AMERCO Subs Downgraded

A.M. Best Co. downgraded the financial strength ratings to “C” (weak) from “B” (fair) of Arizona-based Republic Western Insurance Co. and Louisiana-based North American Fire & Casualty Insurance Co. The outlook is negative. The companies are all subsidiaries of Reno, Nev.-based AMERCO, which is the
parent of U-Haul International Inc. The companies were under review with negative implications largely based on the financial distress of AMERCO.

The downgrade of Republic Western takes into consideration the company’s first quarter accounting charges of approximately $96 million, continued adverse loss reserve development and its adverse impact on policyholders’ surplus. Republic Western’s surplus fell 58 percent from $166 million to roughly $70 million at the end of the first quarter 2003. In the quarter, Republic Western also reported approximately $8.5 million of unfavorable loss reserve development.

Over the past several years, Republic Western has become increasingly dependent on its parent for capital support. However, given its current status, AMERCO’s ability to support its insurance subsidiaries is practically non-existent. Furthermore, Republic Western consented to a supervision order by the Arizona Department of Insurance under which the department will closely monitor the situation while Republic Western and its affiliates engage in self-corrective efforts.