U-Haul 2016 Annual Report Download - page 68

AMERCO AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
F-12
Self-Insurance Reserves
U-Haul retains the risk for certain public liability and property damage programs related to our rental
equipment. The consolidated balance sheets include $386.4 million and $363.6 million of liabilities related
to these programs as of March 31, 2016 and 2015, respectively. These liabilities are recorded in Policy
benefits and losses, claims and loss expenses payable. Management takes into account losses incurred
based upon actuarial estimates, past experience, current claim trends, as well as social and economic
conditions. This liability is subject to change in the future based upon changes in the underlying
assumptions including claims experience, frequency of incidents, and severity of incidents.
Additionally, as of March 31, 2016 and 2015, the consolidated balance sheets include liabilities of $9.5
million and $8.7 million, respectively, related to our provided medical plan benefits for eligible employees.
We estimate this liability based on actual claims outstanding as of the balance sheet date as well as an
actuarial estimate of claims incurred but not reported. This liability is reported net of estimated recoveries
from excess loss reinsurance policies with unaffiliated insurers of $0.2 million and $0.3 million for fiscal
2016 and 2015, respectively. These amounts are recorded in Accounts payable and accrued expenses
on the consolidated balance sheets.
Revenue Recognition
Self-moving rentals are recognized for the period that trucks and moving equipment are rented. Self-
storage revenues, based upon the number of paid storage contract days, are recognized as earned
during the period. Sales of self-moving and self-storage related products are recognized at the time that
title passes and the customer accepts delivery. Property and casualty, traditional life and Medicare
supplement insurance premiums are recognized as revenue over the policy periods. 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. Interest and investment income
are recognized as earned.
Amounts collected from customers for sales tax are recorded on a net basis.
Advertising
All advertising costs are expensed as incurred. Advertising expense was $9.6 million, $7.5 million and
$7.1 million in fiscal 2016, 2015 and 2014, respectively.
Deferred Policy Acquisition Costs
Commissions and other costs that fluctuate with and are primarily related to the acquisition or renewal
of certain insurance premiums are deferred. For our Life Insurance’s life and health insurance products,
these costs are amortized, with interest, in relation to revenue such that costs are realized as a constant
percentage of revenue. For its annuity insurance products the costs are amortized, with interest, in
relation to the present value of actual and expected gross profits.
Starting in fiscal 2014, new annuity contract holders were provided with a sales inducement in the form
of a premium bonus. Sales inducements are recognized as an asset with a corresponding increase to the
policyholder liability and are amortized in a similar manner to Deferred Acquisition Cost. As of December
31, 2015 and 2014, the Sales Inducement Asset included with Deferred Acquisition Costs amounted to
$24.6 million and $24.8 million, respectively on the consolidated balance sheet and amortization expense
totaled $3.0 million $2.4 million and $2.1 million for the periods ended December 31, 2015, 2014 and
2013, respectively .
Environmental Costs
Liabilities are recorded when environmental assessments and remedial efforts, if applicable, are
probable and the costs can be reasonably estimated. The amount of the liability is based on
management’s best estimate of undiscounted future costs. Certain recoverable environmental costs
related to the removal of underground storage tanks or related contamination are capitalized and
amortized over the estimated useful lives of the properties. These costs improve the safety or efficiency of
the property or are incurred in preparing the property for sale.