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35 I AMERCO ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Earnings฀ from฀ operations฀ were฀ $2.1฀ million฀ and฀ $11.3฀
million฀ for฀ 2004฀ and฀ 2003,฀ respectively.฀ The฀ decrease฀
in฀2004฀from฀2003฀is฀due฀primarily฀to฀the฀$10.6฀million฀
accrual฀ for฀ the฀ Kocher฀ settlement฀ offset฀ by฀ improved฀
investment฀ income,฀ and฀ positive฀ loss฀ experience฀ in฀ the฀
Medicare฀supplement฀and฀Credit฀insurance฀segments.
2003 Compared with 2002
Net฀ premiums฀ were฀ $147.8฀ million฀ and฀ $161.4฀ million฀
for฀ 2003฀ and฀ 2002,฀ respectively.฀ Medicare฀ supplement฀
premiums฀ decreased฀ by฀ $3.5฀ million฀ from฀ 2002.฀ Life฀
Insurance฀ premiums฀ decreased฀ $4.1฀ million฀ from฀
2002.฀ Credit฀ life฀ and฀ disability฀ premiums฀ decreased฀
$4.8฀ million฀ from฀ 2002฀ due฀ to฀ account฀ cancellations฀
and฀ decreased฀ penetration.฀ Other฀ health฀ and฀ annuity฀
premiums฀ decreased฀ $1.3฀ million฀ from฀ 2002฀ primarily฀
from฀reduced฀life฀insurance฀sales.
Net฀ investment฀ income฀ was฀ $19.0฀ million฀ and฀ $13.9฀
million฀ for฀ 2003฀ and฀ 2002,฀ respectively.฀ The฀ increase฀
from฀2002฀is฀due฀to฀fewer฀capital฀losses฀and฀fewer฀limited฀
partnership฀ losses฀ offset฀ by฀ a฀ lower฀ invested฀ asset฀ base฀
and฀reduced฀reinvestment฀rates.
Benefits฀incurred฀were฀$103.5฀million฀and฀$115.6฀million฀
for฀ 2003฀ and฀ 2002,฀ respectively.฀ Medicare฀ supplement฀
benefits฀decreased฀$6.5฀million฀from฀2002฀primarily฀due฀
to฀ decreased฀ exposure฀ and฀ improved฀ experience.฀ Credit฀
insurance฀ benefits฀ decreased฀ $2.3฀ million฀ from฀ 2002฀
due฀ to฀ reduced฀ exposure.฀ Benefits฀ from฀ other฀ health฀
lines฀increased฀$0.3฀million฀from฀2002฀due฀to฀increased฀
morbidity.฀ Annuity฀ and฀ life฀ benefits฀ decreased฀ $3.6฀
million฀ from฀ 2002฀ due฀ to฀ decreases฀ in฀ life฀ insurance฀
exposure.
Amortization฀of฀deferred฀acquisition฀costs฀(DAC)฀and฀the฀
value฀ of฀ business฀ acquired฀ (VOBA)฀ was฀ $25.0฀ million฀
and฀ $20.5฀ million฀ for฀ 2003฀ and฀ 2002,฀ 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฀in฀relation฀to฀interest฀spreads.฀
Amortization฀associated฀with฀annuity฀policies฀increased฀
$6.4฀ million฀ from฀ 2002฀ primarily฀ due฀ to฀ increased฀
surrender฀activity.฀Other฀segments฀decreased฀$1.9฀million฀
from฀2002฀due฀to฀decreased฀new฀business฀volume.
Operating฀expenses฀were฀$38.1฀million฀and฀$48.5฀million฀
for฀2003฀and฀2002,฀respectively.฀Commissions฀decreased฀
$4.1฀million฀from฀2002฀primarily฀due฀to฀decreases฀in฀new฀
business.฀General฀and฀administrative฀expenses฀decreased฀
$6.3฀million฀from฀2002.
Earnings/(losses)฀ from฀ operations฀ were฀ $11.3฀ million฀
and฀ ($1.4)฀ million฀ for฀ 2003฀ and฀ 2002,฀ respectively.฀
The฀ increase฀ from฀ 2002฀ is฀ due฀ primarily฀ from฀ fewer฀
other฀ than฀ temporary฀ declines฀ in฀ the฀ investment฀
portfolio฀ and฀ improved฀ loss฀ ratios฀ in฀ the฀ Medicare฀฀
supplement฀segment.