the Bankruptcy Court’s order, which AMERCO has opposed. There has been no ruling on the motion to reconsider.

Environmental

     A subsidiary of U-Haul, INW Company (“INW”) owns one property located within two different state hazardous substance sites in the State of Washington. The sites are referred to as the “Yakima Valley Spray Site” and the “Yakima Railroad Area”. INW has been named as a “potentially liable party” under state law with respect to this property as it relates to both sites. As a result of the cleanup costs of approximately $5 million required by the State of Washington, INW filed for reorganization under the federal bankruptcy laws in May of 2001. The potentially liable parties, including INW, have agreed to share the cost of the environmental cleanup necessary at the Yakima site. INW’s percentage share of the cost is 17% or $879,000. Due to the bankrupt status of INW, U-Haul has agreed to be responsible for paying INW’s share, of which $706,000 has been paid through May 21, 2004.

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Emergence From Chapter 11 Restructuring

     The disclosure included under the caption “Business—Recent Developments—Emergence From Chapter 11 Restructuring” is incorporated into this section by reference.

ITEM 4. Submission of Matters to a Vote of Security Holders

     No matter was submitted to a vote of the security holders of AMERCO or U-Haul during the fourth quarter of the fiscal year covered by this report, through the solicitation of proxies or otherwise.

PART II

ITEM 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     As of April 30, 2004, there were approximately 3,000 holders of record of the common stock. AMERCO’s trading symbol is “UHAL”.

     The following table sets forth the high and the low sales price of the common stock of AMERCO for the periods indicated:

     The common stock of U-Haul is wholly owned by AMERCO. As a result, no active trading market exists for the purchase and sale of such common stock.

Dividends

     AMERCO does not have a formal dividend policy. The Board of Directors of AMERCO periodically considers the advisability of declaring and paying dividends in light of existing circumstances. The Company’s new credit facility and its senior note indentures limit the Company’s ability to pay dividends and accordingly, the Company does not anticipate declaring and paying dividends on its common stock in the foreseeable future.

     

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ITEM 6. Selected Financial Data.

     Listed below is selected financial data for AMERCO and consolidated entities for five years ended March 31:

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(1)

Reflects the change in salvage value and estimated useful lives during the fiscal year ended March 31, 2002. The net effect of these changes for the fiscal year 2002 was to increase net earnings by $3.1 million or $0.15 per share. Gains and losses on the sale of fixed assets are recorded in depreciation.

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Item 6. Selected Financial Data. — (Continued)

     Listed below is selected financial data for U-Haul International, Inc for five years ended March 31:

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(1)

Reflects the change in estimated salvage value and useful lives of assets during the fiscal year ended March 31, 2002. The net effect of these changes was to reduce the net loss for fiscal year 2002 by $3.1 million or $0.15 per share. Gains and losses on the sale of fixed assets are recorded in depreciation.

ITEM 7. 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 a discussion of the overall strategy of AMERCO, followed by a description of our operating segments, and then a discussion of the strategy of our business segments to give the reader an overview of the goals of our business and the direction in which our business and products are moving. This is followed by a discussion of the Critical Accounting Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. In the next section, we discuss our Results of Operations for fiscal year 2004 compared with fiscal year 2003, and for fiscal year 2003 compared with fiscal year 2002 beginning with an overview. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled “Liquidity and Capital Resources” and “Disclosures about Contractual Obligations and Commercial Commitments.” We conclude this MD&A by discussing our outlook for fiscal year 2005.

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     This MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K, including “Item 1: Business”, “Item 6: Selected Financial Data and “Item 8: Financial Statements and Supplementary Data.” The various sections of this MD&A contain a number of forward looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly under the caption “Risk Factors” in this section. Our actual results may differ materially with these forward looking statements.

Description of Operating Segments

     AMERCO has three reportable operating segments and five identifiable operating segments. The three reportable segments are Moving and Self Storage, Property and Casualty Insurance and Life Insurance. The five identifiable segments include U-Haul moving and storage, Real Estate, and SAC moving and storage, which are separately listed under the reportable segment, Moving and Self Storage. The remaining identifiable segments are Property and Casualty Insurance and Life Insurance. See Notes 1, 21 and 21A to the Consolidated Financial Statements included in this Form 10-K.

Strategy

     Our plan is to maintain our leadership position in the North American “do-it-yourself” moving and storage industry. Our overall strategy is to provide 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 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 rooms available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our growing eMove capabilities.

     During fiscal year 2004, RepWest decided to focus its activities on providing property and casualty insurance to U-Haul, its customers, its independent dealers and affiliates. This will enable RepWest to focus its core competencies and financial resources to better support our overall strategy. RepWest has incurred losses as it exits unprofitable non-U-Haul business.

Moving and Self-Storage

     U-Haul moving and self-storage operations consist of the rental of trucks and trailers, sales of moving supplies, sales of trailer hitches, sales of propane, and the rental of self-storage spaces to the “do-it-yourself” mover. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.

     Real Estate owns approximately 90 percent of the Company’s real estate assets, including U-Haul Center and Storage locations. The remainder of our real estate assets are owned by various U-Haul entities. Real Estate is responsible for overseeing property acquisitions, dispositions and managing environmental risks of the properties.

     SAC moving and self-storage operations consist of the rental of self-storage spaces, sales of moving supplies, sales of trailer hitches, and sales of propane. In addition, SAC functions as an independent dealer and earns commissions from the rental of U-Haul trucks and trailers. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.

     We continue to focus on expanding our dealer network, which provides added convenience for our customers and expanding the selection and availability of rental equipment to satisfy the needs of our customers.

     With respect to our retail sales of product, U-Haul has developed a number of specialty packing boxes, “Mover’s Wrap” and Smart Move tape. Mover’s Wrap is a sticks-to-itself plastic stretch wrap used to bind, bundle, and fasten items when moving or storing. Additionally, U-Haul has added a full line of Smart Move tape products. The Smart Move tape is a color coded packing tape that has the room printed right on it allowing customers to tape and label their belongings in one quick step.

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     eMove.com connects consumers to independent customer rated service providers who provide packing, loading, unloading, cleaning, driving help and more. With over 12,000 unedited reviews of service providers, the marketplace has facilitated over 21,000 moves. Another service, the eMove Storage Affiliate program, targets independently owned self-storage facilities to connect into the eMove network to provide storage services. Over 1,900 self-storage facilities are now registered on the eMove network. We believe acting as an intermediary, with little added investment, serves the customer in a cost effective manner. Within two years of its inception, eMove.com has established itself as the only online destination in the “do-it-yourself” moving and storage industry that connects consumers to service providers in all 50 states and 11 Canadian provinces. Our goal is to further utilize our web-based technology platform to expand into additional markets.

Property and Casualty Insurance

     Republic Western Insurance Company (RepWest) provides loss adjusting and claims handling for U-Haul through regional offices across North America. RepWest also provides components of the Safemove, Safetow and Safestor protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products. The business plan for RepWest includes offering property and casualty products in other U-Haul related programs. During the past year RepWest has commuted numerous assumed reinsurance treaties to eliminate the risk of further development on these treaties.

Life Insurance

     Oxford Life Insurance Company originates and reinsures annuities, credit life and disability, life insurance and supplemental health insurance products. Oxford’s business strategy is long-term capital growth through direct writing and reinsuring of annuity, credit life and disability, and Medicare supplement products. Oxford is pursing this growth strategy of increased direct writing via acquisitions of insurance companies, expanded distribution channels and product development. The acquisition of North American Insurance Company and Safe Mate Life Insurance Company in 1997, and Christian Fidelity Life Insurance Company in 2000 represents significant movement toward this long-term goal. Oxford significantly expanded product offerings, distribution channels and administrative capabilities through these acquisitions.

Critical Accounting Policies and Estimates

     The methods, estimates and judgments we use in applying our accounting policies can have a significant impact on the results we report in our financial statements, which we discuss under the heading “Results of Operations.” Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The accounting estimates that require management’s most difficult and subjective judgments include the recoverability of property, plant and equipment; the adequacy of insurance reserves; and the recognition and measurement of income tax assets and liabilities. Below, we discuss these policies further, as well as the estimates and judgments involved. The estimates are based on historical experience, observance of trends in particular areas, information and valuations available from outside sources and on various other assumptions that are believed to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions and conditions. Such differences may be material.

     Accounting policies are considered critical when they are significant and involve difficult, subjective or complex judgments or estimates. The accounting policies that we deem most critical to us, and involve the most difficult, subjective or complex judgments include the following:

     We also have other policies that we consider key accounting policies, such as revenue recognition; however, these policies do not meet the definition of critical accounting estimates, because they do not generally require us to make estimates or judgments that are difficult or subjective.

Principles of Consolidation

     The 2004 balance sheet includes the accounts of AMERCO, its wholly owned subsidiaries, and SAC Holding II Corporation and its subsidiaries. The 2003 balance sheet and the 2004 statements of operations, comprehensive income, and cash flows, and the consolidated financial statements for fiscal 2003 and 2002, include all of those entities plus SAC Holding Corporation and its subsidiaries. In fiscal 2003 and 2002, SAC Holding Corporation and SAC Holding II Corporation (the SAC entities) were considered special purpose entities and were consolidated based on the provision of Emerging Issues Task Force (EITF) Issue No. 90-15. In fiscal 2004, the Company applied FASB Interpretation No. 46 to its interests in the SAC Entities. Initially, the Company concluded that the SAC entities were variable interest entities and that the Company was the primary beneficiary. Accordingly, the Company continued to include the SAC entities in the consolidated financial statements. In February 2004, SAC Holding Corporation restructured the financing of three subsidiaries and then distributed its interest in those subsidiaries to its sole shareholder. This triggered a requirement to reassess the Company’s involvement with those subsidiaries, which led to a conclusion that the Company ceased to be the primary beneficiary of those three subsidiaries at that date. In March 2004, SAC Holding Corporation restructured its financing, triggering a similar reassessment that led to a conclusion that the Company ceased to be the primary beneficiary of SAC Holding Corporation and its remaining subsidiaries. Accordingly, at the dates the Company ceased to be the primary beneficiary, it deconsolidated those entities. The deconsolidation was accounted for as a distribution of the Company’s interests to the sole shareholder of the SAC entities. Because of the Company’s continuing involvement with SAC Holding Corporation and its current and former subsidiaries, the distributions do not qualify as discontinued operations as defined by SFAS No. 144. Inter-company accounts and transactions have been eliminated.

Recoverability of Property, Plant and Equipment

     Property, plant and equipment are stated at cost. Interest costs incurred during the initial construction of buildings or rental equipment are considered part of cost. Depreciation is computed for financial reporting purposes principally using the straight-line method over the following estimated useful lives: rental equipment 2-20 years: buildings and non-rental equipment 3-55 years. Major overhauls to rental equipment are capitalized and are amortized over the estimated period benefited. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment are netted against depreciation expense when realized. Depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal (i.e. no gains or losses.) In determining the depreciation rate, historical disposal experience and holding periods, and trends in the market for vehicles are reviewed. Due to longer holding periods on trucks and the resulting increased possibility of changes in the economic environment and market conditions, these estimates are subject to a greater degree of risk.

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     Reviews are periodically performed to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets is shorter or longer than originally estimated. The company assesses the recoverability of its assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If assets are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives.

Insurance Reserves

     Liabilities for life insurance and certain annuity policies are established to meet the estimated future obligations of policies in force, and are based on mortality and withdrawal assumptions from recognized actuarial tables which contain margins for adverse deviation. Liabilities for annuity contracts consist of contract account balances that accrue to the benefit of the policyholders, excluding surrender values. Liabilities for health, disability and other policies represents estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred, but not yet reported. Insurance reserves for RepWest and U-Haul International, Inc. take into account losses incurred based upon actuarial estimates. These estimates are based on past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation. Due to the nature of underlying risks and the high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle liabilities cannot be precisely determined and may vary significantly from the estimated liability.

Investments

     For investments accounted for under SFAS 115, in determining if and when a decline in market value below amortized cost is other than temporary, quoted market prices, dealer quotes or discounted cash flows are reviewed. Other-than-temporary declines in value are recognized in the current period operating results to the extent of the decline.

Results of Operations

AMERCO and Consolidated Entities

(A) Depreciation is shown net of (gain)/losses on the disposal of fixed assets.

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Fiscal 2004 Compared With Fiscal 2003

     Revenues for AMERCO and its consolidated entities were $2,167.5 million for fiscal year 2004. This compares to $2,132.4 million for fiscal year 2003. Earnings from operations were $126.9 million in fiscal 2004 compared with $109.2 million for fiscal year 2003. We experienced 6.4% revenue growth, before consolidating entries, in our Moving and Self-Storage segment in fiscal 2004 compared with fiscal 2003. Combined earnings from operations before consolidating entries, in our Moving and Self-Storage segments were $266.1 million in fiscal 2004, and reflect an improvement of $70.3 million, or 35.9% in fiscal 2004 compared with fiscal 2003. At the Oxford Life Insurance Company, revenue decreased 4.8% before eliminating entries, primarily as a result of its rating downgrade by A.M. Best in 2003. This downgrade resulted from liquidity issues that faced AMERCO. Earnings from operations at Oxford were $11.3 million in fiscal 2004, reflecting a reduction in write-downs of investments due to other than temporary declines and a solid turnaround from the $1.4 million loss reported in fiscal 2003. At RepWest, revenues declined 34.3%, reflecting its strategic decision to exit unprofitable non-U-Haul lines of business. The benefits and losses on these unprofitable lines adversely affected its profitability. As a result, earnings from operations at RepWest were a loss of $36.0 million in fiscal 2004, compared with a loss of $8.0 million for fiscal 2003.

     Interest expense for fiscal 2004 was $121.7 million. This compares to $148.1 million in fiscal 2003, which included our early termination of BBAT payments of $26.5 million. Income tax expense was $8.1 million in fiscal 2004 compared with a income tax benefit of $13.9 million in fiscal 2003. This reflects pretax earnings and an increase in current year tax of $4.8 million as a result of our settlement with the IRS for tax audits related to 1996 and 1997. As a result of the abovementioned items, there was a loss of $2.9 million in fiscal 2004 compared with a loss of $25.0 million in fiscal 2003. Included in fiscal 2004 results are $44.1 million of non-recurring financial restructuring costs ($27.3 million on an after-tax basis) compared with $6.6 million of non-recurring financial restructuring costs ($4.0 million on an after-tax basis) included in fiscal 2003. Preferred stock dividends paid or accrued were $13.0 million in fiscal 2004 and fiscal 2003. Loss available to common shareholders were a loss of $15.8 million in fiscal 2004 compared to a loss of $37.9 million in fiscal 2003.

Fiscal 2003 Compared With Fiscal 2002

     Revenues for AMERCO and its consolidated entities were $2,132.4 million for fiscal 2003. This compares to $2,193.6 million for fiscal year 2003. Earnings from operations were $109.2 million in fiscal 2003 compared with $42.1 million for fiscal 2002, which included losses from RepWest of $72.4 million in fiscal 2002 compared with losses of $8.0 million in fiscal 2003. We experienced a 3.4% revenue growth, before consolidating entries, in our Moving and Self-Storage segments in fiscal 2003 compared with fiscal 2002. Combined earnings from operations, before consolidating entries, in our Moving and Self-Storage segments were $195.8 million in fiscal 2003, compared with $143.9 million in 2002, reflecting an improvement of $51.9 million, or 36.1% from fiscal 2002. At the Oxford Life Insurance Company, revenue declined 4.0%. Earnings from operations were a loss of $1.4 million in fiscal 2003 compared with a profit of $5.6 million in fiscal 2002, reflecting write-downs of investments due to other than temporary declines. At RepWest revenues declined 38.1% in fiscal 2003 compared with fiscal 2002. Earnings from operations were a loss of $8.0 million in fiscal 2003 compared with a loss of $72.4 million in fiscal 2002.

     Interest expense for fiscal 2003 was $148.1 million. This compares to $109.5 million in fiscal 2002, and includes our early termination of BBAT payments of $26.5 million in fiscal 2003. Income tax benefit was $13.9 million in fiscal 2003 compared with an income tax benefit of $19.9 million in fiscal 2002. This reflects a lower pretax earnings loss. Net loss was $25.0 million in fiscal 2003 compared to $47.4 million in fiscal 2002. Preferred stock dividends paid or accrued were $13.0 million in fiscal 2003 and fiscal 2002. As a result of the above mentioned items, our earnings (loss) available to common shareholders were a loss of $37.9 million in fiscal 2003 compared with the loss of $60.4 million in fiscal 2002. Included in 2003 results are $6.6 million of non-recurring financial restructuring costs ($4.0) million on after-tax basis). There were no non-recurring financial restructuring costs in fiscal 2002.

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Fiscal 2005 Outlook

     As we look ahead to fiscal 2005, we believe the momentum in our Moving and Self-Storage segments will continue, adjusted for the deconsolidation of SAC Holding Corporation. We reported approximately $177.9 million of revenues, $55.2 million of earnings from operations, $67.9 million of interest expense, and a net loss of $9.4 million in fiscal 2004 that are related to variable interests in SAC Holdings that are being deconsolidated as of March 31, 2004. Oxford was recently upgraded to B- by A. M. Best. Oxford’s revenues will likely continue to erode in the near term, although we anticipate operating margins will be maintained. At RepWest, the benefits from focusing its efforts on the U-Haul lines of business are expected to materialize in 2005. Separately, we expect no further costs associated with our financial restructuring during 2005.

Self Moving and Storage

     The following tables sets forth certain revenue and consolidated statements of operations data for the periods indicated:

U-Haul International

	(A)	Depreciation is shown net of (gains)/losses on the disposal of fixed assets:

		2004				2003				2002
Depreciation expense		$	116,693			$	119,802			$	82,940
(Gain)/loss on disposal			8,400				(6,987	)			9,411
Depreciation, net		$	125,093			$	112,815			$	92,351

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SAC Holdings

Amerco Real Estate

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Moving and Self-Storage

2004 Compared With 2003

     Rental revenues at U-Haul, before consolidating entries, were $1,548.4 million in fiscal 2004, compared with $1,433.4 million in 2003. This represents an increase of $115.0 million, or 8.0%, and was driven by a combination of factors, including increased utilization, better price realization and improved product mix. Rental revenues at SAC Holdings, before consolidating entries, were $168.4 million in fiscal 2004 compared with $168.0 million in 2003. This represents an increase of $0.4 million, or 0.2%, and reflects a stable number of rooms available for rent. Rental revenues at Real Estate, before consolidating entries, were $59.8 million in fiscal 2004, compared with $59.2 million in 2003. This represents an increase of $0.6 million, or 1.0%, and reflects increased rental rates.

     Net sales of moving and self-storage related products and services at U-Haul were $181.8 million in fiscal 2004, compared with $174.1 million in 2003. This represents an increase of $7.7 million, or 4.4%, and was driven by increased volume and improved pricing. Net sales of moving and self-storage related products and services at SAC Holdings were $50.6 million in fiscal 2004, compared with $48.8 million in 2003. This represents an increase of $1.8 million, or 3.7%, and was driven by increased volume and improved pricing.

     Net investment and interest income at U-Haul, before consolidating entries, was $21.5 million in fiscal 2004, compared with $29.4 million in 2003. The decrease in interest income is directly related to lower average investment balances in SAC Holdings notes. Net investment and interest income at Real Estate, before consolidating entries, was $16.1 million in fiscal 2004, compared with $10.7 million in 2003. The increase in interest income is directly related to increased investments in mortgage notes.

     Operating expenses at U-Haul, before consolidating entries, were $1,062.7 million in fiscal 2004, compared with $1,029.8 million in 2003. This represents an increase of $32.9 million, or 3.2%, and was the result of increases in payroll, equipment maintenance and insurance costs, which were driven by increases in volume and inflation, partially offset by lower other operating expenses. Operating expenses at SAC Holdings, before consolidating entries, were $108.4 million in fiscal 2004, compared with $105.3 million in 2003. This represents an increase of $3.1 million, or 2.9%, and was the result of inflationary increases in payroll, property taxes, utilities and insurance costs. Operating expenses at Real Estate, before consolidating entries, were $8.1 million in fiscal 2004, compared with $8.1 million in 2003.

     Dealer commissions at U-Haul were $176.2 million in fiscal 2004, compared with $164.5 million in 2003. This represents an increase of $11.7 million, or 7.1%, and was driven by increased rentals by our independent dealers.

     Lease expenses at U-Haul, before consolidating entries, were $159.9 million in fiscal 2004, compared with $165.0 million in 2003. This represents a reduction of $5.1 million, or 3.1%, and reflects a reduction in the amount of rental equipment we leased. Lease expenses at Real Estate, before consolidating entries, were $2.7 million in fiscal 2004, compared with $.6 million in 2003. This represents an increase of $2.1 million and reflects increases in synthetic lease cost and other expenses.

     Depreciation expense, net at U-Haul, before consolidating entries, was $125.1 million in fiscal 2004, net of loss on sales of fixed assets of $8.4 million, compared with $112.8 million in 2003 which included $7.0 million of gains in sales of fixed assets. The overall increase in depreciation between fiscal 2004 and fiscal 2003 is due to losses on the sales of fixed assets in 2004 compared to gains on the sales of fixed assets in 2003. Depreciation expense at SAC Holdings, before consolidating entries, was $21.4 million in fiscal 2004, which is consistent with the amount recorded in 2003.

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     Earnings from operations at U-Haul, before consolidating entries, were $140.5 million in fiscal 2004, compared with $71.0 million in 2003. This represents an increase of $69.5 million, or 97.8%, and was driven by increased rentals of our trucks, trailers and self-storage rooms, increased sales of moving and storage related products and services, operational productivity and improved customer service. Earnings from operations at SAC Holdings, before consolidating entries, were $64.7 million in fiscal 2004, compared with $68.8 million in 2003. This represents a decrease of $4.1 million, or 5.9%, and was driven by stable rentals of self-storage rooms, increased sales of moving and storage related products and services, offset by increased operating expenses. Earnings from operations at Real Estate, before consolidating entries, were $61.0 million in fiscal 2004, compared with $56.0 million in 2003. This represents an increase of $5.0 million, or 8.8%, and was driven by increased interest income from investments in mortgage notes.

2003 Compared With 2002

     Rental revenues at U-Haul, before consolidating entries, were $1,433.4 million in fiscal 2003, compared with $1,425.7 million in 2002. This represents an increase of $7.7 million, or 0.5%, and was driven by a combination of factors, including better price realization and productivity gains. Rental revenues at SAC Holdings, before consolidating entries, were $168.0 million in fiscal 2003 compared with $112.7 million in 2002. This represents an increase of $55.3 million, or 49.1%, and reflects increased storage capacity from the acquisition of several locations from U-Haul and increased storage rates. Rental revenues at Real Estate, before consolidating entries, were $59.2 million in fiscal 2003, compared with $68.2 million in 2002. This represents a decrease of $9.0 million, or 13.3%, and reflects the sale of properties to SAC Holdings.

     Net sales of moving and self-storage related products and services at U-Haul were $174.1 million in fiscal 2003, compared with $198.3 million in 2002. This represents a decrease of $24.2 million, or 12.2%, and was driven primarily by the sale of several retail centers to SAC Holdings. Net sales of moving and self-storage related products and services at SAC Holdings were $48.8 million in fiscal 2003, compared with $24.4 million in 2002. This represents an increase of $24.4 million, or 100.0%, and was driven primarily by the acquisition of U-Haul retail centers by SAC Holdings.

     Net investment and interest income at U-Haul, before consolidating entries, was $29.4 million in fiscal 2003, compared with $22.7 million in 2002. The increase in interest income is directly related to higher average investment balances in SAC Holdings notes. Net investment and interest income at Real Estate, before consolidating entries, was $10.7 million in fiscal 2003, compared with $8.3 million in 2002. The increase in interest income is directly related to increased investments in mortgage notes.

     Operating expenses at U-Haul, before consolidating entries, were $1,029.8 million in fiscal 2003, compared with $1,088.4 million in 2002. This represents a decrease of $58.6 million, or 5.4%, and was the result of the sale of several retail centers to SAC Holdings and a cost reduction program. Operating expenses at SAC Holdings, before consolidating entries, were $105.3 million in fiscal 2003, compared with $68.2 million in 2002. This represents an increase of $37.1 million, or 54.4%, and was primarily the result of the acquisition of several locations from U-Haul. Operating expenses at Real Estate, before consolidating entries, were $8.1 million in fiscal 2003, compared with $6.1 million in 2002. This represents an increase of $2.0 million due to more locations in fiscal 2003 compared to fiscal 2002.

     Dealer commissions at U-Haul were $164.5 million in fiscal 2003, compared with $153.5 million in 2002. This represents an increase of $11.0 million, or 7.2%, and was driven by increased rentals by our independent dealers.

     Lease expenses at U-Haul, before consolidating entries, were $165.0 million in fiscal 2003, compared with $171.7 million in 2002. This represents a reduction of $6.7 million, or 3.9%, and reflects a reduction in the amount of rental equipment we leased. Lease expenses at Real Estate, before consolidating entries, were $.06 million in each fiscal 2003, and 2002.

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     Depreciation expense net at U-Haul, before consolidating entries, was $112.8 million in fiscal 2003, net of $7.0 million gains on the sale of fixed assets compared with $92.4 million in 2002, net of $9.4 million of loss on the sales of fixed assets. Excluding the gains and losses on sales of fixed assets depreciation expense represents an increase of $36.9 million, or 27.5%, and reflects an increase in the number of trucks that we own. Depreciation expense at SAC Holdings, before consolidating entries, was $21.4 million in fiscal 2003, compared with $15.1 million in 2002. This reflects the acquisition of several locations from U-Haul. Depreciation expense at Real Estate, before consolidating entries, was $5.2 million in fiscal 2003, compared with $(2.0) million in 2002.

     Earnings from operations at U-Haul, before consolidating entries, were $71.0 million in fiscal 2003, compared with $30.4 million in 2002. This represents an increase of $40.6 million, or 133.6%, and was driven by increased rental revenues and lower expenses resulting from the sale of several retail centers to SAC Holdings and a cost reduction program. Earnings from operations at SAC Holdings, before consolidating entries, were $68.8 million in fiscal 2003, compared with $41.7 million in 2002. This represents an increase of $27.1 million, or 65.0%, and was driven by the acquisition of several locations from U-Haul. Earnings from operations at Real Estate, before consolidating entries, were $56.0 million in fiscal 2003, compared with $71.9 million in 2002. This represents a decrease of $15.9 million, or 22.1%, and was driven by a reduction in rental revenues and reductions in gains on asset disposals.

Oxford Life Insurance Company

     The following table sets forth certain net revenue and statements of operations data for the periods indicated:

     Premium revenues, before intercompany eliminations, were $147.8 million, $161.4 million, and $159.4 million for the year ended December 31, 2003, 2002, and 2001, respectively. Oxford’s Medicare supplement premiums decreased by $3.5 million from 2002. Within this line of business run-off programs had premium decreases of $7.7 million due to lapses; this was offset by new writings from Christian Fidelity Life Insurance Company (CFLIC) of $4.2 million. Medicare supplement premiums increased $2.8 million from 2001 primarily due to new CFLIC premiums. Premiums from Oxford’s life insurance lines decreased $4.1 million from 2002 and $1.6 million from 2001. Credit life and disability premiums decreased $4.8 million from 2002 and $7.7 million from 2001 due to account cancellations and decreased penetration. Annuitizations decreased by $0.3 million from 2002 and $1.0 million from 2001. Other health insurance premiums decreased $0.9 million from 2002 and decreased $4.1 million from 2001 due to the termination of major medical programs.

     Net investment income before intercompany eliminations was $19.0 million, $13.9 million, and $23.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. The increase from 2002 is due to $6.0 million fewer capital losses and limited partnership losses offset by a lower invested asset base and reduced reinvestment rates. The change from 2001 is due primarily to lower reinvestment rates.

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     Benefits and losses incurred were $103.5 million, $115.6 million, and $120.9 million for the years ended December 31, 2003, 2002 and 2001, respectively. Medicare supplement benefits decreased $6.5 million from 2002 and $8.3 million from 2001 primarily due to decreased exposure and improved experience. Credit insurance benefits decreased $2.3 million from 2002 and $4.0 million from 2001 due to decreased exposure. Benefits from other health lines increased $0.3 million from 2002 due to increased morbidity and decreased $3.8 million from 2001 due to the termination of major medical programs. Annuity and life benefits decreased $3.6 million from 2002 and $1.3 million from 2001 due to decreases in life insurance exposure.

     Amortization of deferred policy acquisition costs (DAC) and the value of business acquired (VOBA) was $25.0 million, $20.5 million, and $18.6 million for 2003, 2002, and 2001, respectively. These costs are amortized for life and health policies as the premium is earned over the term of the policy; and for deferred annuities, amortized in relation to interest spreads. Amortization associated with annuity policies increased $6.4 million from 2002 and $7.5 million from 2001 primarily due to increased surrender activity. Other segments decreased $1.9 million from 2002 to 2003, and $1.1 million from 2001 to 2003 due to decreased new business volume.

     Operating expenses were $27.1 million, $40.5 million, and $37.5 million for the years ended December 31, 2003, 2002, and 2001, respectively. Commissions have decreased $4.1 million from 2002 and $3.1 million from 2001 primarily due to decreases in new business. Fee income from surrendered annuity policies is netted into this category. Surrender charge income increased $5.0 million from 2002 and $5.2 million from 2001. General and administrative expenses net of fees collected decreased $4.3 million from 2002 to 2003 and $2.1 million from 2001 to 2003.

     Earnings/(losses) from operations were $11.3 million, $(1.4) million, and $5.6 million for the years ending December 31, 2003, 2002 and 2001, respectively. The increase from 2002 and 2001 is due primarily to fewer other than temporary declines in the investment portfolio and improved loss ratios in the Medicare supplement segment.

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Republic Western Insurance Company

     The following table sets forth certain revenue and statements of operations data for the periods indicated:

     Premium revenues, before intercompany eliminations, were $93.2 million, $152.6 million, and $262.0 million for the years ended December 31, 2003, 2002, and 2001, respectively. Cancelled agency premiums were $65.6 million, $86.8 million, and $146.5 million for the years ended December 31, 2003, 2002, and 2001, respectively. The decreases from 2002 and 2001 are the result of the Company’s shift in its operating focus away from non affiliated and unprofitable lines of business. Assumed treaty reinsurance premiums were $1.7 million, $31.0 million, and $69.1 million for the year ended December 31, 2003, 2002 and 2001, respectively. The decreases in both years are due to the cancellation and non renewal of all assumed treaty business. Rental industry revenues were $25.9 million, $34.8 million, and $46.3 million for the years ended December 31, 2003, 2002, and 2001, respectively. These decreases are due to the change in structure of the U-Haul business to deductible/self-insured arrangements.

     Net investment income was $21.7 million, $22.3 million, and $20.7 million for the twelve months ended December 31, 2003 2002 and 2001 respectively.

     Benefits and losses incurred were $109.4 million, $128.7 million, and $255.8 million for the twelve months ended December 31, 2003, 2002, and 2001, respectively. The decreases in each year are due to decreased earned premiums in all segments of RepWest’s business.

     Amortization of deferred policy acquisition costs was $14.1 million, $17.3 million, and $22.1 million for the twelve months ended December 31, 2003, 2002, and 2001, respectively. The decreases are due to decreased premium writings.

     Operating expenses, before intercompany eliminations, were $27.4 million, $37.0 million and $77.2 million for the twelve months ended December 31, 2003, 2002, and 2001, respectively. Included in operating expenses are commissions that were $10.3 million, $13.9 million and $51.2 million for the twelve months ended December 31, 2003, 2002 and 2001, respectively. The decreases are due to decreased premium writings.

     Pretax losses from operations were $36.0 million, $8.0 million, and $72.4 million for the twelve months ended December 31, 2003, 2002, and 2001, respectively. The increase in losses in 2003 was due to the development of losses on business lines that were previously written and subsequently terminated. The decrease in losses in 2002 from 2001 was due to reduced expenses as well as improved loss development.

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     Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:

     As a result of changes in estimates of insured events in prior years, the provision for unpaid losses and loss adjustment expenses (net of reinsurance recoveries of $107.4 million) increased by $53.1 million in fiscal 2003.

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     The following table illustrates the change in unpaid loss and loss adjustment expenses. First line — reserves as originally reported at the end of the stated year. Second section, reading down, — cumulative amounts paid as of the end of successive years with respect to that reserve. Third section, reading down, — revised estimates of the original recorded reserve as of the end of successive years. Last section — compares the latest revised estimated reserve amount to the reserve amount as originally established. This last section is cumulative and should not be summed.

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Liquidity and Capital Resources

     Our successful financial restructuring has provided us with a strengthened balance sheet and we believe a capital structure that will allow us to achieve our operational plans and goals and provide us with sufficient liquidity. The majority of the obligations we incurred in connection with our financial restructuring mature at the end of fiscal 2009. The senior subordinated notes mature at the end of fiscal 2011. As a result, we believe that our liquidity is strong, which will allow us the ability to focus on our operations and business to improve our liquidity in the long term. We further believe that as we are successful in improving our operations and further strengthening our liquidity, we will improve our access to the capital markets. However, there is no assurance that future cash flows will be sufficient to meet our outstanding obligations or our future capital needs. The terms of our secured indebtedness place financial and operational covenants on AMERCO and its subsidiaries, and restrict our ability to incur additional indebtedness and other obligations.

     As a result of the deconsolidation of SAC Holding during the fourth quarter of 2004, AMERCO’s assets and liabilities were reduced approximately $472 million and $629 million, respectively, and equity increased approximately $157 million. This deconsolidation was the result of AMERCO no longer being the primary beneficiary of a majority of its variable interests in SAC Holdings.

     At March 31, 2004, cash and cash equivalents totaled $81.6 million, up from $66.8 million at March 31, 2003. In addition, AMERCO had availability under its revolving credit facility of $35.9 million.

     At March 31, 2004 notes and loans payable, as reported, was $1.0 billion, and represented 1.9 times stockholders’ equity. At March 31, 2003, notes and loans payable, as reported, was $1.4 billion and represented 4.3 times stockholders’ equity.

     On April 30, 2004, AMERCO completed its transaction with UH Storage DE, a W.P. Carey affiliate, effectively terminating its amended and restated leases (the synthetic leases) with the Bank of Montreal and Citibank. This transaction will result in AMERCO eliminating its capital lease obligation of approximately $99.5 million during the first quarter of fiscal 2005. (See footnote 23 to Consolidated Financial Statements for a more complete discussion of this transaction and its effect on the Company’s financial statements.)

26

     For fiscal year 2004, cash (used) provided by operating activities was $(40.3) million, compared to $74.5 million in fiscal year 2003, and $(19.6) million in fiscal year 2002.

     We provided $55.2 million in net cash from investing activities during fiscal year 2004, compared to a use of $36.1 million in fiscal year 2003 and a use of $148.1 million in fiscal year 2002. Gross capital expenditures were $198.4 million, $243.2 million and $381.5 million in 2004, 2003 and 2002, respectively. Capital dispositions were $63.2 million, $96.9 million and $229.4 million in 2004, 2003 and 2002, respectively. Net capital expenditures were $135.2 million, $146.3 million and $152.1 million in 2004, 2003 and 2002, respectively.

     Financing activities used $(0.1) million during fiscal year 2004. This compares with usage of $(13.0) million during fiscal year 2003. We provided $159.5 million from financing activities during fiscal year 2002.

Liquidity and Capital Resources and Requirements of Our Operating Segments

Moving and Self-Storage

     Cash provided from operating activities from U-Haul was $210.9 million, $83.5 million and $96.2 million in fiscal years 2004, 2003 and 2002, respectively. The decrease in fiscal year 2003 was due to a decline in intercompany payables that was partially offset by an increase in depreciation expense of rental equipment. Cash provided (used) from operating activities for Real Estate was $93.8 million, $(87.1) million and $(144.1) million for fiscal years 2004, 2003 and 2002, respectively. Cash provided (used) from operating activities for SAC Holdings was $8.2 million, $13.5 million and $(1.3) million in fiscal years 2004, 2003 and 2002, respectively.

Disclosures about Contractual Obligations and Commercial Commitments

     The following table provides contractual commitments and contingencies as of March 31, 2004:

As presented above, contractual obligations on debt and guarantees represent principal payments while contractual obligations for capital and operating leases represent the notional payments under the lease arrangements, including anticipated future cash payments for interest on capital leases. Certain other liabilities are reported in the Company’s consolidated balance sheets but are not reflected in the table above due to the absence of stated maturities.

* These notes and loans represent obligations of SAC Holding II issued to third party lenders and Amerco.

(A)	Includes $218.6 million of obligations under synthetic leases and future interest on the capitalized portion of the synthetic leases of $5.5 million. These agreements were prepaid in full and terminated in April 2004. See Note 23 to the Consolidated Financial Statements.

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Off Balance Sheet Arrangements

     AMERCO used certain equipment and occupies certain facilities under operating lease commitments with terms expiring substantially through 2034 with the exception of one land lease expiring 2079. In the event of a shortfall in proceeds from the sale of the underlying assets, AMERCO has guaranteed approximately $235.0 million of residual values at March 31, 2004, for these assets at the end of the respective lease terms. AMERCO has been leasing equipment since 1987 and, thus far, we have experienced no residual value shortfalls. See details related to operating lease commitments in Note 16 to the consolidated financial statements on page F-30.

     The Company uses off-balance sheet arrangements where the economics and sound business principles warrant their use. The Company’s principal use of off-balance sheet arrangements occurs in connection with the expansion of our self-storage business. The Company currently manages the self-storage properties owned by SAC Holding Corporation pursuant to a standard form of management agreement with each SAC Holding Corporation subsidiary, under which the Company receives a management fee equal to 6% of the gross receipts.

Business Outlook

     As we look ahead to fiscal 2005, we believe the momentum in our Moving and Self-Storage segment will continue, adjusted for the deconsolidation of SAC Holding Corporation. We reported approximately $177.9 million of revenues, $55.2 million of earnings from operations, $67.9 million of interest expense, and a net loss of $9.4 million in fiscal 2004 that are related to variable interests in SAC Holdings that were deconsolidated as of March 31, 2004.

     U-Haul will continue to benefit from the initiatives mentioned earlier, including positive sales increases and maintenance cost improvements associated with our fleet replacement program.

     Oxford is in the process of rebuilding its business that was impacted by the AMERCO restructuring. Prior to the restructuring Oxford was rated B++ by A.M. Best. The rating was reduced to C+ during the restructuring, but has been recently upgraded to B- with a positive future outlook. Continued improvement in the rating will be a key factor in the success of Oxford’s marketing programs including annuities, life insurance, Medicare supplement, and credit life and disability. Oxford’s statutory capital measurements continue to strengthen and its existing business is expected to continue to perform profitably.

     RepWest expects to realize the benefits of our restructuring. During 2004 we successfully discontinued the majority of the unprofitable direct and assumed reinsurance lines and significantly strengthened our reserves associated with those lines. U-Haul related lines have historically been profitable and we expect to see the results of the new business plan during 2005. RepWest’s statutory capital measurements will continue to strengthen as the reserves of the discontinued lines run off. We are working with the Arizona Department of Insurance regarding the supervision order and expect it to be resolved in the future.

     We expect no further costs associated with our financial restructuring during 2005.

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Cautionary Statement Regarding Forward-looking Statements

     This Annual Report on Form 10-K contains forward-looking statements. We may make additional written or oral forward-looking statements from time to time in filings with the Securities and Exchange Commission or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, projections of revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services, financing needs and plans, our perceptions of our legal positions and anticipated outcomes of pending litigation against us, liquidity, goals and strategies, plans for new business, growth rate assumptions, pricing, costs, and access to capital and leasing markets as well as assumptions relating to the foregoing. The words “believe”, “expect”, “anticipate”, “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 risk factors enumerated at the end of this section, as well as the following: the Company’s ability to operate pursuant to the terms of its credit facilities; the Company’s ability to maintain contracts that are critical to its operations; the costs and availability of financing; the Company’s ability to execute its business plan; the Company’s ability to attract, motivate and retain key employees; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; our ability to refinance our debt; changes in government regulations, particularly environmental regulations; our credit ratings; the availability of credit; changes in demand for our products; changes in the general domestic economy; degree and nature of our competition; the resolution of pending litigation against the Company; changes in accounting standards and other factors described in this report or the other documents we file with the Securities Exchange Commission. The above factors, the following disclosures, as well as other statements in this report and in the Notes to our Consolidated Financial Statements, could contribute to or cause such differences, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by the Company that such matters will be realized. The Company disclaims any intent or obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.

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Quarterly Results (unaudited)

     The quarterly results shown below are derived from unaudited financial statements for the eight quarters beginning April 1, 2002 and ending March 31, 2004. The Company believes that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with generally accepted accounting principles, such results. U-Haul moving and storage operations are seasonal and proportionally more of the Company’s revenues and net earnings from its U-Haul moving and self-storage operations are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period.

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*		Amounts revised to reflect the corrected number of weighted average common shares outstanding.
		The weighted average common shares increased (decreased) by approximately 353,000; 33,000; (11,000); (87,000); 906,000; 230,000; and 657,000 for the seven quarters ending December 31, 2003, respectively.
		The effect of including these shares was to increase (decrease) earnings (loss) per share by $.02; $.00; $.00; $.01; $.05; $.02; $(.04); for the seven quarters ended December 31, 2003, respectively.

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