Reno, Nev.-based AMERCO (Nasdaq: UHAL) announced on Wednesday that following an internal review of its property and casualty subsidiary’s excess workers’ compensation business, Repwest will take a third quarter fiscal 2012 charge to strengthen its loss reserves.
The additional reserves relate to excess workers’ compensation policies Repwest either wrote or assumed from other insurance carriers between 1983 and 2003. These policies cover risks totally unrelated to U-Haul’s core moving and storage business and Repwest has not written or assumed business of this nature in nearly a decade, according to a statement from the company.
During the quarter Repwest undertook the comprehensive review of this discontinued line of business and found that claims have been developing much more adversely than previously anticipated, the company stated.
“A combination of issues including medical inflation, additional treatments, longer claim terms and changes in ceding entity and third party administrator reporting practices contributed to these adjustments,” the company stated. “Based upon these findings the Company adjusted its loss assumptions for this business.”
The company said that total after-tax charge for this reserve strengthening in the third was $31 million. This was a non-cash adjustment and does not necessitate any capital contributions from AMERCO, and as a result of the charge, Repwest anticipates incurring a net loss after tax of $28 million in the third quarter of fiscal 2012, according to the company.
AMERCO is best known through its subsidiary, U-Haul International Inc., a moving and storage operator that supplies products and services, including the famous yellow U-Haul trucks, to help people move and store their goods in the U.S. and Canada.
AMERCO is set to report record revenues for the third quarter and absent this charge would have reported record earnings for a third quarter, the company stated.
AMERCO plans to file its Dec. 31, 2011 Form 10-Q with the SEC on Feb. 8 and issue its quarterly earnings release contemporaneously.
Shares of UHAL rose Wednesday $2.04 to $98.76 on Nadsaq.
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