U-Haul Holding Co: Form 10-Q for the period ended Dec 31, 2022

General

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with the overall strategy of U-Haul Holding Company (formally known as AMERCO), followed by a description of, and strategy related to, our operating segments to give the reader an overview of the goals of our businesses and the direction in which our businesses and products are moving. We then discuss our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Next, we discuss our results of operations for the third quarter and first nine months of fiscal 2023, compared with the third quarter and first nine months of fiscal 2022, which is followed by an analysis of liquidity changes in our balance sheets and cash flows, and a discussion of our financial commitments in the sections entitled Liquidity and Capital Resources - Summary and Disclosures about Contractual Obligations and Commercial Commitments. We conclude this MD&A by discussing our current outlook for the remainder of fiscal 2023.

This MD&A should be read in conjunction with the other sections of this Quarterly Report, including the Notes to Condensed Consolidated Financial Statements. The various sections of this MD&A contain a number of forward-looking statements, as discussed under the caption, Cautionary Statements Regarding Forward-Looking Statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing or in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Many of these risks and uncertainties are beyond our control and our actual results may differ materially from these forward-looking statements.

U-Haul Holding Company, a Nevada corporation, has a third fiscal quarter that ends on the 31st of December for each year that is referenced. Our insurance company subsidiaries have a third quarter that ends on the 30th of September for each year that is referenced. They have been consolidated on that basis. Our insurance companies’ financial reporting processes conform to calendar year reporting as required by state insurance departments. Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations. We disclose material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2022 and 2021 correspond to fiscal 2023 and 2022 for U-Haul Holding Company.

Overall Strategy

Our overall strategy is to maintain our leadership position in the United States and Canada “do-it-yourself” moving and storage industry. We accomplish this by providing a seamless and integrated supply chain to the “do-it-yourself” moving and storage market. As part of executing this strategy, we leverage the brand recognition of U-Haul® with our full line of moving and self-storage related products and services and the convenience of our broad geographic presence.

Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services. We are able to expand our distribution and improve customer service by increasing the amount of moving equipment and storage units and portable moving and storage units available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our eMove ® capabilities.

Property and Casualty Insurance is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates.

Life Insurance is focused on long term capital growth through direct writing and reinsuring of life insurance, Medicare supplement and annuity products in the senior marketplace.

Description of Operating Segments

U-Haul Holding Company’s three reportable segments are:

Moving and Storage, comprised of U-Haul Holding Company, U-Haul, and Real Estate and the wholly owned subsidiaries of U-Haul and Real Estate;

Property and Casualty Insurance, comprised of Repwest and its wholly owned subsidiaries and ARCOA; and

Life Insurance, comprised of Oxford and its wholly owned subsidiaries.

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Moving and Storage

Moving and Storage consists of the rental of trucks, trailers, portable moving and storage units, specialty rental items and self-storage spaces primarily to the household mover as well as sales of moving supplies, towing accessories and propane. Operations are conducted under the registered trade name U-Haul ® throughout the United States and Canada.

With respect to our truck, trailer, specialty rental items and self-storage rental business, we are focused on expanding our dealer network, which provides added convenience for our customers, and expands the selection and availability of rental equipment to satisfy the needs of our customers.

U-Haul ® branded self-moving related products and services, such as boxes, pads and tape, allow our customers to, among other things, protect their belongings from potential damage during the moving process. We are committed to providing a complete line of products selected with the “do-it-yourself” moving and storage customer in mind.

uhaul.com ® is an online marketplace that connects consumers to our operations as well as independent Moving Help ® service providers and thousands of independent Self-Storage Affiliates. Our network of customer-rated affiliates and service providers furnish pack and load help, cleaning help, self-storage and similar services throughout the United States and Canada. Our goal is to further utilize our web-based technology platform to increase service to consumers and businesses in the moving and storage market.

U-Haul’s Truck Share 24/7, Skip-the-Counter Self-Storage rentals and Self-checkout for moving supplies provide our customers methods for conducting business with us directly via their mobile devices and also limiting physical exposure.

Since 1945, U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the inventory of total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations, has helped us to reduce our impact on the environment.

Property and Casualty Insurance

Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across the United States and Canada. Property and Casualty Insurance also underwrites components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for Property and Casualty Insurance includes offering property and casualty insurance products in other U-Haul related programs.

Life Insurance

Life Insurance provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.

Cybersecurity Incident

On September 9, 2022, we announced that the Company was made aware of a data security incident involving U-Hauls information technology network. U-Haul detected a compromise of two unique passwords used to access U-Haul customers‘ information. U-Haul took immediate steps to contain the incident and promptly enhanced its security measures to prevent any further unauthorized access. U-Haul retained cybersecurity experts and incident response counsel to investigate the incident and implement additional security safeguards. The investigation determined that between November 5, 2021 and April 8, 2022, the threat actor accessed customer contracts containing customers’ names, dates of birth, and driver’s license or state identification numbers. None of U-Haul’s financial, payment processing or email systems were involved. U-Haul has notified impacted customers and relevant governmental authorities.

Several class action lawsuits related to the incident have been filed against U-Haul. The lawsuits have been consolidated into one action in the U.S. District Court for the District of Arizona and will be vigorously defended by the Company; however the outcome of such lawsuits cannot be predicted or guaranteed with any certainty.

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Critical Accounting Policies and Estimates

Please refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Impairment of Investments

Under the current expected credit loss model, a valuation allowance is recognized in earnings for credit losses. If we intend to sell a debt security, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses, with any incremental impairment reported in earnings. Reversals of the allowance for credit losses are permitted and should not exceed the allowance amount initially recognized.

There was a $2.2 million net impairment charge associated with this allowance recorded for the first nine months ended December 31, 2022.

Results of Operations

U-Haul Holding Company and Consolidated Entities

Quarter Ended December 31, 2022 compared with the Quarter Ended December 31, 2021

Listed below, on a consolidated basis, are revenues for our major product lines for the third quarter of fiscal 2023 and the third quarter of fiscal 2022:

(Unaudited)

(In thousands)

Self-moving equipment rental revenues decreased $76.7 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. Transactions and revenue for both our In-Town and one-way markets decreased. Compared to the same period last year, we increased the number of retail locations, independent dealers, trucks, and trailers in the rental fleet.

Self-storage revenues increased $31.1 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. The average monthly number of occupied units increased by 12%, or 57,229 units, during the third quarter of fiscal 2023 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations, the addition of new capacity to the portfolio and from an improvement in average revenue per occupied foot. Over the last twelve months, we added approximately 6.2 million net rentable square feet, with approximately 1.7 million of that coming on during the third quarter of fiscal 2023.

Sales of self-moving and self-storage products and services decreased $0.6 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022 primarily due to a decrease in the sale of moving supplies.

Life insurance premiums decreased $2.6 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022 due primarily to decreased sales of single premium life products and policy decrements in Medicare supplement premiums.

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Property and casualty insurance premiums increased $1.2 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during July, August and September.

Net investment and interest income increased $21.1 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. Increased yields on government securities were the primary cause of the $23.7 million increase for Moving and Storage. Partially offsetting this increase were changes in the market value of unaffiliated equity stocks held at our Property and Casualty Insurance subsidiary which accounted for a $2.3 million decrease.

Other revenue decreased $2.9 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022, primarily coming from decreased moving transactions within our U-Box ® program.

Listed below are revenues and earnings from operations at each of our operating segments for the third quarter of fiscal 2023 and the third quarter of fiscal 2022. The insurance companies’ third quarters ended September 30, 2022 and 2021.

(Unaudited)

(In thousands)

Total costs and expenses increased $67.3 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. Operating expenses for Moving and Storage increased $75.2 million. Repair costs associated with the rental fleet experienced a $34.7 million increase during the quarter due to preventative maintenance resulting from accumulated fleet activity combined with the slower rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delays with our original equipment manufacturers. Other increases included personnel, liability costs, building maintenance and professional fees. Net gains from the disposal of rental equipment decreased $1.1 million from a decline in resale values. Depreciation expense associated with our rental fleet was $131.1million and $126.6 million for the third quarter of fiscal 2023 and 2022, respectively. Depreciation expense on all other assets, largely from buildings and improvements, increased $4.5 million to $53.2 million.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased $96.3 million to $320.4 million for the third quarter of fiscal 2023, compared with $416.7 million for the third quarter of fiscal 2022.

Interest expense for the third quarter of fiscal 2023 was $59.0 million, compared with $44.0 million for the third quarter of fiscal 2022, due to an increase in our outstanding debt of $805.5 million in the third quarter of fiscal 2023 compared with the third quarter of fiscal 2022.

Income tax expense was $61.8 million for the third quarter of fiscal 2023, compared with $90.0 million for the third quarter of fiscal 2022.

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As a result of the above-mentioned items, earnings available to common stockholders were $199.2 million for the third quarter of fiscal 2023, compared with $281.5 million for the third quarter of fiscal 2022.

Basic and diluted earnings per share of Common Stock, par value $0.25 per share (“Voting Common Stock”) for the third quarter of fiscal 2023 were $0.98, compared with $1.89 for the third quarter of fiscal 2022.

The weighted average shares outstanding basic and diluted for Voting Common Stock were 19,607,788 for both the third quarter of fiscal 2023 and 2022.

Basic and diluted earnings per share of Series N Non-Voting Common Stock, par value $0.001 per share (“Non-Voting Common Stock”) for the third quarter of fiscal 2023 were $1.02, compared with $1.39 for the third quarter of fiscal 2022.

The weighted average shares outstanding basic and diluted for Non-Voting Common Stock were 176,470,092 for both the third quarter of fiscal 2023 and 2022.

Moving and Storage

Quarter Ended December 31, 2022 compared with the Quarter Ended December 31, 2021

Listed below are revenues for our major product lines at Moving and Storage for the third quarter of fiscal 2023 and the third quarter of fiscal 2022:

(Unaudited)

(In thousands)

Self-moving equipment rental revenues decreased $76.8 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. Transactions and revenue for both our In-Town and one-way markets decreased. Compared to the same period last year, we increased the number of retail locations, independent dealers, trucks, and trailers in the rental fleet.

Self-storage revenues increased $31.1 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. The average monthly number of occupied units increased by 12%, or 57,229 units, during the third quarter of fiscal 2023 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations, the addition of new capacity to the portfolio and from an improvement in average revenue per occupied foot. Over the last twelve months, we added approximately 6.2 million net rentable square feet, with approximately 1.7 million of that coming on during the third quarter of fiscal 2023.

We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:

(Unaudited)

(In thousands, except occupancy rate)

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Over the last twelve months, we added approximately 6.2 million net rentable square feet of new storage to the system. This was a mix of existing storage locations we acquired and new development.

Sales of self-moving and self-storage products and services decreased $0.6 million during the third quarter of fiscal 2023, compared with third quarter of fiscal 2022 primarily due to a decrease in the sales of moving supplies.

Net investment and interest income increased $23.8 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022, due to increases in invested cash combined with higher interest rates on these short-term deposits.

Other revenue decreased $3.1 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022 primarily coming from decreased moving transactions within our U-Box ® program.

Total costs and expenses increased $74.0 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022. Operating expenses increased $75.2 million. Repair costs associated with the rental fleet experienced a $34.7 million increase during the quarter due to preventative maintenance resulting from accumulated fleet activity combined with the slower rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delays with our original equipment manufacturers. Other increases included personnel, liability costs, building maintenance and professional fees. Net gains from the disposal of rental equipment decreased $1.1 million from a decline in resale values. Depreciation expense associated with our rental fleet was $131.1million and $126.6 million for the third quarter of fiscal 2023 and 2022, respectively. Depreciation expense on all other assets, largely from buildings and improvements, increased $4.5 million to $53.2 million.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries decreased $99.1 million to $304.7 million for the third quarter of fiscal 2023, compared with $403.9 million for the third quarter of fiscal 2022.

Equity in the earnings of U-Haul Holding Company’s insurance subsidiaries was $12.7 million for the third quarter of fiscal 2023, compared with $10.4 million for the third quarter of fiscal 2022.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $317.4 million for the third quarter of fiscal 2023, compared with $414.3 million for the third quarter of fiscal 2022.

Property and Casualty Insurance

Quarter Ended September 30, 2022 compared with the Quarter Ended September 30, 2021

Net premiums were $26.9 million and $26.5 million for the third quarters ended September 30, 2022 and 2021, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period.

Net investment and interest income were $1.6 million and $3.3 million for the third quarters ended September 30, 2022 and 2021, respectively. The main driver for the decrease was in the unaffiliated common stock valuations of $2.3 million.

Net operating expenses were $11.8 million and $12.2 million for the quarters ended September 30, 2022 and 2021, respectively, due to an increase in commissions offset by an increase in loss adjusting fees.

Benefits and losses incurred were $5.7 million and $7.9 million for the third quarters ended September 30, 2022 and 2021, respectively. The decrease was due to favorable loss experience.

As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $10.8 million and $9.7 million for the third quarters ended September 30, 2022 and 2021, respectively.

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Life Insurance

Quarter Ended September 30, 2022 compared with the Quarter Ended September 30, 2021

Net premiums were $24.4 million and $27.0 million for the third quarters ended September 30, 2022 and 2021, respectively. Medicare Supplement premiums decreased $1.6 million from the policy decrements offset by premium rate increases. Life premiums decreased $1.1 million primarily from the decrease in sales of single premium life and final expense. Deferred annuity deposits were $74.1 million or $1.9 million above prior year and are accounted for on the balance sheet as deposits rather than premiums.

Net investment income was $27.2 million and $28.2 million for the third quarters ended September 30, 2022 and 2021, respectively. Net realized losses on derivatives used as economic hedges to fixed indexed annuities was $1.4 million. The change in the provision for expected credit losses resulted in a $0.4 million additional decrease to investment income. This decrease was offset by a $0.8 million increase in net interest income, primarily on bonds and mortgage loans.

Net operating expenses were $5.1 million and $5.5 million for the quarters ended September 30, 2022 and 2021, respectively. The decrease was primarily due to the decrease in administrative expenses.

Benefits and losses incurred were $35.6 million and $39.4 million for the third quarters ended September 30, 2022 and 2021, respectively. Life benefits decreased $2.4 million due to lower death claims related to COVID-19 and lower sales due to premium adjustments that took place in late 2021. Medicare supplement benefits decreased by $0.6 million from the declined policies in force. Interest credited to policyholders decreased $0.8 million due to a reduction in the interest credited rates on equity-indexed annuities driven by market fluctuations.

Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA”) and the value of business acquired (“VOBA”) was $7.0 million and $7.9 million for the third quarters ended September 30, 2022 and 2021, respectively. The decrease in DAC amortization was primarily on final expense policies from the reduced policy lapses and death benefits.

As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $5.1 million and $3.5 million for the third quarters ended September 30, 2022 and 2021, respectively.

U-Haul Holding Company and Consolidated Entities

Nine Months Ended December 31, 2022 compared with the Nine Months Ended December 31, 2021

Listed below on a consolidated basis are revenues for our major product lines for the first nine months of fiscal 2023 and the first nine months of fiscal 2022:

(Unaudited)

(In thousands)

Self-moving equipment rental revenues decreased $38.4 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. The decline is primarily from a decrease in one-way transactions. Compared to the same period last year, we increased the number of retail locations, independent dealers, trucks and towing devices in the rental fleet.

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Self-storage revenues increased $98.9 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. The average monthly number of occupied units increased by 15%, or 67,873 units, during the first nine months of fiscal 2023 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations, the addition of new capacity to the portfolio and from an improvement in average revenue per occupied foot. Over the last twelve months we added approximately 6.2 million net rentable square feet, or a 13% increase, with approximately 4.6 million of that coming on during the first nine months of fiscal 2023.

Sales of self-moving and self-storage products and services increased $8.6 million for the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022 primarily due to increased hitch and propane sales partially offset by a 1% decrease in the sales of moving supplies.

Life insurance premiums decreased $9.0 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022 due primarily to decreased sales of single premium life products and policy decrements in Medicare supplement premiums.

Property and casualty insurance premiums increased $7.6 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period.

Net investment and interest income increased $13.4 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. Moving and Storage accounted for a $42.4 million increase due to larger short-term invested cash balances combined with higher yields on the associated government securities. Changes in the market value of unaffiliated common stocks held at our Property and Casualty Insurance subsidiary resulted in a $14.6 million decrease for the nine months. Life Insurance experienced a net loss of $11.1 million on derivatives used as hedges to fixed index annuities. A portion of these derivative losses is offset by declines in interest credited benefits.

Other revenue increased $51.8 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022, primarily coming from increased moving and storage transactions within our U-Box ® program.

Listed below are revenues and earnings from operations at each of our operating segments for the first nine months of fiscal 2023 and the first nine months of fiscal 2022. The insurance companies’ first nine months ended September 30, 2022 and 2021.

(Unaudited)

(In thousands)

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Total costs and expenses increased $290.6 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. Operating expenses for Moving and Storage increased $307.3 million. Repair costs associated with the rental fleet experienced a $100.5 million increase during the first nine months of fiscal 2023 due to preventative maintenance resulting from higher fleet activity combined with the slower rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delays with our original equipment manufacturers. Other increases included personnel, liability costs, utilities, non-rental equipment and building maintenance and shipping associated with U-Box transactions. Net gains from the disposal of rental equipment increased $41.2 million from an increase in resale values. Depreciation expense associated with our rental fleet was $386.9 million and $378.5 million for the first nine months of fiscal 2023 and 2022, respectively. Depreciation expense on all other assets, largely from buildings and improvements, increased $16.6 million to $157.3 million. Net losses on the disposal or retirement of land and buildings increased $8.0 million as the first nine months of fiscal 2022 included a condemnation gain of $4.9 million.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $1,333.7 million for the first nine months of fiscal 2023, as compared with $1,489.6 million for the first nine months of fiscal 2022.

Interest expense for the first nine months of fiscal 2023 was $166.0 million, compared with $122.8 million for the first nine months of fiscal 2022, due to an increase in our outstanding debt of $805.5 million in the first nine months of fiscal 2023 compared with the first nine months of fiscal 2022.

Income tax expense was $280.4 million for the first nine months of fiscal 2023, compared with $328.5 million for first nine months of fiscal 2022.

As a result of the above-mentioned items, earnings available to common stockholders were $885.3 million for the first nine months of fiscal 2023, compared with $1,036.5 million for the first nine months of fiscal 2022.

Basic and diluted earnings per share of Voting Common Stock for the first nine months of fiscal 2023 were $5.38, compared with $6.64 for the first nine months of fiscal 2022.

The weighted average shares outstanding basic and diluted for Voting Common Stock were 19,607,788 for both the first nine months of fiscal 2023 and 2022.

Basic and diluted earnings per share of Non-Voting Common Stock for the first nine months of fiscal 2023 were $4.42, compared with $5.14 for the first nine months of fiscal 2022.

The weighted average shares outstanding basic and diluted for Non-Voting Common Stock were 176,470,092 for both the first nine months of fiscal 2023 and 2022.

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Moving and Storage

Nine Months Ended December 31, 2022 compared with the Nine Months Ended December 31, 2021

Listed below are revenues for the major product lines at our Moving and Storage operating segment for the first nine months of fiscal 2023 and the first nine months of fiscal 2022:

(Unaudited)

(In thousands)

Self-moving equipment rental revenues decreased $38.3 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. The decline is primarily from a decrease in one-way transactions. Compared to the same period last year, we increased the number of retail locations, independent dealers, trucks and towing devices in the rental fleet.

Self-storage revenues increased $98.9 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. The average monthly number of occupied units increased by 15%, or 67,873 units, during the first nine months of fiscal 2023 compared with the same period last year. The growth in revenues and square feet rented comes from a combination of occupancy gains at existing locations, the addition of new capacity to the portfolio and from an improvement in average revenue per occupied foot. Over the last twelve months we added approximately 6.2 million net rentable square feet, or a 13% increase, with approximately 4.6 million of that coming on during the first nine months of fiscal 2023.

We own and manage self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:

(Unaudited)

(In thousands, except occupancy rate)

Over the last twelve months, we added approximately 6.2 million net rentable square feet of new storage to the system. This was a mix of existing storage locations we acquired and new development.

Sales of self-moving and self-storage products and services increased $8.6 million for the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022 primarily due to increased hitch and propane sales offset by a 1% decrease in sales of moving supplies.

Net investment and interest income increased $42.4 million during the third quarter of fiscal 2023, compared with the third quarter of fiscal 2022, due to increases in invested cash combined with higher interest rates on these short-term deposits.

Other revenue increased $51.7 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022, primarily coming from increased moving and storage transactions within our U-Box® program.

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Total costs and expenses increased $306.6 million during the first nine months of fiscal 2023, compared with the first nine months of fiscal 2022. Operating expenses increased $307.3 million. Repair costs associated with the rental fleet experienced a $100.5 million increase during the first nine months of fiscal 2023 due to preventative maintenance resulting from higher fleet activity combined with the slower rotation of new equipment into the fleet and older equipment out of the fleet. The addition of new equipment has been affected by delays with our original equipment manufacturers. Other increases included personnel, liability costs, utilities, non-rental equipment and building maintenance and shipping associated with U-Box transactions. Net gains from the disposal of rental equipment increased $41.2 million from an increase in resale values. Depreciation expense associated with our rental fleet was $386.9 million and $378.5 million for the first nine months of fiscal 2023 and 2022, respectively. Depreciation expense on all other assets, largely from buildings and improvements, increased $16.6 million to $157.3 million. Net losses on the disposal or retirement of land and buildings increased $8.0 million as the first nine months of fiscal 2022 included a condemnation gain of $4.9 million.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations for Moving and Storage before consolidation of the equity in the earnings of the insurance subsidiaries decreased to $1,301.3 million for the first nine months of fiscal 2023, compared with $1,442.8 million for the first nine months of fiscal 2022.

Equity in the earnings of U-Haul Holding Company’s insurance subsidiaries was $26.4 million for the first nine months of fiscal 2023, compared with $37.8 million for the first nine months of fiscal 2022.

As a result of the above-mentioned changes in revenues and expenses, earnings from operations decreased to $1,327.7 million for the first nine months of fiscal 2023, compared with $1,480.6 million for the first nine months of fiscal 2022.

Property and Casualty Insurance

Nine Months Ended September 30, 2022 compared with the Nine Months Ended September 30, 2021

Net premiums were $73.6 million and $67.3 million for the nine months ended September 30, 2022 and 2021, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with the increased moving and storage transactions at U-Haul during the same period.

Net investment and interest income was $1.3 million and $15.5 million for the nine months ended September 30, 2022 and 2021, respectively. The main driver of the change in net investment income was the decrease in valuation of unaffiliated common stock of $14.6 million.

Net operating expenses were $33.6 million and $31.8 million for the nine months ended September 30, 2022 and 2021, respectively. The change was due to an increase in commissions.

Benefits and losses incurred were $16.2 million and $16.7 million for the nine months ended September 30, 2022 and 2021, respectively. The decrease was due to favorable loss experience.

As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $24.9 million and $34.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Life Insurance

Nine Months Ended September 30, 2022 compared with the Nine Months Ended September 30, 2021

Net premiums were $75.6 million and $84.6 million for the nine months ended September 30, 2022 and 2021, respectively. Medicare Supplement premiums decreased $5.5 million from the policy decrements offset by premium rate increases. Life premiums decreased $3.6 million primarily from the decrease in sales of single premium life and final expense. Deferred annuity deposits were $243.1 million or $13.5 million below prior year and are accounted for on the balance sheet as deposits rather than premiums. The decrease in deferred annuity deposits is a result of the competitive industry rates.

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Net investment income was $73.7 million and $88.4 million for the nine months ended September 30, 2022 and 2021, respectively. Net realized losses on derivatives used as economic hedges to fixed indexed annuities was $11.1 million. The change in the provision for expected credit losses resulted in a $3.1 million additional decrease to investment income. Investment income from fixed maturities decreased $0.9 million from lower investment yields. In addition, realized gains on fixed maturities decreased by $0.9 million. This was offset by a $1.7 million increase in mortgage loans investment income from gains on maturities and prepayment penalties. Interest income on the remaining invested assets decreased $0.4 million.

Benefits and losses incurred were $106.6 million and $122.5 million for the nine months ended September 30, 2022 and 2021, respectively. Interest credited to policyholders decreased $8.2 million due to a reduction in the interest credited rates on equity - indexed annuities driven by market fluctuations. Life benefits decreased $5.3 million due to lower death claims related to COVID-19 and lower sales due to premium adjustments that took place in late 2021. Medicare supplement benefits decreased by $2.6 million from the declined policies in force. Benefits on the annuities increased $0.1 million.

Amortization of DAC, SIA and VOBA were $21.6 million and $23.5 million for the nine months ended September 30, 2022 and 2021, respectively. The decrease in life products DAC amortization is from the reduced policy lapses and death benefits. In addition, there was a decrease in DAC amortization on certain fixed indexed and multi-year guaranteed annuities caused by the completion of the amortization period in 2021. Medicare supplement DAC Amortization is also steadily decreasing due to a decline in the in-force.

As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $8.3 million and $13.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

We believe our current capital structure is a positive factor that will enable us to pursue our operational plans and goals and provide us with sufficient liquidity for the foreseeable future. There are many factors that could affect our liquidity, including some of which are beyond our control, and there is no assurance that future cash flows and liquidity resources will be sufficient to meet our outstanding debt obligations and our other future capital needs.

As of December 31, 2022, cash and cash equivalents totaled $2,510.6 million, compared with $2,704.1 million as of March 31, 2022. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (Moving and Storage). As of December 31, 2022 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were:

(Unaudited)

(In thousands)

As of December 31, 2022, Moving and Storage had additional cash available under existing credit facilities of $465.0 million. The majority of invested cash at the Moving and Storage segment is held in government money market funds.

Net cash provided by operating activities decreased $273.5 million in the first nine months of fiscal 2023 compared with the first nine months of fiscal 2022. The decrease was primarily due to reduced net earnings of $151.3 million and the payment of $78.0 million in federal income tax in fiscal 2023 compared with the receipt of $243 million of federal income tax refunds in fiscal 2022.

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Net cash used in investing activities increased $424.8 million in the first nine months of fiscal 2023, compared with the first six months of fiscal 2022. Purchases of property, plant and equipment increased $423.4 million. Reinvestment in the rental fleet was less than our projection due to delays in receiving new equipment from our original equipment manufacturers during the first nine months of fiscal 2023; however, the level of reinvestment in the rental fleet has increased in comparison to the first nine months of fiscal 2022. Cash from the sales of property, plant and equipment increased $49.8 million largely due to fleet sales. For our insurance subsidiaries, net cash used in investing activities decreased $188.2 million due to a decrease in purchases in fixed maturity investments, which was offset by a $225.0 million increase in purchases of short-term Treasury notes by Moving and Storage.

Net cash provided by financing activities decreased $621.0 million in the first nine months of fiscal 2023, as compared with the first nine months of fiscal 2022. This was due to a combination of increased debt payments of $361.9 million, decreased finance lease repayments of $33.9 million, a decrease in cash from borrowings of $226.4 million and a decrease in net annuity deposits from Life Insurance of $72.5 million.

Liquidity and Capital Resources and Requirements of Our Operating Segments

Moving and Storage

To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily consisted of new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. U-Haul estimates that during fiscal 2023, the Company will reinvest in its rental equipment fleet approximately $625 million, net of equipment sales and excluding any lease buyouts. Through the first nine months of fiscal 2023, the Company invested, net of sales, approximately $489 million before any lease buyouts in its rental equipment fleet. Fleet investments in fiscal 2023 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment, the availability of equipment from our original equipment manufacturers and the used-truck sales market. We anticipate that the fiscal 2023 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options.

The Company has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations. The Company’s plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. For the first nine months of fiscal 2023, the Company invested $1,003.2 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2023, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, and the identification and successful acquisition of target properties. U-Haul's growth plan in self-storage also includes the expansion of the U-Haul Storage Affiliate program, which does not require significant capital.

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Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) were $1,545.9 million and $1,169.2 million for the first nine months of fiscal 2023 and 2022, respectively. The components of our net capital expenditures are provided in the following table:

(Unaudited)

(In thousands)

Moving and Storage continues to hold significant cash and has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage marketplace or reduce existing indebtedness where possible.

Property and Casualty Insurance

State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance’s assets are generally not available to satisfy the claims of U-Haul Holding Company or its legal subsidiaries.

We believe that stockholders’ equity at Property and Casualty Insurance remains sufficient, and we do not believe that its ability to pay ordinary dividends to U-Haul Holding Company will be restricted per state regulations.

Property and Casualty Insurance’s stockholder’s equity was $281.3 million and $296.1 million as of September 30, 2022 and December 31, 2021, respectively. The decrease resulted from net earnings of $19.8 million, and a decrease in other comprehensive income of $34.6 million due to the decrease in the market value of its investment portfolio. Property and Casualty Insurance does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio.

Life Insurance

Life Insurance manages its financial assets to meet policyholder and other obligations, including investment contract withdrawals and deposits. Life Insurance’s net deposits for the nine months as of September 30, 2022 were $21.3 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s assets are generally not available to satisfy the claims of U-Haul Holding Company or its legal subsidiaries.

Life Insurance’s stockholder’s equity was $141.2 million and $440.9 million as of September 30, 2022 and December 31, 2021, respectively. The decrease resulted from net earnings of $6.6 million, and a decrease in other comprehensive income of $306.3 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio. Outside of its membership in the Federal Home Loan Bank (“FHLB”) system, Life Insurance has not historically used debt or equity issues to increase capital and therefore has not had any significant direct exposure to capital market conditions other than through its investment portfolio. As of September 30, 2022, Oxford had outstanding deposits of $60.0 million in the FHLB. For a more detailed discussion of this deposit, please see Note 4, Borrowings, of the Notes to Condensed Consolidated Financial Statements.

Cash Provided from Operating Activities by Operating Segments

Moving and Storage

Net cash provided from operating activities were $1,419.0 million and $1,698.9 million for the first nine months of fiscal 2023 and 2022, respectively. The decrease was primarily due to reduced net earnings of $151.3 million and the payment of $78.0 million in federal income tax in fiscal 2023 compared with the receipt of $243 million of federal income tax refunds in fiscal 2022.

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Property and Casualty Insurance

Net cash provided by operating activities were $30.2 million and $23.1 million for the first nine months ended September 30, 2022 and 2021, respectively. The increase was the result of changes in intercompany balances and the timing of payables activity.

Property and Casualty Insurance’s cash and cash equivalents and short-term investment portfolios amounted to $33.8 million and $41.7 million as of September 30, 2022 and December 31, 2021, respectively. These balances reflect funds in transition from maturity proceeds to long-term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow Property and Casualty Insurance to schedule cash needs in accordance with investment and underwriting proceeds.

Life Insurance

Net cash provided by operating activities were $66.5 million and $67.2 million for the first nine months ended September 30, 2022 and 2021, respectively. The decrease in operating cash flows was primarily due to a decrease in investment and premium income only partially offset by a decrease in benefits, commissions, and federal income taxes.

In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through Life Insurance’s short-term portfolio and its membership in the FHLB. As of September 30, 2022 and December 31, 2022, cash and cash equivalents and short-term investments amounted to $60.2 million and $50.1 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs.

Liquidity and Capital Resources - Summary

We believe we have the financial resources needed to meet our business plans, including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs.

As a result of the federal income tax provisions of the Coronavirus Aid, Relief and Economic Security Act, we have filed applicable forms with the Internal Revenue Service to carryback net operating losses. These refund claims total approximately $366 million, of which we have received approximately $243 million and are reflected in Prepaid expense. These amounts are expected to provide us additional liquidity whenever received. It is possible future legislation could negatively impact our ability to receive these tax refunds.

Our borrowing strategy has primarily focused on asset-backed financing, rental equipment leases and private placement borrowings limited by the amount of unencumbered assets available. As part of this strategy, we seek to ladder maturities and fix interest rates. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. As of December 31, 2022, we had available borrowing capacity under existing credit facilities of $465.0 million. It is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit. We believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long term debt and borrowing capacity, please see Note 4, Borrowings, of the Notes to Condensed Consolidated Financial Statements.

Disclosures about Contractual Obligations and Commercial Commitments

Our estimates as to future contractual obligations have not materially changed from the disclosure included under the subheading Disclosures about Contractual Obligations and Commercial Commitments in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

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Fiscal 2023 Outlook

We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals and is likely to increase in fiscal 2023. Revenue in the U-Move ® program could be adversely impacted should we fail to execute in any of these areas. Should we be unable to acquire enough new rental equipment to properly rotate our fleet, repair and maintenance costs will continue to increase. Even if we execute our plans, we could see declines in revenues primarily due to unforeseen events including adverse economic conditions or heightened competition that is beyond our control.

With respect to our storage business, we have added new locations and expanded existing locations. In fiscal 2023, we are actively looking to complete current projects, increase occupancy in our existing portfolio of locations and acquire new locations. New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. It is likely spending on acquisitions and new development will increase in fiscal 2023. We will continue to invest capital and resources in the U-Box ® program throughout fiscal 2023.

Inflationary pressures may challenge our ability to maintain or improve upon our operating margin.

Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove ® , Safetow ® , Safemove Plus ® , Safestor ® and Safestor Mobile ® protection packages to U-Haul customers.

Life Insurance is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.

We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.

Interest Rate Risk

The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations and one variable rate operating lease. We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in interest rates. We enter into these arrangements with counterparties that are significant financial institutions with whom we generally have other financial arrangements. We are exposed to credit risk should these counterparties not be able to perform on their obligations. Following is a summary of our interest rate swap agreements as of December 31, 2022:

(Unaudited)

(In thousands)

As of December 31, 2022, we had $823.5 million of variable rate debt obligations. If SOFR were to increase 100 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by $6.2 million annually (after consideration of the effect of the above derivative contracts). Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule.

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Additionally, our insurance subsidiaries’ fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies’ asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates.

We use derivatives to hedge our equity market exposure to indexed annuity products sold by our Life Insurance company. These contracts earn a return for the contractholder based on the change in the value of the S&P 500 index between annual index point dates. We buy and sell listed equity and index call options and call option spreads. The credit risk is with the party in which the options are written. The net option price is paid up front and there are no additional cash requirements or additional contingent liabilities. These contracts are held at fair market value on our balance sheet. As of September 30, 2022 and December 31, 2021, these derivative hedges had a net market value of $2.2 million and $7.5 million, with notional amounts of $456.4 million and $416.7 million, respectively. These derivative instruments are included in Investments, other, on the condensed consolidated balance sheets.

Although the call options are employed to be effective hedges against our policyholder obligations from an economic standpoint, they do not meet the requirements for hedge accounting under GAAP. Accordingly, the call options are marked to fair value on each reporting date with the change in fair value, plus or minus, included as a component of net investment and interest income. The change in fair value of the call options includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open contracts.

Foreign Currency Exchange Rate Risk

The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 5.2% of our revenue was generated in Canada during each of the first nine months of fiscal 2023 and 2022. The result of a 10.0% change in the value of the U.S. dollar relative to the Canadian dollar would not be material to net income. We typically do not hedge any foreign currency risk since the exposure is not considered material.

Cautionary Statements Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” regarding future events and our future results of operations. We may make additional written or oral forward-looking statements from time to time in filings with the SEC or otherwise. We believe such forward-looking statements are within the meaning of the safe-harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements may include, but are not limited to, the risk associated with COVID-19 or similar events on employees or customers; impact on the economic environment or demand of our products and the cost and availability of debt and capital; estimates of capital expenditures; plans for future operations, products or services, financing needs plans and strategies; our perceptions of our legal positions and anticipated outcomes of government investigations and pending litigation against us; liquidity and the availability of financial resources to meet our needs, goals and strategies; plans for new business, storage occupancy, growth rate assumptions, pricing, costs, and access to capital and leasing markets; the impact of our compliance with environmental laws and cleanup costs; our beliefs regarding our sustainable practices; our used vehicle disposition strategy; the sources and availability of funds for our rental equipment and self-storage expansion and replacement strategies and plans; our plan to expand our U-Haul storage affiliate program; that additional leverage can be supported by our operations and business; the availability of alternative vehicle manufacturers; our estimates of the residual values of our equipment fleet; our plans with respect to off-balance sheet arrangements; our plans to continue to invest in the U-Box® program; the impact of interest rate and foreign currency exchange rate changes on our operations; the sufficiency of our capital resources; the sufficiency of capital of our insurance subsidiaries; inflationary pressures that may challenge our ability to maintain or improve upon our operating margin; expectations regarding the potential impact to our information technology infrastructure and on our financial performance and business operations, including any related costs, fines or lawsuits, and our ability to continue ongoing operations and safeguard the integrity of our information technology infrastructure, data, and employee customer and vendor information, as well as assumptions relating to the foregoing. The words “believe,” “expect,” “anticipate,” “plan,” “may,” “will,” “could,” “estimate,” “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made.

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Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could significantly affect results include, without limitation, the degree and nature of our competition; our leverage; general economic conditions; fluctuations in our costs to maintain and update our fleet and facilities; the limited number of manufacturers that supply our rental trucks; our ability to effectively hedge our variable interest rate debt; that we are controlled by a small contingent of stockholders; fluctuations in quarterly results and seasonality; changes in, and our compliance with, government regulations, particularly environmental regulations and regulations relating to motor carrier operations; outcomes of litigation; our reliance on our third party dealer network; liability claims relating to our rental vehicles and equipment; our ability to attract, motivate and retain key employees; reliance on our automated systems and the internet; our credit ratings; our ability to recover under reinsurance arrangements and other factors described in our Annual Report on Form 10-K in Item 1A, Risk Factors, and in this Quarterly Report or the other documents we file with the SEC. The above factors, as well as other statements in this Quarterly Report and in the Notes to Condensed Consolidated Financial Statements, could contribute to or cause such risks or uncertainties, or could cause our stock price to fluctuate dramatically. Consequently, the forward-looking statements should not be regarded as representations or warranties by us that such matters will be realized. We assume no obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise, except as required by law.

Attached as exhibits to this Quarterly Report are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented in the section titled Evaluation of Disclosure Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (as such term is defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (“Disclosure Controls”) as of the end of the most recently completed fiscal quarter covered by this Quarterly Report. Our Disclosure Controls are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report, our Disclosure Controls were not effective due to a material weakness in internal control over financial reporting.

An error was identified in the implementation of the accounting for the two-class method of earnings per share associated with the recently issued UHAL.B common stock. The error arose during the preparation of the Form 10-Q and was due to our untimely review of the matter in connection with our financial reporting process, which constitutes a material weakness.

Our remediation process includes, but is not limited to, enhancing the design of controls relevant to the preparation and presentation of financial reporting matters; and evaluating applicable personnel to ensure appropriate knowledge and experience. We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controls operate, and management has concluded, through testing, that these controls are operating effectively.

Notwithstanding such material weakness in internal control over financial reporting, our management, including our CEO and our CFO, have concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of our operations and our cash flows for the periods presented in this Quarterly Report, in conformity with GAAP.

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Inherent Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of our controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting

Other than the material weakness described above, there have not been any changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” of our most recent annual report on Form 10-K for the year ended March 31, 2022, which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-Looking Statements” in our MD&A of this quarterly report on Form 10-Q. MD&A and the consolidated financial statements and related notes should be read in conjunction with such risks and other factors for a full understanding of our operations and financial conditions. The risks described in our Form 10-K and herein are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The trading price for our outstanding Voting Common Stock may continue to be volatile and the trading price for our newly distributed Series N Non-Voting Common Stock may also be volatile.

An Independent Special Committee of the Board of Directors authorized the creation of a new Series of Common Stock, designated as Series N Non-Voting Common Stock, par value of $0.001 per share (the “Non-Voting Common Stock”). This series of stock is in addition to our pre-existing class of common stock, $0.25 par value (the “Voting Common Stock”). On November 9, 2022, each holder of our Voting Common Stock as of November 3, 2022 received nine shares of Non-Voting Common Stock for every outstanding share of Voting Common Stock through a stock dividend.

The Non-Voting Common Stock is listed on the New York Stock Exchange, and we cannot predict whether, or to what extent, a liquid trading market will develop long-term for the Non-Voting Common Stock. If a liquid trading market does not develop or if the Non-Voting Common Stock is not attractive to retail investors, including team members and customers of the Company, we may not achieve our objectives in creating this new class.

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The trading price of our stock has at times experienced substantial price volatility and may continue to be volatile, including as a result of the distribution of shares of Non-Voting Common Stock. The market prices of our two series of stock and the allocation of value between the two may be volatile and their respective values may decline. The trading price of our Voting Common Stock and Non-Voting Common Stock may fluctuate widely in response to various factors, some of which are beyond our control. These factors include, among others:

• Quarterly variations in our results of operations or those of our competitors.
• Announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships, or capital commitments.
• Recommendations by securities analysts or changes in earnings estimates.
• Announcements about our earnings that are not in line with analyst expectations.
• Announcements by our competitors of their earnings that are not in line with analyst expectations.
• Commentary by industry and market professionals about our products, strategies, and other matters affecting our business and results, regardless of its accuracy.
• The volume of shares of Voting Common Stock and Non-Voting Common Stock available for public sale.
• Sales of Voting Common Stock and Non-Voting Common Stock by us or by our stockholders (including sales by our directors, executive officers, and other employees).
• Short sales, hedging, and other derivative transactions on shares of our Voting Common Stock and Non-Voting Common Stock.
• The perceived values of Voting Common Stock and Non-Voting Common Stock relative to one another.

A substantial amount of our shares is owned by a small contingent of stockholders.

Willow Grove Holdings LP, directly and through controlled entities (“WGHLP”), owns 9,767,011 shares of Voting Common stock, and together with Edward J. Shoen and Mark V. Shoen, owns 9,803,642 shares (approximately 50.0%) of Voting Common Stock. The general partner of WGHLP controls the voting and disposition decisions with respect to the Voting Common Stock owned by WGHLP, and is managed by Edward J. Shoen (the Chairman of the Board of Directors and Chief Executive Officer of U-Haul Holding Company) and his brother, Mark V. Shoen. Accordingly, Edward J. Shoen and Mark V. Shoen are in a position to significantly influence our business and policies, including the approval of certain significant transactions, the election of the members of our Board and other matters submitted to our stockholders. There can be no assurance that their interests will not conflict with the interests of our other stockholders.

In addition, 855,032 shares (approximately 4.4%) of Voting Common Stock are owned under our ESOP. Each ESOP participant is entitled to vote the shares allocated to himself or herself in their discretion. In the event an ESOP participant does not vote his or her shares, such shares shall be voted by the ESOP trustee, in the ESOP trustee’s discretion.

The concentrated voting control of U-Haul Holding Company may limit or severely restrict our stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. Further, this concentration of ownership could delay or prevent a change in control or otherwise discourage a potential acquirer from attempting to obtain control of us, which in turn could cause the trading price of our capital stock to decline or prevent our stockholders from realizing a premium over the market price for their capital stock. As a result, the market price of our Voting Common Stock and Non-Voting Common Stock could be adversely affected

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