# U-Haul Holding Co /NV/ (UHAL-B) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from U-Haul Holding Co /NV/'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/4457/000000445723000052/uhal-20230331.htm Accession: 0000004457-23-000052 Filing date: 2023-06-02 Report date: 2023-03-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/UHAL-B/ All MD&A years: /company/UHAL-B/mda/ Previous year: /company/UHAL-B/mda/fy2022/ (FY 2022) Next year: /company/UHAL-B/mda/fy2024/ (FY 2024) Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations We begin this MD&A with the overall strategy of U-Haul Holding Company, 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 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 fiscal 2023 compared with fiscal 2022, which are 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 and Disclosures about Contractual Obligations and Commercial Commitments. The discussion of our financial condition and results of operations for the year ended March 31, 2021 included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2022 is incorporated by reference into this MD&A. We conclude this MD&A by discussing our outlook for fiscal 2024. This MD&A should be read in conjunction with the other sections of this Annual Report, including Item 1: Business and Item 8: Financial Statements and Supplementary Data. 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 risk factors described throughout this Annual Report and particularly under the section Item 1A: Risk Factors. Our actual results may differ materially from these forward-looking statements. U-Haul Holding Company has a fiscal year that ends on the 31 st of March for each year that is referenced. Our insurance company subsidiaries have fiscal years that end on the 31 st of December 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 all material events, if any, occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2022, 2021 and 2020 correspond to fiscal 2023, 2022 and 2021 for U-Haul Holding Company. Overall Strategy Our overall strategy is to maintain our leadership position in the North American “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 and 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 Storage Affiliate and Moving Help ® 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, 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 subsidiaries of U-Haul and Real Estate; Property and Casualty Insurance, comprised of Repwest and its subsidiaries and ARCOA; and Life Insurance, comprised of Oxford and its subsidiaries. 17 See Note 1, Basis of Presentation, Note 22, Financial Information by Geographic Area, and Note 22A, Consolidating Financial Information by Industry Segment, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report. Moving and Storage Operating Segment 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 expanding 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 mobile app, 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 Operating Segment Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices in 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 products in other U-Haul ® related programs. Life Insurance Operating Segment 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-Haul‘s 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. 18 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. Critical Accounting Estimates Our financial statements have been prepared in accordance with the generally accepted accounting principles (“GAAP”) in the United States. The methods, estimates and judgments we use in applying our accounting policies can have a significant impact on the results we report in our financial statements. Note 3, Accounting Policies, of the Notes to Consolidated Financial Statements in Item 8: Financial Statements and Supplementary Data, in this Annual Report summarizes the significant accounting policies and methods used in the preparation of our consolidated financial statements and related disclosures. Certain accounting policies require us to make difficult and subjective judgments and assumptions, often as a result of the need to estimate matters that are inherently uncertain. Following is a detailed description of the accounting estimates that we deem most critical to us and that require management’s most difficult and subjective judgments. These estimates are based on historical experience, observance of trends in particular areas, information and valuations available from outside sources and on various other assumptions that are believed to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions and conditions, and such differences may be material. We also have other policies that we consider key accounting policies, such as revenue recognition; however, these policies do not meet the definition of critical accounting estimates, because they do not generally require us to make estimates or judgments that are difficult or subjective. The accounting estimates that we deem most critical to us, and involve the most difficult, subjective or complex judgments include the following: Recoverability of Property, Plant and Equipment Our property, plant and equipment is stated at cost. We regularly perform reviews to determine whether facts and circumstances exist, which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets are shorter or longer than originally estimated. Reductions in residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) or useful lives will result in an increase in depreciation expense over the remaining life of the equipment. Reviews are performed based on vehicle class, generally subcategories of trucks and trailers. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. We consider factors such as current and expected future market price trends on used vehicles and the expected life of vehicles included in the fleet. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If asset residual values are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, then the net book value of the assets is depreciated over the newly determined remaining useful lives. Insurance Reserves Liabilities for future policy benefits related to life insurance, Medicare supplement insurance, and deferred annuities are determined by management utilizing the net premium valuation methodology and are accrued when premium revenue is recognized. The liability, which represents the present value of future benefits to be paid to policyholders and related expenses less the present value of future net premiums, is estimated using assumptions applicable at the time the insurance contracts are written, with provisions for the risk of adverse deviation, as appropriate. Assumptions include expected mortality and morbidity experience, policy lapses and surrenders, current asset yields and expenses, and expected interest rate yields. The Company periodically performs a gross premium valuation and reviews original assumptions, including capitalized expenses which reduce the gross premium valuation, to evaluate whether the assets and liabilities are adequate and whether a loss reserve should be recognized. 19 Insurance reserves for Property and Casualty Insurance and U-Haul take into account losses incurred based upon actuarial estimates and are management’s best approximation of future payments.   These estimates are based upon past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation.   These reserves consist of case reserves for reported losses and a provision for incurred but not reported (“IBNR”) losses, both reduced by applicable reinsurance recoverables, resulting in a net liability. Due to the nature of the underlying risks and high degree of uncertainty associated with the determination of the liability for future policy benefits and claims, the amounts to be ultimately paid to settle these liabilities cannot be precisely determined and may vary significantly from the estimated liability, especially for long-tailed casualty lines of business such as excess workers’ compensation.   As a result of the long-tailed nature of the excess workers’ compensation policies written by Repwest from 1983 through 2001, it may take a number of years for claims to be fully reported and finally settled. On a regular basis, insurance reserve adequacy is reviewed by management to determine if existing assumptions need to be updated. In determining the assumptions for calculating workers’ compensation reserves, management considers multiple factors including the following: Claimant longevity, Cost trends associated with claimant treatments, Changes in ceding entity and third party administrator reporting practices, Changes in environmental factors, including legal and regulatory, Current conditions affecting claim settlements, and Future economic conditions, including inflation. We have reserved each claim based upon the accumulation of current claim costs projected through each claimant’s life expectancy, and then adjusted for applicable reinsurance arrangements.   Management reviews each claim bi-annually or more frequently, if there are changes in facts or circumstances to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.   We have factored in an estimate of what the potential cost increases could be in our IBNR liability.   We have not assumed settlement of the existing claims in calculating the reserve amount, unless it is in the final stages of completion. Continued increases in claim costs, including medical inflation and new treatments and medications could lead to future adverse development resulting in additional reserve strengthening.   Conversely, settlement of existing claims or if injured workers return to work or expire prematurely, could lead to future positive development. 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 $2.0 million net impairment charge recorded in fiscal 2023. Income Taxes We file a consolidated tax return with all of our legal subsidiaries. Our tax returns are periodically reviewed by various taxing authorities. The final outcome of these audits may cause changes that could materially impact our financial results. Please see Note 14, Provision for Taxes, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report for more information. Recent Accounting Pronouncements Please see Note 3, Accounting Policies, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report for more information. 20 Results of Operations U-Haul Holding Company and Consolidated Subsidiaries Fiscal 2023 Compared with Fiscal 2022 Listed below, on a consolidated basis, are revenues for our major product lines for fiscal 2023 and fiscal 2022: [[GREPCENT_TABLE]] [["","","Year Ended March 31,"],["","","2023","","2022"],["","","(In thousands)"],["Self-moving equipment rentals","$","3,877,917","$","3,958,807"],["Self-storage revenues","","744,492","","617,120"],["Self-moving and self-storage products and service sales","","357,286","","351,447"],["Property management fees","","37,073","","35,194"],["Life insurance premiums","","99,149","","111,027"],["Property and casualty insurance premiums","","93,209","","86,518"],["Net investment and interest income","","176,679","","148,261"],["Other revenue","","478,886","","431,373"],["Consolidated revenue","$","5,864,691","$","5,739,747"]] [[/GREPCENT_TABLE]] Self-moving equipment rental revenues decreased $80.9 million during fiscal 2023, compared with fiscal 2022. Transactions, revenue and average miles driven per transaction decreased.   These declines were more pronounced in our one-way markets.   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 $127.4 million during fiscal 2023, compared with fiscal 2022.   The average monthly number of occupied units increased by 14%, or 63,800 units during fiscal 2023 compared with the same period last year.   Over the course of the fiscal year our average revenue per occupied square foot increased 9%.   During fiscal 2023, we added approximately 6.0 million net rentable square feet, a 13% increase compared to fiscal 2022 additions.   This additional capacity consisted of approximately 1.1 million square feet of existing self-storage acquired along with 4.9 million square feet of new development. Sales of self-moving and self-storage products and services increased $5.8 million during fiscal 2023, compared with 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 $11.9 million during fiscal 2023, compared with fiscal 2022 primarily due to decreased sales of single premium life products and policy decrements in Medicare supplement. Property and casualty insurance premiums increased $6.7 million during fiscal 2023, compared with fiscal 2022. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul moving and storage transactions and generally correspond to the related activity at U-Haul during the same period. Net investment and interest income increased $28.4 million during fiscal 2023, compared with fiscal 2022. Moving and Storage accounted for a $67.9 million increase due to higher yields on our short-term cash balances which are primarily invested in United States government securities. Changes in the market value of unaffiliated common stocks held at our Property and Casualty Insurance subsidiary resulted in a $16.6 million decrease. Life Insurance experienced a net decrease of $21.4 million. Other revenue increased $47.5 million during fiscal 2023, compared with fiscal 2022, caused primarily by growth in our U-Box® program. 21 Listed below are revenues and earnings from operations at each of our operating segments for fiscal 2023 and 2022. The insurance companies’ years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended March 31,"],["","","2023","","2022"],["","","(In thousands)"],["Moving and storage"],["Revenues","$","5,567,714","$","5,398,267"],["Earnings from operations before equity in earnings of subsidiaries","","1,396,122","","1,577,226"],["Property and casualty insurance"],["Revenues","","103,512","","115,043"],["Earnings from operations","","36,570","","49,780"],["Life insurance"],["Revenues","","206,100","","238,812"],["Earnings from operations","","12,935","","19,538"],["Eliminations"],["Revenues","","(12,635)","","(12,375)"],["Earnings from operations before equity in earnings of subsidiaries","","(1,521)","","(1,547)"],["Consolidated Results"],["Revenues","","5,864,691","","5,739,747"],["Earnings from operations","","1,444,106","","1,644,997"]] [[/GREPCENT_TABLE]] Total costs and expenses increased $325.8 million during fiscal 2023, compared with fiscal 2022. Operating expenses for Moving and Storage increased $345.7 million.   Repair costs associated with the rental fleet experienced a $132.9 million increase during fiscal year 2023 and personnel costs increased $97.8 million.   The increases in fleet repair costs are primarily due to additional preventative maintenance resulting from higher fleet activity over the last several years.   Also, the slower rotation of new equipment into the fleet and older equipment out of the fleet has added to the amount of preventative maintenance needed.   Personnel cost increases stem from a 12% increase in headcount on average throughout the year; the headcount variance narrowed towards the end of the year.   Other expense increases included liability costs, utilities, property taxes, non-rental equipment and building maintenance and shipping associated with U-Box transactions. Depreciation expense associated with our rental fleet was $520.5 million and $504.2 million for fiscal 2023 and 2022, respectively.   Net gains from the disposal of rental equipment increased $32.9 million from an increase in resale values combined with additional units sold.   Depreciation expense on all other assets, largely from buildings and improvements, increased $20.6 million to $213.4 million. Net losses on the disposal or retirement of land and buildings increased $9.7 million as 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 $1,444.1 million for fiscal 2023, compared with $1,645.0 million for fiscal 2022. Interest expense for fiscal 2023 was $224.0 million, compared with $167.4 million for fiscal 2022 due to an increase in our average outstanding debt of $871.6 million in fiscal 2023 compared with fiscal 2022 combined with a higher average cost of debt. Income tax expense was $294.9 million for fiscal 2023, compared with $352.2 million for fiscal 2022. See Note 14, Provision for Taxes, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report for more information on income taxes. Basic and diluted earnings per share of Voting Common Stock for fiscal 2023 was $5.54, compared with $7.08 for fiscal 2022. The weighted average shares outstanding basic and diluted for Voting Common Stock were 19,607,788 for both fiscal 2023 and 2022. Basic and diluted earnings per share of Non-Voting Common Stock for fiscal 2023 were $4.62, compared with $5.58 for fiscal 2022. 22 The weighted average shares outstanding basic and diluted for Non-Voting Common Stock were 176,470,092 for both fiscal 2023 and 2022. Moving and Storage Fiscal 2023 Compared with Fiscal 2022 Listed below are revenues for the major product lines at Moving and Storage for fiscal 2023 and fiscal 2022: [[GREPCENT_TABLE]] [["","","Year Ended March 31,"],["","","2023","","2022"],["","","(In thousands)"],["Self-moving equipment rentals","$","3,882,620","$","3,963,535"],["Self-storage revenues","","744,492","","617,120"],["Self-moving and self-storage products and service sales","","357,286","","351,447"],["Property management fees","","37,073","","35,194"],["Net investment and interest income","","70,992","","3,135"],["Other revenue","","475,251","","427,836"],["Moving and Storage revenue","$","5,567,714","$","5,398,267"]] [[/GREPCENT_TABLE]] Self-moving equipment rental revenues decreased $80.9 million during fiscal 2023, compared with fiscal 2022 .   Transactions, revenue and average miles driven per transaction decreased.   These declines were more pronounced in our one-way markets.   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 $127.4 million during fiscal 2023, compared with fiscal 2022.   The average monthly number of occupied units increased by 14%, or 63,800 units during fiscal 2023 compared with the same period last year.   Over the course of the fiscal year our average revenue per occupied square foot increased 9%. The Company owns and manages 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: [[GREPCENT_TABLE]] [["","","Year Ended March 31,"],["","","2023","","2022"],["","(In thousands, except occupancy rate)"],["Unit count as of March 31","","673","","601"],["Square footage as of March 31","","56,382","","50,366"],["Average monthly number of units occupied","","535","","471"],["Average monthly occupancy rate based on unit count","","83.4%","","82.6%"],["Average monthly square footage occupied","","46,257","","41,379"]] [[/GREPCENT_TABLE]] During fiscal 2023, we added approximately 6.0 million net rentable square feet, a 13% increase compared to fiscal 2022 additions.   This additional capacity consisted of approximately 1.1 million square feet of existing self-storage acquired along with 4.9 million square feet of new development. Sales of self-moving and self-storage products and services increased $5.8 million during fiscal 2023, compared with fiscal 2022, primarily due to increased hitch and propane sales partially offset by a 1% decrease in the sales of moving supplies. Net investment and interest income increased $67.9 million during fiscal 2023, compared with fiscal 2022, due to higher yields on our short-term cash balances which are primarily invested in United States government securities. Other revenue increased $47.4 million during fiscal 2023, compared with fiscal 2022, caused primarily by growth in our U-Box® program. 23 Total costs and expenses increased $350.6 million during fiscal 2023, compared with fiscal 2022. Operating expenses increased $345.7 million.   Repair costs associated with the rental fleet experienced a $132.9 million increase during fiscal year 2023 and personnel costs increased $97.8 million.   The increases in fleet repair costs are primarily due to additional preventative maintenance resulting from higher fleet activity over the last several years.   Also, the slower rotation of new equipment into the fleet and older equipment out of the fleet has added to the amount of preventative maintenance needed.   Personnel cost increases stem from a 12% increase in headcount on average throughout the year; the headcount variance narrowed towards the end of the year.   Other expense increases included liability costs, utilities, property taxes, non-rental equipment and building maintenance and shipping associated with U-Box transactions. Depreciation expense associated with our rental fleet was $520.5 million and $504.2 million.   Net gains from the disposal of rental equipment increased $32.9 million from an increase in resale values combined with additional units sold.   Depreciation expense on all other assets, largely from buildings and improvements, increased $20.6 million to $213.4 million. Net losses on the disposal or retirement of land and buildings increased $9.7 million as fiscal 2022 included a condemnation gain of $4.9 million. Property and Casualty Insurance 2022 Compared with 2021 Net premiums were $96.2 million and $89.7 million for the years ended December 31, 2022 and 2021, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul moving and storage transactions and generally correspond to the related activity at U-Haul during the same period. Net investment and interest income were $7.3 million and $25.4 million for the years ended December 31, 2022 and 2021, respectively. The main driver of the change in net investment income was the decrease in valuation of unaffiliated common stock of $16.6 million; these stocks were not sold and no actual economic losses have been recognized. Net operating expenses were $45.0 million and $42.5 million for the years ended December 31, 2022 and 2021, respectively. The change was primarily due to an increase in commissions from higher premiums. Benefits and losses expenses were $21.5 million and $22.4 million for the years ended December 31, 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 $36.6 million and $49.8 million for the twelve months ended December 31, 2022 and 2021, respectively. Life Insurance 2022 Compared with 2021 Net premiums were $99.1 million and $111.0 million for the years ended December 31, 2022 and 2021, respectively. Medicare Supplement premiums decreased $7.2 million from policy decrements offset by premium rate increases. Life insurance premiums decreased $4.4 million. Premiums on annuity supplemental contracts decreased $0.3 million from fewer annuitizations. Deferred annuity deposits were $326.5 million or $6.0 million below the 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 low sales at the beginning of the year improving as the year progressed. Net investment income was $102.4 million and $123.8 million for the years ended December 31, 2022 and 2021, respectively.  The realized loss on derivatives used as hedges to fixed indexed annuities was $12.6 million. The realized loss on bonds was $6.5 million. The change in the provision for expected credit losses resulted in a $2.9 million additional decrease to the investment income. Mortgage loan interest decreased $0.9 million from the decreased prepayment penalties. The interest on the remaining assets also decreased by $0.6 million. This was offset by a $2.1 million increase in the investment income from fixed maturities on higher asset base despite lower investment yields. 24 Benefits and losses incurred were $144.0 million and $164.2 million for the years ended December 31, 2022 and 2021, respectively. Interest credited to policyholders decreased $8.6 million due to a reduction in the interest credited rates on fixed indexed annuities driven by stock market fluctuations. Life benefits decreased $8.2 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 $3.2 million from fewer policies in force. Benefits on the annuity supplemental contracts decreased $0.2 million. Amortization of deferred acquisition costs (“DAC”), sales inducement asset (“SIA“) and the value of business acquired (“VOBA”) was $27.9 million and $33.9 million for the years ended December 31, 2022 and 2021, respectively. The annuity related DAC amortization decreased $4.3 million due to realized investment gains and a completion of the amortization period on certain fixed indexed and multi-year guaranteed annuities in 2021. The decrease of $1.2 million on Life Insurance segment is from reduced policy lapses and death benefits. Medicare supplement related DAC amortization decreased $0.5 million and will continue to decrease due to a decline in the number of policies remaining in-force. As a result of the above-mentioned changes in revenues and expenses, pretax earnings from operations were $12.5 million and $19.1 million for the years ended December 31, 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 which could affect our liquidity, including some 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 March 31, 2023, cash and cash equivalents totaled $2,060.5 million, compared with $2,704.1 million as of March 31, 2022. The assets of our insurance subsidiaries are generally unavailable to fulfill the obligations of non-insurance operations (U-Haul Holding Company, U-Haul and Real Estate). As of March 31, 2023 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were: [[GREPCENT_TABLE]] [["","","Moving & Storage","","Property and Casualty Insurance (a)","","Life Insurance (a)"],["","","(In thousands)"],["Cash and cash equivalents","$","2,034,242","$","11,276","$","15,006"],["Other financial assets","","428,018","","446,977","","2,744,196"],["Debt obligations (b)","","6,143,350","","\u2013","","\u2013"],["(a) As of December 31, 2022"],["(b) Excludes ($35,308) of debt issuance costs"]] [[/GREPCENT_TABLE]] As of March 31, 2023, Moving and Storage had available borrowing capacity 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.  Our current forecasted debt payments for fiscal 2024 on all borrowings are $563.2 million. For detailed information regarding our debt obligations, please see Note 9, Borrowings, of the Notes to Consolidated Financial Statements. 25 A summary of our consolidated cash flows for fiscal 2023, 2022 and 2021 is shown in the table below: [[GREPCENT_TABLE]] [["","","Years Ended March 31,"],["","","2023","","2022","","2021"],["","","(In thousands)"],["Net cash provided by operating activities","$","1,729,610","$","1,946,235","$","1,535,395"],["Net cash used by investing activities","","(2,421,385)","","(1,867,176)","","(1,129,529)"],["Net cash provided by financing activities","","59,795","","1,433,155","","287,353"],["Effects of exchange rate on cash","","(11,633)","","(2,089)","","6,441"],["Net increase (decrease) in cash flow","","(643,613)","","1,510,125","","699,660"],["Cash at the beginning of the period","","2,704,137","","1,194,012","","494,352"],["Cash at the end of the period","$","2,060,524","$","2,704,137","$","1,194,012"]] [[/GREPCENT_TABLE]] Net cash provided by operating activities decreased $216.6 million in fiscal 2023, compared with fiscal 2022.   The decrease was primarily due to reduced net earnings of $200.2 million and the payment of $106.0 million in federal income tax in fiscal 2023 compared with the receipt of $243.0 million of federal income tax refunds in fiscal 2022. Partially offsetting this was a decrease in inventory and an increase in the collection of corporate receivables. Net cash used in investing activities increased $554.2 million in fiscal 2023, compared with fiscal 2022. Purchases of property, plant and equipment increased $587.4 million. Reinvestment in the rental fleet was less than our projection due to delays in receiving new equipment from our original equipment manufacturers during fiscal 2023; however, the level of reinvestment in the rental fleet has increased in comparison to fiscal 2022.   Cash from the sales of property, plant and equipment increased $78.1 million largely due to fleet sales. For our insurance subsidiaries, net cash used in investing activities decreased $167.2 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 $1,373.4 million in fiscal 2023, as compared with fiscal 2022.   Fiscal 2022 included the borrowing of $1,200.0 million through our two private placement offerings.   Additionally, debt payments increased $364.5 million, finance lease repayments decreased $42.1 million, and dividends paid increased $4.3 million.   For Life Insurance, net annuity deposits declined $103.2 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. In the future, we anticipate that our internally generated funds will be used to service the existing debt and fund operations. U-Haul estimates that during fiscal 2024 the Company will reinvest in its rental equipment fleet approximately $685 million, net of equipment sales and excluding any lease buyouts. For fiscal 2023, the Company invested, net of sales, approximately $611 million before any lease buyouts in its rental equipment fleet. Fleet investments in fiscal 2024 and beyond will be dependent upon several factors including the availability of capital, the truck rental environment, the availability of equipment from manufacturers and the used-truck sales market. We anticipate that the fiscal 2024 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. 26 The Company has traditionally funded 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. The Company expects to fund these development projects through a combination of internally generated funds, corporate debt and with borrowings against existing properties as they operationally mature. For fiscal 2023, the Company invested $1,341.4 million in real estate acquisitions, new construction and renovation and repair compared to $1,004.2 million in fiscal 2022.   For fiscal 2024, the timing of new projects will be dependent upon several factors, including the entitlement process, availability of capital, weather, the identification and successful acquisition of target properties and the availability of labor and materials.   We are likely to maintain a high level of real estate capital expenditures in fiscal 2024.   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. Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) at Moving and Storage were $2,025.6 million, $1,513.3 million and $904.0 million for fiscal 2023, 2022 and 2021, respectively. The components of our net capital expenditures are provided in the following table: [[GREPCENT_TABLE]] [["","","Years Ended March 31,"],["","","2023","","2022","","2021"],["","","(In thousands)"],["Purchases of rental equipment","$","1,298,955","$","1,061,439","$","870,106"],["Equipment lease buyouts","","\u2013","","\u2013","","11,477"],["Purchases of real estate, construction and renovations","","1,341,417","","1,004,192","","505,112"],["Other capital expenditures","","86,595","","70,906","","54,780"],["Gross capital expenditures","","2,726,967","","2,136,537","","1,441,475"],["Less: Sales of property, plant and equipment","","(701,331)","","(623,235)","","(537,484)"],["Net capital expenditures","$","2,025,636","$","1,513,302","$","903,991"]] [[/GREPCENT_TABLE]] Moving and Storage continues to hold significant cash and we believe 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, pay dividends or reduce existing indebtedness where possible. Property and Casualty Insurance State insurance regulations may 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. For calendar year 2023, the ordinary dividend available to be paid to U-Haul Holding Company is $29.5 million. For more information, please see Note 21, Statutory Financial Information of Insurance Subsidiaries, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. We believe that stockholders’ equity at the Property and Casualty operating segment 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. Our Property and Casualty operating segment stockholders’ equity was $294.5 million and $296.1 million as of December 31, 2022 and 2021, respectively. The decrease in 2022 compared with 2021 resulted from net earnings of $29.8 million and a decrease in accumulated other comprehensive income of $31.4 million.   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. 27 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 year ended December 31, 2022 were $6.8 million. State insurance regulations may 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. Oxford had a statutory net loss as of December 31, 2022, so no dividends can be distributed in calendar year 2023. For more information, please see Note 21, Statutory Financial Information of Insurance Subsidiaries, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. Our Life Insurance operating segment stockholders’ equity was $156.4 million and $440.9 million as of December 31, 2022 and 2021, respectively. The decrease in 2022 compared with 2021 resulted from earnings of $10.0 million and a decrease in accumulated other comprehensive income of $294.5 million primarily due to the effect of interest rate changes on the fixed maturity portion of the investment portfolio.   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. However, as of December 31, 2022, Oxford had outstanding advances of $60.0 million through its membership in the Federal Home Loan Bank (“FHLB”). For a more detailed discussion of these advances, please see Note 9, Borrowings, of the Notes to Consolidated Financial Statements. Cash Provided from Operating Activities by Operating Segments Moving and Storage Net cash provided by operating activities was $1,593.7 million, $1,823.3 million and $1,428.9 million in fiscal 2023, 2022 and 2021, respectively. The decrease was primarily due to reduced net earnings of $200.2 million and the payment of $106.0 million in federal income tax in fiscal 2023 compared with the receipt of $243.0 million of federal income tax refunds in fiscal 2022. Partially offsetting this was a decrease in inventory and an increase in the collection of corporate receivables. Property and Casualty Insurance Net cash provided by operating activities was $36.2 million, $31.2 million, and $19.4 million for the years ended December 31, 2022, 2021, and 2020, 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 $27.2 million, $41.7 million, and $12.9 million as of December 31, 2022, 2021, and 2020, 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 was $99.8 million, $91.8 million and $87.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. The increase in operating cash flows was primarily due to an increase in accounts payable due to the timing of settlements. This was offset by a decrease in investment and premium income. 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 December 31, 2022, 2021 and 2020, cash and cash equivalents and short-term investments amounted to $15.0 million, $50.1 million and $178.1 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 additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs. 28 As a result of the federal income tax provisions of the CARES Act we have filed applicable forms with the IRS to carryback net operating losses. These refund claims total approximately $366 million, of which we have already received approximately $243 million, with the remaining amount reflected in prepaid expenses. 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 and rental equipment leases. 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 March 31, 2023, we had available borrowing capacity under existing credit facilities of $465.0 million.   While it is possible that circumstances beyond our control could alter the ability of the financial institutions to lend us the unused lines of credit, we believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long-term debt and borrowing capacity, please see Note 9, Borrowings, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report. Historically, we used certain off-balance sheet arrangements in connection with the expansion of our self-storage business. For more information, please see Note 20, Related Party Transactions, of the Notes to Consolidated Financial Statements included in Item 8: Financial Statements and Supplementary Data, of this Annual Report. These arrangements were primarily used when our overall borrowing structure was more limited. We do not face similar limitations currently and off-balance sheet arrangements have not been utilized in our self-storage expansion in recent years. In the future, we will continue to identify and consider off-balance sheet opportunities to the extent such arrangements would be economically advantageous to us and our stockholders. Contractual Obligations and Commercial Commitments For contractual obligations for material cash requirements from known contractual and other obligations as part of liquidity and capital resources discussion, please see Notes 9, 10, 11, 15, 17, 18 and 19 of the Notes to Consolidated Financial Statements.   The following table provides additional detail for contractual commitments and contingencies as of March 31, 2023. [[GREPCENT_TABLE]] [["","","","","Payment due by Period (as of March 31, 2023)"],["Contractual Obligations","","Total","","04/01/23 - 03/31/24","","04/01/24 - 03/31/26","","04/01/26 - 03/31/28","","Thereafter"],["","","(In thousands)"],["Notes and loans payable - Principal","$","4,049,382","$","226,105","","466,487","$","842,847","$","2,513,943"],["Notes and loans payable - Interest","","1,387,115","","178,530","","326,733","","275,149","","606,703"],["Revolving credit agreements - Principal","","615,000","","\u2013","","370,556","","244,444","","\u2013"],["Revolving credit agreements - Interest","","102,175","","36,228","","54,875","","11,072","","\u2013"],["Finance leases - Principal","","223,205","","103,780","","119,425","","\u2013","","\u2013"],["Finance leases - Interest","","11,991","","7,032","","4,959","","\u2013","","\u2013"],["Finance liability - Principal","","1,255,763","","233,268","","409,323","","379,271","","233,901"],["Finance liability - Interest","","158,493","","45,093","","65,750","","35,427","","12,223"],["Operating lease liabilities","","103,956","","24,338","","16,497","","6,506","","56,615"],["Property and casualty obligations (a)","","110,545","","23,986","","23,974","","10,084","","52,501"],["Life, health and annuity obligations (b)","","3,624,456","","683,685","","846,007","","507,084","","1,587,680"],["Self-insurance accruals (c)","","335,227","","95,321","","127,755","","65,527","","46,624"],["Post-retirement benefit liability","","23,428","","1,546","","3,789","","4,802","","13,291"],["Total contractual obligations","$","12,000,736","$","1,658,912","$","2,836,130","$","2,382,213","$","5,123,481"]] [[/GREPCENT_TABLE]] (a) These estimated obligations for unpaid losses and loss adjustment expenses include case reserves for reported claims and estimates of IBNR claims and are net of expected reinsurance recoveries. The ultimate amount to settle both the case reserves and IBNR is an estimate based upon historical experience and current trends and such estimates could materially differ from actual results. The assumptions do not include future premiums. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results. (b) These estimated obligations are based on mortality, morbidity, withdrawal and lapse assumptions drawn from our historical experience and adjusted for any known trends. These obligations include expected interest crediting but no amounts for future annuity deposits or premiums for life and Medicare supplement policies.  The cash flows shown above are undiscounted for interest and as a result total outflows for all years shown significantly exceed the corresponding liabilities of $2,785.3 million included in our 29 consolidated balance sheet as of March 31, 2023. Life Insurance expects to fully fund these obligations from their invested asset portfolio. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results. (c) These estimated obligations are primarily the Company’s self insurance accruals for portions of the liability coverage for our rental equipment. The estimates for future settlement are based upon historical experience and current trends. Due to the significant assumptions employed in this model, the amounts shown could materially differ from actual results. As presented above, contractual obligations on debt and guarantees represent principal payments while contractual obligations for operating leases represent the notional payments under the lease arrangements. ASC 740 - Income Taxes liabilities and interest of $75.8 million is not included above due to uncertainty surrounding ultimate settlements, if any. Fiscal 2024 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 2024. Revenue in the U-Move ® program could be adversely impacted should we fail to execute in any of these areas. 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 2024, 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 2024. We will continue to invest capital and resources in the U-Box ® program throughout fiscal 2024. 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.