AMERCO's Rtg Outlook Revised To Negative From Stable By Fitch.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 11, 2001

Fitch has revised AMERCO's Rating Outlook to Negative from Stable and affirmed the company's senior debt and commercial paper ratings at 'BBB' and 'F2', respectively.

The change in outlook reflects Fitch's concern that problems arising from AMERCO's Republic Western Insurance Company subsidiary will continue to adversely impact overall operating performance and require additional management attention. Additionally, AMERCO was faced with a heightened level of competition in its core moving and storage group during the March 31, 2001 quarter. Fitch expects the business to remain highly competitive in future periods with continued pressure on operating margins as AMERCO seeks to maintain its marketshare, which approximates 50% at present.

On June 29, 2001, AMERCO reported its annual results for the fiscal year-ending March 31, 2001. The company reported net income of $15 million, a 78% decline from fiscal year 2000's net income of $66 million. Historically, AMERCO reports a loss during its fourth quarter due to the seasonality of the 'U- Move' business. However, the sharp decline in net income in the fourth quarter of 2001 was principally due to three discreet events, which aggregated over $28 million of charges. The company reported $17 million of after-tax losses arising from its Republic Western unit. Unfavorable loss development in the non-standard auto line, long-haul trucking, and agricultural insurance businesses were principally the drivers for the loss. In 2001, Republic Western has reduced or eliminated its participation in these sectors. The company also reported a $6.3 million after-tax charge in connection with the judgment in Crandall lawsuit in California. Finally, increased industry competition and higher operating expenses resulted in an $23.2 million loss from the core U-Haul business versus a loss of $11.5 million during the fourth quarter of fiscal 2000. The company was successful is raising truck and trailer rental rates to absorb increases in personnel, utility, and other operating expenses during the fourth quarter of fiscal 2001.

While AMERCO's business remains vibrant as evidenced by the 7.74% rise in total revenues, profitability and cash flow slumped in fiscal 2001. Earnings before interest, taxes, depreciation, amortization, and lease rent expense (EBITDAR) declined by 4.69% to $434 million in fiscal 2001 from $456 million. With the decline in EBITDAR, AMERCO's coverage ratios weakened in fiscal 2001 from fiscal 2000. EBITDAR divided by interest expense plus lease expense totaled 1.63 times (x) for fiscal 2001 down from 2.09x for fiscal 2000. Total debt plus operating leases divided by EBITDAR increased at March 31, 2001 to 2.82x from 2.56x at March 31, 2000.

Given the operating problems at Republic Western over the last 2 years, Fitch remains cautious regarding the timing of the turnaround of this subsidiary. This combined with the heightened level of competition and higher operating expenses in the U-Haul business suggest that margins may not return to historic levels over the intermediate term. As such, lower EBITDAR and weaker coverage ratios, thereby raising AMERCO's risk profile, could occur and place additional pressure on the company's current ratings.

Based in Reno, NV, AMERCO is the holding company for U-Haul International, Inc., AMERCO Real Estate Company, Republic Western Insurance Company and Oxford Life Insurance Company. Its Moving and Self-storage operations consist of renting trucks and trailers, selling moving aids and renting self-storage spaces to the do-it-yourself mover, all under the U-Haul trade name throughout the United States and Canada and is the largest provider in North America.