U-Haul 2005 Annual Report Download - page 24

23 I AMERCO ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
web-based฀management฀software,฀savings฀on฀insurance,฀
credit฀card฀processing,฀and฀more.฀Over฀2,700฀facilities฀are฀
now฀registered฀on฀the฀eMove฀network.
With฀over฀33,000฀unedited฀reviews฀of฀service฀providers,฀
the฀ eMove฀ marketplace฀ has฀ facilitated฀ over฀ 60,000฀
moving฀and฀storage฀transactions฀all฀over฀North฀America.฀
We฀ believe฀ that฀ acting฀ as฀ an฀ intermediary,฀ with฀ little฀
added฀investment,฀serves฀the฀customer฀in฀a฀cost฀effective฀
manner.฀ Our฀ goal฀ is฀ to฀ further฀ utilize฀ our฀ web-based฀
technology฀platform฀to฀increase฀service฀to฀consumers฀and฀
businesses฀in฀the฀moving฀and฀storage฀market.
Property฀and฀Casualty฀Insurance฀Operating฀Segment
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฀fiscal฀
2005฀ and฀ fiscal฀ 2004฀ RepWest฀ commuted฀ numerous฀฀
assumed฀ reinsurance฀ treaties฀ to฀ eliminate฀ the฀ risk฀
of฀ further฀ development฀ on฀ these฀ treaties฀ as฀ it฀ exits฀฀
non-U-Haul฀business.
Life฀Insurance฀Operating฀Segment
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฀AMERCO.฀Reinsurance฀arrangements฀
are฀entered฀into฀with฀unaffiliated฀reinsurers.
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฀ our฀
principles฀of฀consolidation,฀the฀recoverability฀of฀property,฀
plant฀and฀equipment,฀the฀adequacy฀of฀insurance฀reserves,฀
and฀the฀recognition฀and฀measurement฀of฀impairments฀for฀
investments฀ accounted฀ for฀under฀ SFAS฀No.฀115.฀ 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.฀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.฀The฀accounting฀
policies฀that฀we฀deem฀most฀critical฀to฀us,฀and฀involve฀the฀
most฀difficult,฀subjective฀ or฀complex฀judgments฀include฀
the฀following:
Principles฀of฀Consolidation
The฀ 2005฀ consolidated฀ financial฀ statements฀ and฀ the฀
2004฀ balance฀ sheet฀ include฀ the฀ accounts฀ of฀ AMERCO,฀
its฀ wholly฀ owned฀ subsidiaries,฀ and฀ SAC฀ Holding฀ II฀
Corporation฀and฀its฀subsidiaries฀(“SAC฀Holding฀II”).฀The฀
2004฀ statements฀ of฀ operations,฀ comprehensive฀ income,฀
and฀cash฀flows,฀and฀the฀consolidated฀financial฀statements฀
for฀fiscal฀2003฀and฀fiscal฀2002฀include฀all฀of฀those฀entities฀
plus฀SAC฀Holding฀Corporation฀and฀its฀subsidiaries.
In฀fiscal฀2003฀and฀fiscal฀2002,฀SAC฀Holding฀Corporation฀and฀
SAC฀Holding฀II฀(together,฀“SAC฀Holdings”)฀were฀considered฀
special฀purpose฀entities฀and฀were฀consolidated฀based฀on฀the฀
provisions฀of฀Emerging฀Issues฀Task฀Force฀(EITF)฀Issue฀No.฀
90-15.฀ For฀ fiscal฀ 2003,฀ AMERCO฀ reported฀ consolidated฀
revenue฀of฀$216.8฀million,฀a฀net฀loss฀of฀$8.7฀million,฀assets฀
of฀ $990฀ million,฀ and฀ liabilities฀ and฀ shareholder’s฀ equity฀
(deficit)฀of฀$1,035.1฀million฀and฀($45.1)฀million,฀respectively,฀
for฀SAC฀Holdings฀and฀their฀subsidiaries.
In฀ fiscal฀ 2004,฀ the฀ Company฀ applied฀ Financial฀
Interpretation฀No.฀46(R)฀to฀its฀interests฀in฀SAC฀Holdings.฀
Initially,฀ the฀ Company฀ concluded฀ that฀ the฀ SAC฀ entities฀
were฀ variable฀ interest฀ entities฀ (VIE’s)฀ and฀ that฀ the฀
Company฀was฀the฀primary฀beneficiary.฀Accordingly,฀the฀
Company฀continued฀to฀include฀SAC฀Holdings฀entities฀in฀
its฀consolidated฀financial฀statements.
Under฀ the฀ provisions฀ of฀ FIN฀ 46(R),฀ certain฀ changes฀
in฀ the฀ operations฀ of฀ a฀ variable฀ interest฀ entity฀ or฀ its฀
relationship฀ with฀ the฀ primary฀ beneficiary฀ constitute฀ a฀
re-determination฀event฀and฀require฀a฀reassessment฀of฀the฀
variable฀interest฀on฀the฀basis฀of฀the฀most฀current฀facts฀and฀
circumstances฀to฀determine฀whether฀or฀not฀a฀company฀is฀
a฀variable฀interest฀entity,฀which฀other฀company(s)฀have฀a฀
variable฀interest฀in฀the฀variable฀interest฀entity฀and฀whether฀
or฀not฀the฀reporting฀company’s฀variable฀interest฀in฀such฀
variable฀interest฀entity฀make฀it฀the฀primary฀beneficiary.฀
These฀determinations฀and฀re-determinations฀require฀that฀