A.M. Best Lowers Republic Western.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 2, 2001

A.M. Best Co. has lowered the financial strength rating of B++ (Very Good) to B+ (Very Good) for Republic Western Insurance Group, Phoenix, Ariz.

This rating action reflects Republic Western's deteriorating capitalization and below average operating performance that is driven by adverse loss reserve development, inadequate pricing and competitive pressures. Also, the rating takes into consideration the implicit and explicit financial support of its publicly traded parent company, AMERCO, the holding company of U-Haul International, Inc., one of the largest moving and self-storage companies in the U.S.

In 2000 and again in 2001, capitalization has been significantly impaired due to adverse reserve development. As a consequence, capitalization fell to its lowest level in a decade, as measured by Best's Capital Adequacy model. As of September 30, 2001, in an effort to replenish the capital depleted from prior year reserve charges, AMERCO infused over $55 million of additional capital into Republic Western. Assets contributed to Republic Western were largely in the form of real estate held by AMERCO. Although AMERCO has a relatively high level of financial leverage, it is low compared to other organizations in the moving and storage industry and the insurance operations are not utilized to service these obligations.

Additionally, this rating acknowledges a host of corrective actions implemented by management including significant management changes, discontinued lines of business, a slow down in premium growth, significant rate increases and a complete review of its reserves through the second quarter 2001.

Despite the above, A.M. Best remains concerned with Republic Western's historical operating performance, inclusive of a pattern of adverse reserve development. Therefore, A.M. Best believes there remains an element of execution risk on the part of management, as well as a potential for additional adverse loss reserve development. As a result, A.M. Best continues to view the rating outlook as negative and will continue to monitor Republic Western's results on a quarterly basis. Although cautiously optimistic, any future impairment from operations and/or adverse reserve development could result in further rating action.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.