8-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): July 27, 2000 ALLMERICA FINANCIAL CORPORATION (Exact name of Registrant as specified in its charter) Delaware 1-13754 04-3263626 (State or other jurisdic- (Commission File Number) (I.R.S. Employer tion of Incorporation) I.D. Number) 440 Lincoln Street, Worcester, Massachusetts 01653 (Address of Principal Executive Offices) (Zip Code) (508) 855-1000 (Registrant's Telephone Number including area code) Page 1 of 34 pages Exhibit Index on page 4 Page 1 Item 5. Other Events. On July 27, 2000, Allmerica Financial Corporation announced its financial results for second quarter 2000. A copy of the press release and accompanying statistical supplement are attached as Exhibits 99 and 99.1 and are incorporated by reference herein. CAUTIONARY STATEMENT FOR THE PURPOSES OF THE `SAFE HARBOR' PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Forward-Looking Statements The Company wishes to caution readers that the following important factors, among others, in some cases have affected and in the future could affect, the Company's actual results and could cause the Company's actual results for 2000 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. When used in the attached press release, words such as "believes", "anticipated", "expects" and similar expressions are intended to identify forward looking statements. See "Important Factors Regarding Forward-Looking Statements" filed as Exhibit 99-2 to the Company's Annual Report on Form 10-K for the period ended December 31, 1999. Factors that may cause actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward looking statements include among others, the following possibilities: (i) adverse catastrophe experience and severe weather; (ii) adverse loss development for events the Company insured in prior years or adverse trends in mortality and morbidity;(iii) heightened competition, including the intensification of price competition, the entry of new competitors, and the introduction of new products by new and existing competitors; (iv) adverse state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital and reserve requirements, benefit mandates, limitations on the ability to manage care and utilization, and tax treatment of insurance and annuity products; as well as continued compliance with state and federal regulations; (v) changes in interest rates causing a reduction of investment income or in the market value of interest rate sensitive investments; (vi) failure to obtain new customers, retain existing customers or reductions in policies in force by existing customers; (vii) higher service, administrative, or general expense due to the need for additional advertising, marketing, administrative or management information systems expenditures; (viii) loss or retirement of key executives; (ix) increases in medical costs, including increases in utilization, costs of medical services, pharmaceuticals, durable medical equipment and other covered items; (x) termination of provider contracts or renegotiations at less cost-effective rates or terms of payment; (xi) changes in the Company's liquidity due to changes in asset and liability matching; (xii) restrictions on insurance underwriting, based on genetic testing and other criteria; (xiii) adverse changes in the ratings obtained from independent rating agencies, such as Moody's, Standard and Poor's, A.M. Best, and Duff & Phelps; (xiv) lower appreciation on and decline in value of managed investments, resulting in reduced variable products, assets and related fees; (xv) possible claims relating to sales practices for insurance products; (xvi) uncertainty related to the Year 2000 issue; (xvii) failure of a reinsurer of the Company's policies to pay its liabilities under reinsurance contracts; (xviii) earlier than expected withdrawals from the Company's general account annuities, GICs (including funding agreements), and other insurance products; (xix) changes in the mix of assets comprising the Company's investment portfolio and the fluctuation of the market value of such assets; (xx) losses resulting from the Company's participation in certain reinsurance pools; and (xxi) adverse results of regulatory audits related to the Company's prior years' federal income tax filings. Item 7. Financial Statements and Exhibits. Exhibit 99 Press Release dated July 27, 2000, announcing Allmerica Financial Corporation second quarter 2000 financial results. Exhibit 99.1 Allmerica Financial Corporation Second Quarter Statistical Supplement. Page 2 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ALLMERICA FINANCIAL CORPORATION By: /S/ Edward J. Parry III ---------------------------------- Edward J. Parry III Vice President and Chief Financial Officer Date: July 31, 2000 Page3 Exhibit Index Exhibit 99 Press Release dated July 27, 2000, announcing Allmerica Financial Corporation second quarter 2000 financial results. Exhibit 99.1 Allmerica Financial Corporation Second Quarter Statistical Supplement. Page 4 Exhibit 99 ALLMERICA FINANCIAL CORPORATION REPORTS RECORD SECOND QUARTER OPERATING EARNINGS OF $1.37 PER SHARE WORCESTER, Mass., July 27, 2000 - Allmerica Financial Corporation (NYSE: AFC) today reported record second quarter operating earnings from continuing operations. Second quarter highlights: Net operating income per share from continuing operations was $1.37, or $74.5 million, an increase in earnings per share of 3.8 percent compared to $1.32 per share, or $73.0 million in 1999. Net operating income excludes net realized investment gains and losses and other non-recurring gains and charges, net of taxes. Asset Accumulation pre-tax operating earnings were $60.1 million, up 10.3 percent from $54.5 million for the same period in 1999. Variable annuity sales were $804.5 million, up from $765.6 million for the second quarter of 1999. Risk Management pre-tax operating earnings were $53.9 million, compared to $55.3 million reported in the second quarter of 1999. Net income was $47.6 million, or $0.88 per share compared to $60.2 million, or $1.09 per share in 1999. "Our increased operating earnings per share in the second quarter marked the seventh consecutive quarter in which we have produced record comparative operating earnings," said John F. O'Brien, president and chief executive officer of Allmerica Financial Corporation. "We are encouraged by the continued expansion of our Asset Accumulation segment, and expect our recent investments in technology and distribution to produce new business opportunities in the future. In Risk Management, we are pleased to report premium growth across our key markets and further progress on the reduction of our expense levels." Allmerica Financial announced a new corporate-wide earnings enhancement program, Project Ready!, designed to create additional processing and workflow improvements and operating efficiencies throughout the entire organization. Project Ready! began in the late Fall of 1999. Allmerica has recently begun the implementation phase of the project, which will continue throughout 2001. In the second quarter, Allmerica Financial recorded a $13.2 million one-time after-tax restructuring charge related to Project Ready! "During the last nine months, we have identified over one thousand ideas which will enhance our organizational efficiency through the redeployment of our human and financial resources," said O'Brien. "Project Ready! is a continuation of our ongoing efforts to achieve lower expense levels and is one of the most significant initiatives undertaken since our demutualization in 1995. We are confident this program will make Allmerica a stronger, more competitive company." Page5 Segment Results Allmerica Financial operates in two primary businesses: Asset Accumulation and Risk Management. Asset Accumulation markets insurance and retirement savings products and services to individual and institutional clients through Allmerica Financial Services, and investment management services to institutions, pension funds, and other organizations through Allmerica Asset Management, Inc. Risk Management markets property and casualty insurance products on a regional basis through The Hanover Insurance Company and Citizens Insurance Company of America, with distribution channels in Standard Markets, Sponsored Markets and Specialty Markets. Asset Accumulation Second quarter pre-tax operating earnings for the Asset Accumulation business increased 10.3 percent to $60.1 million, from $54.5 million in 1999. Allmerica Financial Services' pre-tax operating earnings increased to $55.5 million in the quarter, a 16.4 percent increase from $47.7 million in the second quarter of 1999. Allmerica Asset Management's pre-tax operating earnings were $4.6 million, compared to $6.8 million in the same period of the prior year. This decline is principally due to lower levels of spread-based assets in the current quarter related to the previously reported redemptions of funding agreement assets during the fourth quarter of 1999. Asset Accumulation highlights: Variable annuity sales were $804.5 million in the second quarter of 2000, compared to $765.6 million in the second quarter of 1999. Variable product assets increased to $18.5 billion at June 30, 2000, up 18.6 percent from June 30, 1999. Variable product fees of $86.3 million were up 20.7 percent over the second quarter of 1999. Increased fees are related to variable product asset growth resulting from sales and stock market appreciation. Variable life insurance sales were $28.6 million in the quarter, up 31.2 percent compared to the second quarter of 1999. Risk Management Risk Management pre-tax operating earnings were $53.9 million, compared to $55.3 million for the second quarter of 1999. Property and Casualty highlights: Direct written premiums increased 10.0 percent in the second quarter, to $601.1 million compared to $534.0 million in the second quarter of 1999. Net earned premiums for the second quarter were $519.6 million, up 5.1 percent from $494.6 million in 1999. The statutory expense ratio improved to 26.4 percent in the quarter, compared to 28.7 percent for the second quarter of last year, 28.5 percent for the full year in 1999. Net pre-tax catastrophe losses were $17.8 million in this year's second quarter compared to $9.2 million in the prior year. Excluding catastrophe losses, the Company's loss ratio was 61.8 percent in the second quarter versus 60.6 percent one year earlier, a result of a decrease in favorable development on prior accident years partially offset by improvements in the current accident year. Page 6 Corporate Corporate segment net expenses were $12.2 million in the second quarter of 2000, compared to $13.5 million in 1999. Investment Results Net investment income was $146.6 million for the second quarter of 2000, compared to $158.2 million in the same period in 1999. This decrease is principally due to lower levels of spread-based assets in the funding agreement business and lower invested assets in Allmerica Financial Services due to the continued shift in assets from the general account to the separate accounts. Second quarter net realized investment losses were $20.4 million, compared to $5.5 million of net realized investment losses in the second quarter of 1999. In 2000, the increased net realized losses related to the sale of securities and impairments in the fixed income portfolios. Balance Sheet Shareholders' equity was $2.3 billion, or $42.98 per share at June 30, 2000, compared to $2.2 billion, or $41.32 per share at December 31, 1999. Excluding the impact of SFAS No. 115, book value was $44.17 per share at the close of the second quarter, compared to $42.71 per share at December 31, 1999. Total assets were $32.1 billion at June 30, 2000, up from $30.8 billion at year-end 1999. Interim information is unaudited. Allmerica Financial Corporation is the holding company for a diversified group of insurance and financial services companies headquartered in Worcester, Mass. Certain statements in this release may be considered to be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Use of the words "believes", "anticipates", "expects" and similar expressions is intended to identify forward-looking statements. The Company cautions investors that any such forward-looking statements are not guarantees of future performance, and actual results could differ materially. Investors are directed to consider the risks and uncertainties in our business that may affect future performance and that are discussed in readily available documents, including the Company's annual report and other documents filed by Allmerica with the Securities and Exchange Commission. These uncertainties include the possibility of adverse catastrophe experience and severe weather, adverse loss development and adverse trends in mortality and morbidity, heightened competition, adverse state and federal legislation or regulation, and various other factors. CONTACTS: Investors Media Henry P. St. Cyr Michael F. Buckley (508) 855-2959 (508) 855-3099 E-mail:hstcyr@allmerica.com E-mail:mibuckley@allmerica.com Page 7 ALLMERICA FINANCIAL CORPORATION
Quarter ended June 30 (In millions, except per share data) 2000 1999 Net income $ 47.6 $ 60.2 Net income per share $ 0.88 $ 1.09 Weighted average shares 54.1 55.1
The following is a reconciliation from net operating income to net income per share:
Quarter ended June 30 PER SHARE DATA (DILUTED) 2000 1999 Net operating income $ 1.37 $ 1.32 Net realized losses on investments, net of taxes and amortization (0.25) (0.11) Restructuring costs (0.24) 0.00 ----------------- Income from continuing operations 0.88 1.21 Loss from operations of discontinued business, net of taxes 0.00 (0.12) ----------------- Net income $ 0.88 $ 1.09 ================= Basic net income per share was $0.89 and $1.10 for the quarters ended June 30, 2000 and 1999 and $1.45 and $3.83 for the six months ended June 30, 2000 and 1999, respectively. Net operating income excludes net realized gains and losses and other items which management believes are not indicative of overall operating trends, net of taxes and minority interest.
All figures reported are unaudited and are in accordance with generally accepted accounting principles. Page 8 ALLMERICA FINANCIAL CORPORATION STATISTICAL SUPPLEMENT TABLE OF CONTENTS Financial Highlights 1 Consolidated Financial Statements Income Statements 2 Balance Sheets 3 Segment Results Income Statement Highlights 4 Historical Income Statement Highlights 5 Balance Sheet Highlights 6 Risk Management Condensed Income Statements 7 Statutory Underwriting Profit/(Loss) by Distribution Channel, Reconciled to GAAP 8-9 Selected Statutory Information by Distribution Channel 10-13 Asset Accumulation Allmerica Financial Services Condensed Income Statements 14 Operating Income by Product Line 15-16 Premiums, Deposits and Other Income 17 Future Policy Benefits and Account Balances 18 Allmerica Asset Management Condensed Income Statements and Supplemental Information 19 Corporate Condensed Income Statements 20 Investment Results Net Investment Income, Including Closed Block 21 Historical Financial Highlights 22-24 Other Information Corporate Information Inside back cover Market and Dividend Information Industry Ratings ALLMERICA FINANCIAL CORPORATION FINANCIAL HIGHLIGHTS
(In millions, except per Quarter ended June 30 Six Months ended June 30 share data and ratios) 2000 1999 % Change 2000 1999 % Change RECONCILIATION FROM NET OPERATING INCOME TO NET INCOME Net operating income $ 74.5 $ 73.0 2.1 $140.9 $124.3 13.4 Net realized investment (losses) gains, net of taxes and amortization (13.7) (6.2) N/M (49.9) 93.3 N/M Restructuring costs (13.2) 0.0 N/M (13.2) 0.0 N/M ------------------------ ------------------------- Income from continuing operations 47.6 66.8 (28.7) 77.8 217.6 (64.2) Loss from operations of discontinued business, net of taxes 0.0 (6.6) N/M 0.0 (3.3) N/M ------------------------ ------------------------- Net income $ 47.6 $ 60.2 (20.9) $ 77.8 $214.3 (63.7) ======================== ======================== PER SHARE DATA (DILUTED) Net operating income $ 1.37 $ 1.32 3.8 $ 2.60 $ 2.20 18.2 Net realized investment (losses) gains, net of taxes and amortization (0.25) (0.11) N/M (0.93) 1.66 N/M Restructuring costs (0.24) 0.00 N/M (0.24) 0.00 N/M ------------------------ -------------------------- Income from continuing operations 0.88 1.21 (27.3) 1.43 3.86 (63.0) Loss from operations of discontinued business, net of taxes 0.00 (0.12) N/M 0.00 (0.06) N/M ----------------------- -------------------------- Net income $ 0.88 $ 1.09 (19.3) $ 1.43 $ 3.80 (62.4) ======================== ========================= Net operating income excludes net realized gains and losses and other items which management believes are not indicative of overall operating trends, net of taxes and minority interest.
June 30 December 31 2000 1999 % Change BALANCE SHEET Shareholders' equity $ 2,288.6 $ 2,240.2 2.2 Statutory surplus: Property and casualty insurance companies $ 1,002.8 $ 1,089.1 (7.9) Life and health insurance companies $ 545.2 $ 590.1 (7.6) Book value per share $ 42.98 $ 41.32 4.0 Book value per share, excluding SFAS No. 115 $ 44.17 $ 42.71 3.4 Shares outstanding 53.3 54.2 Stock price $ 52.38 $ 55.63 (5.8) Price/book value per share 1.2 x 1.3 x (0.1) x Debt/equity 8.7 % 8.9 % (0.2) pts Debt/total capital 7.2 % 7.3 % (0.1) pts Debt plus preferred securities of a subsidiary trust/total capital 17.9 % 18.2 % (0.3) pts Shares outstanding do not include common stock equivalents.
N/M - Not meaningful Page 1 ALLMERICA FINANCIAL CORPORATION CONSOLIDATED INCOME STATEMENTS
Quarter ended June 30 Six Months ended June 30 (In millions, except per share data) 2000 1999 % Change 2000 1999 % Change REVENUES Premiums $520.1 $494.7 5.1 $1,017.6 $ 953.0 6.8 Universal life and investment product policy fees 102.7 88.6 16.0 205.2 171.5 19.7 Net investment income 146.6 158.2 (7.3) 288.9 312.5 (7.6) Net realized investment (losses) gains (20.4) (5.5) N/M (67.2) 126.3 N/M Other income 36.8 28.8 27.8 73.5 57.7 27.4 -------------------------- ---------------------------- Total revenues 785.8 764.8 2.7 1,518.0 1,621.0 (6.4) -------------------------- ---------------------------- BENEFITS, LOSSES AND EXPENSES Policy benefits, claims, losses and loss adjustment expenses 462.2 440.2 5.0 915.6 883.4 3.6 Policy acquisition expenses 115.0 111.9 2.8 232.1 204.6 13.4 Other operating expenses 128.3 119.9 7.0 248.3 237.7 4.5 Restructuring costs 20.3 0.0 N/M 20.3 0.0 N/M -------------------------- ----------------------------- Total benefits, losses and expenses 725.8 672.0 8.0 1,416.3 1,325.7 6.8 -------------------------- ----------------------------- Income from continuing operations before federal income taxes 60.0 92.8 (35.4) 101.7 295.3 (65.6) Federal income tax expense 8.4 22.0 (61.8) 15.9 69.7 (77.1) -------------------------- ----------------------------- Income from continuing operations before minority interest 51.6 70.8 (27.2) 85.8 225.6 (61.9) -------------------------- ----------------------------- Minority interest: Distributions on mandatorily redeemable preferred securities of a subsidiary trust (4.0) (4.0) 0.0 (8.0) (8.0) 0.0 -------------------------- ----------------------------- Income from continuing operations 47.6 66.8 (28.8) 77.8 217.6 (64.2) Loss from operations of discontinued business (less applicable income taxes (benefit) of $(3.5) for the quarter ended June 30, 1999 and $(1.8) for the six months ended June 30, 1999) 0.0 (6.6) N/M 0.0 (3.3) N/M -------------------------- ----------------------------- Net income $ 47.6 $ 60.2 (20.9) $ 77.8 $ 214.3 (63.7) ========================== ============================ PER SHARE DATA (DILUTED) Income from continuing operations $ 0.88 $ 1.21 (27.3) $ 1.43 $ 3.86 (63.0) -------------------------- ----------------------------- Loss from operations of discontinued business (less applicable income taxes (benefit) of $(0.06) for the quarter ended June 30, 1999 and $(0.03) for the six months ended June 30, 1999) 0.00 (0.12) N/M 0.00 (0.06) N/M -------------------------- ---------------------------- Net income $ 0.88 $ 1.09 (19.3) $ 1.43 $ 3.80 (62.4) ========================== =========================== Dividends declared to shareholders $ 0.00 $ 0.00 $ 0.00 $ 0.00 =============== =================== Weighted average shares outstanding 54.1 55.1 54.2 56.4 =============== =================== Basic net income per share was $0.89 and $1.10 for the quarters ended June 30, 2000 and 1999 and $1.45 and $3.83 for the six months ended June 30, 2000 and 1999, respectively.
Page 2 ALLMERICA FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS
June 30 December 31 % (In millions, except per share data) 2000 1999 Change ASSETS Investments: Debt securities, at fair value (Amortized cost of $7,540.5 and $7,095.0) $ 7,396.2 $ 6,933.8 6.7 Equity securities, at fair value (Cost of $41.3 and $49.5) 69.1 83.2 (16.9) Mortgage loans 500.3 521.2 (4.0) Policy loans 181.1 170.5 6.2 Other long-term investments 174.7 180.0 (2.9) ------------------------------- Total investments 8,321.4 7,888.7 5.5 ------------------------------- Cash and cash equivalents 327.2 442.2 (26.0) Accrued investment income 131.5 134.7 (2.4) Premiums, accounts and notes receivable, net 628.8 583.5 7.8 Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums 1,303.3 1,279.9 1.8 Deferred policy acquisition costs 1,505.9 1,386.8 8.6 Deferred federal income taxes 113.7 141.7 (19.8) Other assets 510.8 510.2 0.1 Closed Block assets 768.5 772.3 (0.5) Separate account assets 18,477.5 17,629.6 4.8 ------------------------------- Total assets $32,088.6 $30,769.6 4.3 =============================== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Policy liabilities and accruals: Future policy benefits $ 2,685.1 $ 2,825.0 (5.0) Outstanding claims, losses and loss adjustment expenses 2,825.1 2,838.6 (0.5) Unearned premiums 964.4 890.2 8.3 Contractholder deposit funds and other policy liabilities 2,196.3 2,041.0 7.6 ------------------------------- Total policy liabilities and accruals 8,670.9 8,594.8 0.9 ------------------------------- Expenses and taxes payable 783.5 795.5 (1.5) Reinsurance premiums payable 89.8 73.0 23.0 Trust instruments supported by funding obligations 403.5 50.6 N/M Short-term debt 51.4 45.0 14.2 Long-term debt 199.5 199.5 0.0 Closed Block liabilities 824.9 842.1 (2.0) Separate account liabilities 18,476.5 17,628.9 4.8 ------------------------------- Total liabilities 29,500.0 28,229.4 4.5 ------------------------------- MINORITY INTEREST Mandatorily redeemable preferred securities of a subsidiary trust 300.0 300.0 0.0 SHAREHOLDERS' EQUITY Preferred stock, par value $.01 per share; authorized 20.0 million shares; issued none 0.0 0.0 0.0 Common stock, par value $.01 per share; authorized 300.0 million shares; issued 60.4 million shares 0.6 0.6 0.0 Additional paid-in capital 1,762.3 1,770.5 (0.5) Accumulated other comprehensive income (63.7) (75.3) (15.4) Retained earnings 960.0 882.2 8.8 Treasury stock at cost (7.1 and 6.2 million shares) (370.6) (337.8) 9.7 ------------------------------- Total shareholders' equity 2,288.6 2,240.2 2.2 ------------------------------- Total liabilities and shareholders' equity $32,088.6 $30,769.6 4.3 ===============================
Page 3 ALLMERICA FINANCIAL CORPORATION SEGMENT RESULTS INCOME STATEMENT HIGHLIGHTS
Quarter ended June 30 Six Months ended June 30 (In millions, except per share data) 2000 1999 % Change 2000 1999 % Change OPERATING REVENUES Risk Management $ 579.4 $ 554.5 4.5 $ 1,136.9 $ 1,075.8 5.7 ---------------------------- ------------------------------ Asset Accumulation Allmerica Financial Services 195.0 174.8 11.6 387.6 343.0 13.0 Allmerica Asset Management 34.9 40.5 (13.8) 64.2 74.8 (14.2) ---------------------------- ------------------------------ 229.9 215.3 6.8 451.8 417.8 8.1 ---------------------------- ------------------------------ Corporate 1.7 2.4 (29.2) 2.7 3.6 (25.0) Eliminations and other (1.5) (1.9) (21.1) (2.6) (2.5) 4.0 ---------------------------- ------------------------------ Total operating revenues $ 809.5 $ 770.3 5.1 $ 1,588.8 $ 1,494.7 6.3 ============================ ============================= NET OPERATING INCOME Risk Management $ 53.9 $ 55.3 (2.5) $ 97.0 $ 85.1 14.0 ---------------------------- ------------------------------ Asset Accumulation Allmerica Financial Services 55.5 47.7 16.4 109.9 96.6 13.8 Allmerica Asset Management 4.6 6.8 (32.4) 9.7 12.5 (22.4) ---------------------------- ------------------------------ 60.1 54.5 10.3 119.6 109.1 9.6 ---------------------------- ------------------------------ Corporate (12.2) (13.5) (9.6) (26.7) (29.5) (9.5) ---------------------------- ------------------------------ Total net operating income before federal income taxes and minority interest 101.8 96.3 5.7 189.9 164.7 15.3 Federal income taxes on operating income (23.3) (19.3) 20.7 (41.0) (32.4) 26.5 Minority interest: Distributions on mandatorily redeemable preferred securities of a subsidiary trust (4.0) (4.0) 0.0 (8.0) (8.0) 0.0 ---------------------------- ------------------------------ Consolidated net operating income $ 74.5 $ 73.0 2.1 $ 140.9 $ 124.3 13.4 ============================ ============================== Consolidated net operating income per share (diluted) $ 1.37 $ 1.32 3.8 $ 2.60 $ 2.20 18.2 ============================ ============================== Weighted average shares outstanding (diluted) 54.1 55.1 54.2 56.4 =================== ===================== Operating revenues exclude net realized gains and losses and other items which management believes are not indicative of overall operating trends. Net operating income excludes net realized gains and losses and other items which management believes are not indicative of overall operating trends, net of taxes and minority interest.
Page 4 ALLMERICA FINANCIAL CORPORATION SEGMENT RESULTS HISTORICAL INCOME STATEMENT HIGHLIGHTS
Year ended December 31 (In millions, except per share data) 1999 1998 1997 1996 1995 OPERATING REVENUES Risk Management $2,189.4 $2,222.1 $2,227.6 $2,160.4 $2,106.3 ------------------------------------------------- Asset Accumulation Allmerica Financial Services 714.8 625.6 610.0 595.0 639.5 Allmerica Asset Management 150.5 121.7 91.1 110.5 157.6 ------------------------------------------------- 865.3 747.3 701.1 705.5 797.1 ------------------------------------------------- Corporate 6.0 12.9 16.1 6.9 (2.4) Eliminations and other (5.9) (7.6) (11.5) (12.7) (4.4) ------------------------------------------------- Total operating revenues $3,054.8 $2,974.7 $2,933.3 $2,860.1 $2,896.6 ================================================ NET OPERATING INCOME Risk Management $ 199.6 $ 149.6 $ 174.2 $ 173.1 $ 212.0 ------------------------------------------------- Asset Accumulation Allmerica Financial Services 205.5 169.0 134.6 106.8 60.0 Allmerica Asset Management 23.5 23.7 18.4 11.5 12.2 ------------------------------------------------- 229.0 192.7 153.0 118.3 72.2 ------------------------------------------------- Corporate (59.3) (50.9) (48.0) (58.0) (47.8) ------------------------------------------------- Total net operating income before federal income taxes and minority interest 369.3 291.4 279.2 233.4 236.4 ------------------------------------------------- Federal income taxes on operating income (72.4) (53.1) (63.4) (50.8) (67.4) Minority interest: Distributions on mandatorily redeemable preferred securities of a subsidiary trust (16.0) (16.0) (14.5) 0.0 0.0 Equity in earnings 0.0 (9.8) (37.0) (61.5) (69.2) ------------------------------------------------- Consolidated net operating income $ 280.9 $ 212.5 $ 164.3 $ 121.1 $ 99.8 ================================================= Consolidated net operating income per share (diluted) $ 5.06 $ 3.52 $ 3.00 $ 2.41 $ 1.99 ================================================= Weighted average shares outstanding (diluted) 55.5 60.3 54.8 50.1 50.1 ================================================= Operating revenues exclude net realized gains and losses and other items which management believes are not indicative of overall operating trends. Net operating income excludes net realized gains and losses and other items which management believes are not indicative of overall operating trends, net of taxes and minority interest.
Page 5 ALLMERICA FINANCIAL CORPORATION SEGMENT RESULTS BALANCE SHEET HIGHLIGHTS
(In millions) June 30, 2000 Asset Accumulation -------------------------- Allmerica Allmerica Risk Financial Asset Management Services Management Corporate Total Cash and investments $ 3,613.4 $ 3,017.9 $ 1,895.5 $ 121.8 $ 8,648.6 Reinsurance receivables 971.5 331.8 0.0 0.0 1,303.3 Deferred policy acquisition costs 183.5 1,322.1 0.3 0.0 1,505.9 Separate account assets 0.0 18,477.5 0.0 0.0 18,477.5 Other assets 1,121.7 230.0 19.5 6.6 1,384.8 Closed Block assets 0.0 768.5 0.0 0.0 768.5 -------------------------------------------------------------------------- Total assets $ 5,897.1 $24,147.8 $ 1,915.3 $ 128.4 $32,088.6 ========================================================================= Policy liabilities and accruals: Future policy benefits $ 175.1 $ 2,510.0 $0.0 $0.0 $ 2,685.1 Outstanding claims, losses and loss adjustment expenses 2,799.7 25.4 0.0 0.0 2,825.1 Unearned premiums 961.5 2.9 0.0 0.0 964.4 Contractholder deposit funds and other policy liabilities 25.3 648.1 1,522.9 0.0 2,196.3 -------------------------------------------------------------------------- Total policy liabilities and accruals $ 3,961.6 $ 3,186.4 $ 1,522.9 $ 0.0 $ 8,670.9 ========================================================================= Separate account liabilities $ 0.0 $18,476.5 $ 0.0 $ 0.0 $18,476.5 ========================================================================= Closed Block liabilities $ 0.0 $ 824.9 $ 0.0 $ 0.0 $ 824.9 =========================================================================
December 31, 1999 Asset Accumulation ------------------------------ Allmerica Allmerica Risk Financial Asset Management Services Management Corporate Total Cash and investments $ 3,627.3 $ 3,264.2 $ 1,367.4 $ 72.0 $ 8,330.9 Reinsurance receivables 946.6 333.3 0.0 0.0 1,279.9 Deferred policy acquisition costs 173.3 1,213.1 0.4 0.0 1,386.8 Separate account assets 0.0 17,629.6 0.0 0.0 17,629.6 Other assets 1,128.8 223.2 19.8 5.3 1,370.1 Closed Block assets 0.0 772.3 0.0 0.0 772.3 -------------------------------------------------------------------------- Total assets $ 5,869.0 $23,435.7 $ 1,387.6 $ 77.3 $30,769.6 ========================================================================= Policy liabilities and accruals: Future policy benefits $ 183.5 $ 2,641.5 $0.0 $0.0 $ 2,825.0 Outstanding claims, losses and loss adjustment expenses 2,820.3 18.3 0.0 0.0 2,838.6 Unearned premiums 887.2 3.0 0.0 0.0 890.2 Contractholder deposit funds and other policy liabilities 24.8 700.2 1,316.0 0.0 2,041.0 -------------------------------------------------------------------------- Total policy liabilities and accruals $ 3,915.8 $ 3,363.0 $ 1,316.0 $ 0.0 $ 8,594.8 ========================================================================= Separate account liabilities $ 0.0 $17,628.9 $ 0.0 $ 0.0 $17,628.9 ========================================================================= Closed Block liabilities $ 0.0 $ 842.1 $ 0.0 $ 0.0 $ 824.1 =========================================================================
Page 6 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT CONDENSED INCOME STATEMENT
Quarter ended June 30 Six Months ended June 30 (In millions) 2000 1999 % Change 2000 1999 % Change REVENUES Net premiums written $ 562.2 $505.2 11.3 $1,089.8 $ 982.4 10.9 Change in unearned premiums, net of prepaid reinsurance premiums (42.6) (10.6) N/M (73.2) (30.2) N/M ------------------------ --------------------------- Net premiums earned 519.6 494.6 5.1 1,016.6 952.2 6.8 Net investment income 54.4 55.1 (1.3) 109.6 113.5 (3.4) Other income 5.4 4.8 12.5 10.7 10.1 5.9 ------------------------- --------------------------- Total operating revenue 579.4 554.5 4.5 1,136.9 1,075.8 5.7 ------------------------- --------------------------- LOSSES AND OPERATING EXPENSES Policy benefits, claims, losses and loss adjustment expenses 383.6 351.8 9.0 759.3 705.5 7.6 Policy acquisition expenses 93.9 93.1 0.9 186.0 181.6 2.4 Other operating expenses 48.0 54.3 (11.6) 94.6 103.6 (8.7) ------------------------ --------------------------- Total losses and operating expenses 525.5 499.2 5.3 1,039.9 990.7 5.0 ------------------------ --------------------------- Net operating income before taxes $ 53.9 $ 55.3 (2.5) $ 97.0 $ 85.1 14.0 ========================= ===========================
The Risk Management Segment manages its products through three distribution channels identified as Standard Markets,Sponsored Markets, and Specialty Markets. Standard Markets sells property & casualty insurance products through independent agents and brokers primarily in the Northeast, Midwest and Southeast United States maintaining a strong regional focus. Sponsored Markets focuses on worksite distribution, which offers discounted property & casualty (auto and homeowners) insurance through employer sponsored programs. This distribution channel also offers products to members of affinity groups and other organizations. Specialty Markets offers specialty or program business nationwide. Page 7 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT STATUTORY UNDERWRITING PROFIT/(LOSS) BY DISTRIBUTION CHANNEL, RECONCILED TO GAAP
(In millions) Quarter ended June 30, 2000 Standard Sponsored Specialty Markets Markets Markets Other Total Net premiums earned $360.2 $144.5 $ 9.9 $ 1.3 $ 515.9 Policy benefits, claims, losses and loss adjustment expenses 263.5 109.7 5.2 0.9 379.3 Policy acquisition and other underwriting expenses 108.6 34.4 3.2 1.2 147.4 Policyholders' dividends 2.6 0.0 0.0 0.0 2.6 ------------------------------------------------------- Underwriting (loss) profit $(14.5) $ 0.4 $ 1.5 $ (0.8) (13.4) --------------------------------------------- Net investment income 54.4 Other income and expenses, net 2.8 Net deferred acquisition costs 7.7 Other Statutory to GAAP adjustments 2.4 --------- Net operating income before taxes - GAAP Basis $ 53.9 ========= PRETAX CATASTROPHE LOSSES $ 8.1 $ 9.7 $ 0.0 $ 0.0 $ 17.8 ======================================================= Includes results from certain property and casualty business which the Company has exited.
(In millions) Quarter ended June 30, 1999 Standard Sponsored Specialty Markets Markets Markets Other Total Net premiums earned $352.5 $129.0 $ 12.2 $ (0.3) $493.4 Policy benefits, claims, losses and loss adjustment expenses 244.7 97.2 8.7 (0.7) 349.9 Policy acquisition and other underwriting expenses 106.7 34.3 3.5 0.4 144.9 Policyholders' dividends 2.3 0.0 0.0 0.0 2.3 ------------------------------------------------------ Underwriting loss $ (1.2) $ (2.5) $ 0.0 $ 0.0 (3.7) --------------------------------------------- Net investment income 55.1 Other income and expenses, net 1.4 Net deferred acquisition costs (1.6) Other Statutory to GAAP adjustments 4.1 ------- Net operating income before taxes - GAAP Basis $ 55.3 ======= PRETAX CATASTROPHE LOSSES $ 4.5 $ 4.7 $ 0.0 $ 0.0 $ 9.2 ====================================================== Includes results from certain property and casualty business which the Company has exited.
Page 8 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT STATUTORY UNDERWRITING PROFIT/(LOSS) BY DISTRIBUTION CHANNEL, RECONCILED TO GAAP
(In millions) Six Months ended June 30, 2000 Standard Sponsored Specialty Markets Markets Markets Other Total Net premiums earned $709.9 $284.6 $ 16.5 $ 1.7 $1,012.7 Policy benefits, claims, losses and loss adjustment expenses 525.4 211.5 11.6 3.2 751.7 Policy acquisition and other underwriting expenses 211.9 70.7 4.7 1.7 289.0 Policyholders' dividends 5.4 0.0 0.0 0.0 5.4 ------------------------------------------------------- Underwriting (loss) profit $(32.8) $ 2.4 $ 0.2 $ (3.2) (33.4) ---------------------------------------------- Net investment income 109.6 Other income and expenses, net 5.4 Net deferred acquisition costs 11.8 Other Statutory to GAAP adjustments 3.6 --------- Net operating income before taxes - GAAP Basis $ 97.0 ========= PRETAX CATASTROPHE LOSSES $ 22.8 $ 10.2 $ 0.0 $ 0.0 $ 33.0 ======================================================= Includes results from certain property and casualty business which the Company has exited.
Six Months ended June 30, 1999 Standard Sponsored Specialty Markets Markets Markets Other Total Net premiums earned $671.5 $250.8 $ 26.3 $ 2.6 $951.2 Policy benefits, claims, losses and loss adjustment expenses 485.6 191.9 18.3 3.3 699.1 Policy acquisition and other underwriting expenses 205.6 66.5 8.1 0.4 280.6 Policyholders' dividends 4.2 0.0 0.0 0.0 4.2 ------------------------------------------------------ Underwriting loss $(23.9) $ (7.6) $ (0.1) $ (1.1) (32.7) ---------------------------------------------- Net investment income 113.5 Other income and expenses, net 3.3 Net deferred acquisition costs (2.3) Other Statutory to GAAP adjustments 3.3 ------- Net operating income before taxes - GAAP Basis $ 85.1 ======= PRETAX CATASTROPHE LOSSES $ 29.0 $ 23.9 $ 0.0 $ 0.0 $ 52.9 ===================================================== Includes results from certain property and casualty business which the Company has exited.
Page 9 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT SELECTED STATUTORY INFORMATION BY DISTRIBUTION CHANNEL
(In millions, except ratios) Quarter ended June 30, 2000 Standard Sponsored Specialty Markets Markets Markets Other Total NET PREMIUMS WRITTEN Personal automobile $ 125.4 $ 115.2 $ 0.0 $ 2.0 $ 242.6 Homeowners 43.5 32.9 0.0 0.1 76.5 Workers' compensation 53.8 0.0 2.3 0.0 56.1 Commercial automobile 59.1 0.0 4.8 (0.2) 63.7 Commercial multiple peril 79.1 0.0 1.1 0.0 80.2 Other property & casualty 32.1 3.0 3.7 0.5 39.3 ------------------------------------------------- Total $ 393.0 $ 151.1 $ 11.9 $ 2.4 $ 558.4 ================================================= NET PREMIUMS EARNED Personal automobile $ 117.0 $ 113.8 $ 0.0 $ 1.3 $ 232.1 Homeowners 39.0 28.1 0.0 0.0 67.1 Workers' compensation 50.1 0.0 3.3 0.0 53.4 Commercial automobile 52.5 0.0 2.8 (0.6) 54.7 Commercial multiple peril 73.8 0.0 1.4 0.0 75.2 Other property & casualty 27.8 2.6 2.4 0.6 33.4 ------------------------------------------------- Total $ 360.2 $ 144.5 $ 9.9 $ 1.3 $ 515.9 ================================================= POLICY BENEFITS, CLAIMS AND LOSSES Personal automobile $ 80.2 $ 78.7 $ 0.0 $ 1.1 $ 160.0 Homeowners 28.1 21.4 0.0 0.0 49.5 Workers' compensation 39.9 0.0 1.3 (0.3) 40.9 Commercial automobile 35.7 0.0 1.3 (0.4) 36.6 Commercial multiple peril 39.3 0.0 (0.3) 0.6 39.6 Other property & casualty 8.1 0.8 1.3 0.0 10.2 ------------------------------------------------- Total $ 231.3 $ 100.9 $ 3.6 $ 1.0 $ 336.8 ================================================= LOSS ADJUSTMENT EXPENSES $ 32.2 $ 8.8 $ 1.6 $ (0.1) $ 42.5 ================================================= RATIOS LOSSES Personal automobile 68.7 % 69.1 % 0.0 % N/M 68.9 % Homeowners 71.8 % 76.2 % 0.0 % N/M 73.5 % Workers' compensation 79.3 % 0.0 % 39.4 % N/M 76.4 % Commercial automobile 67.8 % 0.0 % 46.4 % N/M 66.9 % Commercial multiple peril 53.3 % 0.0 % N/M N/M 52.7 % Other property & casualty 29.2 % 30.8 % 54.2 % N/M 30.6 % ------------------------------------------------- Total 64.2 % 69.8 % 36.4 % N/M 65.3 % LOSS ADJUSTMENT EXPENSES 8.9 % 6.1 % 16.2 % N/M 8.2 % POLICY ACQUISITION AND OTHER UNDERWRITING EXPENSES 27.7 % 22.6 % 26.9 % N/M 26.4 % POLICYHOLDERS' DIVIDENDS 0.7 % 0.0 % 0.0 % N/M 0.5 % ------------------------------------------------- COMBINED 101.5 % 98.5 % 79.5 % N/M 100.4 % =================================================
Page 10 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT SELECTED STATUTORY INFORMATION BY DISTRIBUTION CHANNEL
(In millions, except ratios) Quarter ended June 30, 1999 Standard Sponsored Specialty Markets Markets Markets Other Total NET PREMIUMS WRITTEN Personal automobile $ 114.4 $ 105.9 $ 0.0 $ 0.3 $ 220.6 Homeowners 45.1 29.4 0.0 (0.6) 73.9 Workers' compensation 47.8 0.0 0.8 1.1 49.7 Commercial automobile 49.0 0.0 0.8 (0.1) 49.7 Commercial multiple peril 69.2 0.0 2.6 0.5 72.3 Other property & casualty 30.4 3.1 5.8 (1.3) 38.0 ------------------------------------------------- Total $ 355.9 $ 138.4 $ 10.0 $ (0.1) $ 504.2 ================================================= NET PREMIUMS EARNED Personal automobile $ 122.6 $ 101.5 $ 0.0 $ 0.2 $ 224.3 Homeowners 43.2 25.1 0.0 (0.5) 67.8 Workers' compensation 47.1 0.0 0.6 0.9 48.6 Commercial automobile 45.4 0.0 2.1 0.0 47.5 Commercial multiple peril 67.0 0.0 3.5 0.6 71.1 Other property & casualty 27.2 2.4 6.0 (1.5) 34.1 ------------------------------------------------- Total $ 352.5 $ 129.0 $ 12.2 $ (0.3) $ 493.4 ================================================= POLICY BENEFITS, CLAIMS AND LOSSES Personal automobile $ 68.9 $ 68.2 $ 0.0 $ (0.6) $ 136.5 Homeowners 26.9 20.4 0.0 (0.3) 47.0 Workers' compensation 29.7 0.0 0.0 0.2 29.9 Commercial automobile 30.0 0.0 1.7 (0.6) 31.1 Commercial multiple peril 47.0 0.0 3.4 0.5 50.9 Other property & casualty 9.3 1.0 1.8 0.5 12.6 ------------------------------------------------- Total $ 211.8 $ 89.6 $ 6.9 $ (0.3) $ 308.0 ================================================= LOSS ADJUSTMENT EXPENSES $ 32.9 $ 7.6 $ 1.8 $ (0.4) $ 41.9 ================================================= RATIOS LOSSES Personal automobile 56.2 % 67.2 % 0.0 % N/M 60.9 % Homeowners 62.3 % 81.3 % 0.0 % N/M 68.9 % Workers' compensation 63.1 % 0.0 % N/M N/M 61.5 % Commercial automobile 66.1 % 0.0 % 81.0 % N/M 65.5 % Commercial multiple peril 70.1 % 0.0 % 97.1 % N/M 71.7 % Other property & casualty 34.2 % 43.5 % 30.0 % N/M 38.6 % ------------------------------------------------- Total 60.1 % 69.5 % 56.6 % N/M 62.4 % LOSS ADJUSTMENT EXPENSES 9.3 % 5.8 % 14.8 % N/M 8.5 % POLICY ACQUISITION AND OTHER UNDERWRITING EXPENSES 30.0 % 24.8 % 35.0 % N/M 28.7 % POLICYHOLDERS' DIVIDENDS 0.7 % 0.0 % 0.0 % N/M 0.5 % ------------------------------------------------- COMBINED 100.1 % 100.1 % 106.4 % N/M 100.1 % =================================================
Page 11 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT SELECTED STATUTORY INFORMATION BY DISTRIBUTION CHANNEL
(In millions, except ratios) Six Months ended June 30, 2000 Standard Sponsored Specialty Markets Markets Markets Other Total NET PREMIUMS WRITTEN Personal automobile $ 253.1 $ 243.7 $ 0.0 $ 2.1 $ 498.9 Homeowners 77.3 54.0 0.0 (0.1) 131.2 Workers' compensation 107.9 0.0 2.7 0.0 110.6 Commercial automobile 111.8 0.0 5.9 (0.2) 117.5 Commercial multiple peril 154.3 0.0 2.9 (0.1) 157.1 Other property & casualty 57.8 5.0 6.8 1.0 70.6 -------------------------------------------------- Total $ 762.2 $ 302.7 $ 18.3 $ 2.7 $1,085.9 ================================================= NET PREMIUMS EARNED Personal automobile $ 227.6 $ 223.5 $ 0.0 $ 1.4 $ 452.5 Homeowners 78.1 55.9 0.0 (0.1) 133.9 Workers' compensation 100.4 0.0 4.1 0.0 104.5 Commercial automobile 102.6 0.0 3.4 (0.7) 105.3 Commercial multiple peril 145.7 0.0 2.8 (0.1) 148.4 Other property & casualty 55.5 5.2 6.2 1.2 68.1 -------------------------------------------------- Total $ 709.9 $ 284.6 $ 16.5 $ 1.7 $1,012.7 ================================================= POLICY BENEFITS, CLAIMS AND LOSSES Personal automobile $ 152.7 $ 149.5 $ 0.0 $ 0.6 $ 302.8 Homeowners 57.1 43.3 0.0 (0.4) 100.0 Workers' compensation 76.8 0.0 2.2 0.1 79.1 Commercial automobile 65.6 0.0 3.6 (0.6) 68.6 Commercial multiple peril 88.3 0.0 1.1 1.9 91.3 Other property & casualty 19.5 1.9 1.5 1.3 24.2 -------------------------------------------------- Total $ 460.0 $ 194.7 $ 8.4 $ 2.9 $ 666.0 ================================================== LOSS ADJUSTMENT EXPENSES $ 65.4 $ 16.8 $ 3.2 $ 0.3 $ 85.7 ================================================== RATIOS LOSSES Personal automobile 67.2 % 66.9 % 0.0 % N/M 66.9 % Homeowners 73.1 % 77.5 % 0.0 % N/M 74.7 % Workers' compensation 76.5 % 0.0 % 53.7 % N/M 75.8 % Commercial automobile 63.9 % 0.0 % 105.9 % N/M 65.1 % Commercial multiple peril 60.6 % 0.0 % 39.3 % N/M 61.5 % Other property & casualty 35.2 % 36.5 % 23.8 % N/M 35.5 % ------------------------------------------------- Total 64.8 % 68.4 % 50.6 % N/M 65.8 % LOSS ADJUSTMENT EXPENSES 9.2 % 5.9 % 19.3 % N/M 8.5 % POLICY ACQUISITION AND OTHER UNDERWRITING EXPENSES 27.8 % 23.4 % 25.7 % N/M 26.6 % POLICYHOLDERS' DIVIDENDS 0.8 % 0.0 % 0.0 % N/M 0.5 % -------------------------------------------------- COMBINED 102.6 % 97.7 % 95.6 % N/M 101.4 % ==================================================
Page 12 ALLMERICA FINANCIAL CORPORATION RISK MANAGEMENT SELECTED STATUTORY INFORMATION BY DISTRIBUTION CHANNEL
(In millions, except ratios) Six Months ended June 30, 1999 Standard Sponsored Specialty Markets Markets Markets Other Total NET PREMIUMS WRITTEN Personal automobile $ 241.4 $ 226.4 $ 0.0 $ 0.1 $ 467.9 Homeowners 69.7 36.4 0.0 (0.4) 105.7 Workers' compensation 97.7 0.0 3.4 0.8 101.9 Commercial automobile 95.9 0.0 3.2 (0.2) 98.9 Commercial multiple peril 133.1 0.0 5.6 0.5 139.2 Other property & casualty 56.2 3.3 9.2 (0.5) 68.2 ------------------------------------------------- Total $ 694.0 $ 266.1 $ 21.4 $ 0.3 $ 981.8 ================================================= NET PREMIUMS EARNED Personal automobile $ 235.3 $ 209.5 $ 0.0 $ 1.1 $ 445.9 Homeowners 76.8 36.7 0.0 0.1 113.6 Workers' compensation 90.7 0.0 2.5 0.9 94.1 Commercial automobile 89.7 0.0 4.8 0.3 94.8 Commercial multiple peril 126.3 0.0 7.5 0.9 134.7 Other property & casualty 52.7 4.6 11.5 (0.7) 68.1 ------------------------------------------------- Total $ 671.5 $ 250.8 $ 26.3 $ 2.6 $ 951.2 ================================================= POLICY BENEFITS, CLAIMS AND LOSSES Personal automobile $ 147.6 $ 143.3 $ 0.0 $ (0.8) $ 290.1 Homeowners 49.3 32.7 0.0 (0.3) 81.7 Workers' compensation 58.1 0.0 (0.8) 1.2 58.5 Commercial automobile 62.5 0.0 4.1 (0.5) 66.1 Commercial multiple peril 89.7 0.0 5.6 1.7 97.0 Other property & casualty 16.2 2.2 5.7 2.2 26.3 ------------------------------------------------- Total $ 423.4 $ 178.2 $ 14.6 $ 3.5 $ 619.7 ================================================= LOSS ADJUSTMENT EXPENSES $ 62.2 $ 13.7 $ 3.7 $ (0.2) $ 79.4 ================================================= RATIOS LOSSES Personal automobile 62.7 % 68.4 % 0.0 % N/M 65.1 % Homeowners 64.2 % 89.1 % 0.0 % N/M 72.0 % Workers' compensation 64.1 % 0.0 % N/M N/M 62.2 % Commercial automobile 69.7 % 0.0 % 85.4 % N/M 69.6 % Commercial multiple peril 71.0 % 0.0 % 74.7 % N/M 72.1 % Other property & casualty 30.7 % 47.8 % 49.6 % N/M 38.2 % ------------------------------------------------- Total 63.1 % 71.0 % 55.5 % N/M 65.2 % LOSS ADJUSTMENT EXPENSES 9.3 % 5.5 % 14.1 % N/M 8.3 % POLICY ACQUISITION AND OTHER UNDERWRITING EXPENSES 29.6 % 25.0 % 37.9 % N/M 28.6 % POLICYHOLDERS' DIVIDENDS 0.6 % 0.0 % 0.0 % N/M 0.4 % ------------------------------------------------- COMBINED 102.6 % 101.5 % 107.5 % N/M 102.5 % =================================================
Page 13 ALLMERICA FINANCIAL CORPORATION ALLMERICA FINANCIAL SERVICES CONDENSED INCOME STATEMENT Quarter ended June 30 Six Months ended June 30 (In millions) 2000 1999 % Change 2000 1999 % Change REVENUES Premiums $ 0.5 $ 0.1 N/M $ 1.0 $ 0.8 25.0 Universal life and investment product policy fees 102.7 88.6 15.9 205.2 171.5 19.7 Net investment income 58.6 64.1 (8.6) 118.4 127.6 (7.2) Other income 28.3 19.2 47.4 54.6 36.5 49.6 Operating contribution from the Closed Block 4.9 2.8 75.0 8.4 6.6 27.3 -------------------------- ---------------------------- Total operating revenue 195.0 174.8 11.6 387.6 343.0 13.0 -------------------------- ---------------------------- POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES Policy benefits, claims and losses 53.1 56.9 (6.7) 109.0 119.8 (9.0) Policy acquisition expenses 23.2 21.0 10.5 48.9 26.6 83.8 Other operating expenses 63.2 49.2 28.5 119.8 100.0 19.8 -------------------------- ---------------------------- Total policy benefits, claims and operating expenses 139.5 127.1 9.8 277.7 246.4 12.7 -------------------------- ---------------------------- Net operating income before taxes 55.5 47.7 16.4 $ 109.9 $ 96.6 13.8 ========================== ===========================
Page 14 ALLMERICA FINANCIAL CORPORATION ALLMERICA FINANCIAL SERVICES OPERATING INCOME BY PRODUCT LINE
(In millions) Quarter ended June 30, 2000 Variable Group Individual Universal Universal Closed Retirement All Annuities Life Life Block Products Others Total REVENUES Premiums $ 0.0 $ 0.0 $ 0.0 $ 8.3 $ 0.0 $ 0.5 $ 8.8 Universal life and investment product policy fees 58.5 21.3 16.4 0.0 6.5 0.0 102.7 Net investment income 14.2 0.5 18.9 13.8 19.3 5.7 72.4 Other income 9.3 1.6 0.2 0.0 2.3 14.9 28.3 ------------------------------------------------------------------ Total operating revenue 82.0 23.4 35.5 22.1 28.1 21.1 212.2 ------------------------------------------------------------------ POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES Policy benefits, claims and losses 10.9 10.7 17.1 16.9 12.8 1.6 70.0 Policy acquisition expenses 16.3 1.2 5.0 0.4 0.7 0.0 23.6 ------------------------------------------------------------------- Total policy benefits, claims, and policy acquisition expenses 27.2 11.9 22.1 17.3 13.5 1.6 93.6 ------------------------------------------------------------------ Operating income before other operating expenses $ 54.8 $ 11.5 $ 13.4 $ 4.8 $ 14.6 $ 19.5 118.6 ========================================================== Other operating expenses 63.1 -------- Net operating income before taxes $ 55.5 ======== Includes defined benefit and defined contribution plan products and services. Includes non-insurance activities and products in runoff (e.g.YRT,DI). Includes other operating expenses (credits) from the Closed Block of approximately $(0.1) million for the quarter ended June 30, 2000.
(In millions) Quarter ended June 30, 1999 Variable Group Individual Universal Universal Closed Retirement All Annuities Life Life Block Products Others Total REVENUES Premiums $ 0.0 $ 0.0 $ 0.0 $ 8.4 $ 0.0 $ 0.1 $ 8.5 Universal life and investment product policy fees 47.7 18.4 17.1 0.0 5.4 0.0 88.6 Net investment income 18.5 0.2 20.2 13.5 19.6 5.6 77.6 Other income 7.3 1.1 0.2 0.0 2.3 8.3 19.2 ------------------------------------------------------------------ Total operating revenue 73.5 19.7 37.5 21.9 27.3 14.0 193.9 ------------------------------------------------------------------ POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES Policy benefits, claims and losses 16.5 5.1 19.2 18.9 14.4 1.7 75.8 Policy acquisition expenses 14.2 1.0 4.8 0.6 1.0 0.0 21.6 ------------------------------------------------------------------- Total policy benefits, claims, and policy acquisition expenses 30.7 6.1 24.0 19.5 15.4 1.7 97.4 ------------------------------------------------------------------ Operating income before other operating expenses $ 42.8 $ 13.6 $ 13.5 $ 2.4 $ 11.9 $ 12.3 96.5 ========================================================== Other operating expenses 48.8 -------- Net operating income before taxes $ 47.7 ========= Includes defined benefit and defined contribution plan products and services. Includes non-insurance activities and products in runoff (e.g.YRT,DI). Includes other operating expenses (credits) from the Closed Block of approximately $(0.4) million for the quarter ended June 30, 1999.
Page 15 ALLMERICA FINANCIAL CORPORATION ALLMERICA FINANCIAL SERVICES OPERATING INCOME BY PRODUCT LINE
(In millions) Six Months ended June 30, 2000 Variable Group Individual Universal Universal Closed Retirement All Annuities Life Life Block Products Others Total REVENUES Premiums $ 0.0 $ 0.0 $ 0.0 $ 34.3 $ 0.0 $ 1.0 $ 35.3 Universal life and investment product policy fees 116.0 41.9 33.1 0.0 14.2 0.0 205.2 Net investment income 29.5 1.2 37.9 27.0 38.7 11.1 145.4 Other income 18.6 3.0 0.4 0.0 3.9 28.7 54.6 ------------------------------------------------------------------ Total operating revenue 164.1 46.1 71.4 61.3 56.8 40.8 440.5 ------------------------------------------------------------------ POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES Policy benefits, claims and losses 29.0 17.5 35.0 51.7 25.1 2.4 160.7 Policy acquisition expenses 34.8 2.7 10.1 1.0 1.3 0.0 49.9 ------------------------------------------------------------------- Total policy benefits, claims, and policy acquisition expenses 63.8 20.2 45.1 52.7 26.4 2.4 210.6 ------------------------------------------------------------------ Operating income before other operating expenses $100.3 $ 25.9 $ 26.3 $ 8.6 $ 30.4 $ 38.4 229.9 ========================================================== Other operating expenses 120.0 -------- Net operating income before taxes $ 109.9 ========= Includes defined benefit and defined contribution plan products and services. Includes non-insurance activities and products in runoff (e.g.YRT,DI). Includes other operating expenses from the Closed Block of approximately $0.2 million for the six months ended June 30, 2000.
(In millions) Six Months ended June 30, 1999 Variable Group Individual Universal Universal Closed Retirement All Annuities Life Life Block Products Others Total REVENUES Premiums $ 0.0 $ 0.0 $ 0.0 $ 35.6 $ 0.0 $ 0.8 $ 36.4 Universal life and investment product policy fees 89.7 36.1 34.5 0.0 11.2 0.0 171.5 Net investment income 35.3 0.4 38.8 26.6 39.9 13.2 154.2 Other income 14.4 2.1 0.5 0.0 4.1 15.4 36.5 ------------------------------------------------------------------ Total operating revenue 139.4 38.6 73.8 62.2 55.2 29.4 398.6 ------------------------------------------------------------------ POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES Policy benefits, claims and losses 39.9 11.3 38.1 54.4 27.3 3.2 174.2 Policy acquisition expenses 12.5 3.1 9.1 1.1 1.9 0.0 27.7 ------------------------------------------------------------------- Total policy benefits, claims, and policy acquisition expenses 52.4 14.4 47.2 55.5 29.2 3.2 201.9 ------------------------------------------------------------------ Operating income before other operating expenses $ 87.0 $ 24.2 $ 26.6 $ 6.7 $ 26.0 $ 26.2 196.7 ========================================================== Other operating expenses 100.1 -------- Net operating income before taxes $ 96.6 ========= Includes defined benefit and defined contribution plan products and services. Includes non-insurance activities and products in runoff (e.g.YRT,DI). Includes other operating expenses from the Closed Block of approximately $0.1 million for the six months ended June 30, 1999.
Page 16 ALLMERICA FINANCIAL CORPORATION ALLMERICA FINANCIAL SERVICES PREMIUMS, DEPOSITS AND OTHER INCOME
Quarter ended June 30 Six Months ended June 30 (In millions) 2000 1999 % Change 2000 1999 % Change STATUTORY PREMIUMS AND DEPOSITS SUMMARY Insurance Traditional life $ 13.9 $ 17.3 (19.7) $ 43.7 $ 48.7 (10.3) Universal life 15.5 15.9 (2.5) 33.4 32.6 2.5 Variable universal life 51.5 43.8 17.6 102.7 89.1 15.3 Individual health 0.0 0.0 0.0 0.1 0.1 0.0 Group variable universal life 18.6 7.2 N/M 30.1 17.6 71.0 ------------------------ --------------------------- Total insurance 99.5 84.2 18.2 210.0 188.1 11.6 ------------------------ --------------------------- Annuities Separate account annuities 676.5 510.5 32.5 1,355.4 1,009.1 34.3 General account annuities 125.4 251.5 (50.1) 264.1 461.8 (42.8) Retirement investment accounts 2.6 3.6 (27.8) 6.1 9.5 (35.8) ------------------------ --------------------------- Total individual annuities 804.5 765.6 5.1 1,625.6 1,480.4 9.8 Group annuities 90.7 112.2 (19.2) 259.3 194.3 33.5 ------------------------ --------------------------- Total annuities 895.2 877.8 2.0 1,884.9 1,674.7 12.6 ------------------------ --------------------------- Total premiums and deposits $ 994.7 $ 962.0 3.4 $2,094.9 $1,862.8 12.5 ======================== ========================== COMPONENTS Insurance Traditional life New business premium $ 1.1 $ 0.7 57.1 $ 10.8 $ 10.4 3.8 Renewal premium and deposits 12.8 16.6 (22.9) 32.9 38.3 (14.1) ------------------------ --------------------------- $ 13.9 $ 17.3 (19.7) $ 43.7 $ 48.7 (10.3) ======================== ========================== Universal life New business premium $ 0.1 $ 0.1 (0.0) $ 0.2 $ 0.3 (33.3) Renewal premium and deposits 15.4 15.8 (2.5) 33.2 32.3 2.8 ------------------------ --------------------------- $ 15.5 $ 15.9 (2.5) $ 33.4 $ 32.6 2.5 ======================== ========================== Variable universal life New business premium $ 28.6 $ 21.8 31.2 $ 55.8 $ 44.0 26.8 Renewal premium and deposits 22.9 22.0 4.1 46.9 45.1 4.0 ------------------------ --------------------------- $ 51.5 $ 43.8 17.6 $ 102.7 $ 89.1 15.3 ======================== ========================== Individual annuities by distribution channel Agency $ 244.5 $ 270.1 (9.5) $ 484.4 $ 479.7 1.0 Select 197.6 159.1 24.2 416.4 312.7 33.2 Kemper 256.5 174.7 46.8 519.0 343.5 51.1 Pioneer 56.0 94.4 (40.7) 106.0 189.7 (44.1) Delaware 46.6 59.0 (21.0) 92.5 133.3 (30.6) Fulcrum 0.7 4.7 (85.1) 1.2 12.0 (90.0) Retirement investment accounts 2.6 3.6 (27.8) 6.1 9.5 (35.8) ------------------------ --------------------------- $ 804.5 $ 765.6 5.1 $1,625.6 $1,480.4 9.8 ======================== ========================== GAAP OTHER INCOME (Excluding Closed Block) Investment management fees $ 12.0 $ 9.9 21.2 $ 23.3 $ 18.7 24.6 Brokerage income 10.9 5.9 84.7 20.8 10.7 94.4 Other 5.4 3.4 58.8 10.5 7.1 47.9 ------------------------ --------------------------- $ 28.3 $ 19.2 47.4 $ 54.6 $ 36.5 49.6 ======================== ==========================
Page 17 ALLMERICA FINANCIAL CORPORATION ALLMERICA FINANCIAL SERVICES FUTURE POLICY BENEFITS AND ACCOUNT BALANCES
June 30 December 31 (In millions) 2000 1999 % Change GENERAL ACCOUNT RESERVES Insurance Traditional life, excluding Closed Block $ 34.9 $ 37.7 (7.4) Universal life 790.4 816.1 (3.1) Variable universal life 150.7 136.3 10.6 Individual health 269.9 273.0 (1.1) Group variable universal life 9.0 10.0 (10.0) ---------------------------- Total insurance 1,254.9 1,273.1 (1.4) ---------------------------- Annuities Individual annuities 1,105.9 1,219.0 (9.3) Group annuities 825.6 870.9 (5.2) ---------------------------- Total annuities 1,931.5 2,089.8 (7.6) ---------------------------- Total general account reserves $ 3,186.4 $ 3,363.0 (5.3) ============================ SEPARATE ACCOUNT LIABILITIES Variable individual life $ 1,294.1 $ 1,244.8 4.0 Variable individual annuities 14,651.3 13,872.6 5.6 ---------------------------- Total individual 15,945.4 15,117.4 5.5 Group variable universal life 293.0 260.5 12.5 Group annuities 2,238.1 2,251.0 (0.6) ---------------------------- Total group 2,531.1 2,511.5 0.8 ---------------------------- Total separate account liabilities $18,476.5 $17,628.9 4.8 ============================
Page 18 ALLMERICA FINANCIAL CORPORATION ALLMERICA ASSET MANAGEMENT CONDENSED INCOME STATEMENTS AND SUPPLEMENTAL INFORMATION
Quarter ended June 30 Six Months ended June 30 (In millions) 2000 1999 % Change 2000 1999 % Change INTEREST MARGINS ON GICS Net investment income $ 32.1 $ 36.9 (13.0) $ 58.5 $ 68.3 (14.3) Interest credited 28.5 31.5 (9.5) 50.9 58.1 (12.4) -------------------------- --------------------------- Net interest margin 3.6 5.4 (33.3) 7.6 10.2 (25.5) -------------------------- --------------------------- OTHER INCOME AND EXPENSES External fees and other income 1.5 1.6 (6.3) 3.1 3.0 3.3 Internal fees and other income 1.3 2.0 (35.0) 2.6 3.5 (25.7) Other operating expenses 1.8 2.2 (18.2) 3.6 4.2 (14.3) -------------------------- --------------------------- Net operating income before taxes $ 4.6 $ 6.8 (32.4) $ 9.7 $ 12.5 (22.4) ========================== ==========================
Six Month ended June 30 2000 1999 % Change GIC DEPOSITS Outstanding GIC deposits, beginning of period $ 1,369.3 $ 1,791.8 (23.6) Withdrawals during the period (145.3) (348.5) N/M Deposits during the period 651.5 952.5 (31.6) Interest credited during the period 50.9 58.1 (12.8) ---------------------------------- Outstanding GIC deposits, end of period $ 1,926.4 $ 2,453.9 (21.3) ================================== Includes $2.0 million of traditional GIC deposits for the six months ended June 30, 2000.
June 30 2000 1999 GIC SCHEDULED MATURITIES 1999 $ 0.0 $ 0.0 2000 40.2 90.1 2001 216.3 81.0 2002 231.9 26.7 2003+ 366.1 133.4 ------------------------------ 854.5 331.2 Short term funding agreement balances 1,071.9 2,122.7 -------------------------- $ 1,926.4 $ 2,453.9 ========================== Includes $750.2 million and $101.9 million of long term funding agreement balances for the quarters ended June 30, 2000 and 1999, respectively.
Page 19 ALLMERICA FINANCIAL CORPORATION CORPORATE CONDENSED INCOME STATEMENTS
Quarter ended June 30 Six Months ended June 30 (In millions) 2000 1999 % Change 2000 1999 % Change REVENUES Net investment income $ 1.7 $ 2.4 (29.2) $ 2.7 $ 3.6 (25.0) -------------------------- --------------------------- OPERATING EXPENSES Interest expense 3.8 3.8 0.0 7.6 7.6 0.0 Other operating expenses 10.1 12.1 (16.5) 21.8 25.5 (14.5) -------------------------- --------------------------- Total operating expenses 13.9 15.9 (12.6) 29.4 33.1 (11.2) -------------------------- --------------------------- Net operating loss before taxes and minority interest $(12.2) $(13.5) (9.6) $(26.7) $(29.5) (9.5) ========================== ==========================
Page 20 ALLMERICA FINANCIAL CORPORATION NET INVESTMENT INCOME, INCLUDING CLOSED BLOCK
(In millions, except yields) Six Months ended June 30, 2000 Allmerica Allmerica Risk Financial Asset Management Yield Services Yield Management Yield Corporate Yield Total Yield Fixed maturities $108.9 6.74% $109.8 8.09% $ 48.9 7.05% $ 1.5 7.86% $269.1 7.30% Equity securities 0.5 3.52% 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.5 1.29% Mortgages 0.0 0.00% 19.1 8.12% 7.0 8.26% 0.0 0.00% 26.1 8.16% All other 2.1 0.00% 21.2 0.00% 3.6 0.00% 0.7 0.00% 27.6 0.00% Investment expenses (1.9) 0.00% (4.7) 0.00% (0.8) 0.00% 0.0 0.00% (7.4)0.00% ------------------------------------------------------------------------------------ Total $109.6 6.58% $145.4 7.39% $ 58.7 7.37% $ 2.2 6.02% $315.9 7.07% ===================================================================================== Includes purchase accounting adjustments of $2.3 million for the six months ended June 30, 2000. Includes corporate eliminations of $0.5 million for the six months ended June 30, 2000.
(In millions, except yields) Six Months ended June 30, 1999 Allmerica Allmerica Risk Financial Asset Management Yield Services Yield Management Yield Corporate Yield Total Yield Fixed maturities $110.2 6.66% $110.5 8.25% $ 60.9 6.30% $ 1.7 6.42% $283.3 7.10% Equity securities 0.8 2.05% 0.5 1.47% 0.0 0.00% 0.0 0.00% 1.3 1.77% Mortgages 0.0 0.00% 21.1 8.33% 6.8 8.18% 0.0 0.00% 27.9 8.29% All other 4.6 0.00% 26.3 0.00% 2.1 0.00% 1.4 0.00% 34.4 0.00% Investment expenses (2.1) 0.00% (4.2) 0.00% (1.5) 0.00% 0.0 0.00% (7.8)0.00% ------------------------------------------------------------------------------------- Total $113.5 6.37% $154.2 7.74% $ 68.3 6.38% $ 3.1 4.48% $339.1 6.90% ==================================================================================== Includes purchase accounting adjustments of $2.3 million for the six months ended June 30, 1999. Includes corporate eliminations of $0.5 million for the six months ended June 30, 1999.
Page 21 ALLMERICA FINANCIAL CORPORATION HISTORICAL FINANCIAL HIGHLIGHTS
(In millions, except per share data) Q2 00 Q1 00 1999 Q4 99 Q3 99 Q2 99 Q1 99 NET OPERATING INCOME BEFORE TAXES AND MINORITY INTEREST Risk Management $ 53.9 $ 43.1 $ 199.6 $ 65.0 $ 49.5 $ 55.3 $ 29.8 ------------------------------------------------------------------------ Asset Accumulation Allmerica Financial Services 55.5 54.4 205.5 54.2 54.7 47.7 48.9 Allmerica Asset Management 4.6 5.1 23.5 5.3 5.7 6.8 5.7 ----------------------------------------------------------------------- 60.1 59.5 229.0 59.5 60.4 54.5 54.6 ----------------------------------------------------------------------- Corporate (12.2) (14.5) (59.3) (16.1) (13.7) (13.5) (16.0) ----------------------------------------------------------------------- Total net operating income before federal income taxes and minority interest 101.8 88.1 369.3 108.4 96.2 96.3 68.4 Federal income taxes on operating income (23.3) (17.7) (72.4) (23.6) (16.4) (19.3) (13.1) Minority interest: Distributions on mandatorily redeemable preferred securities of a subsidiary trust (4.0) (4.0) (16.0) (4.0) (4.0) (4.0) (4.0) ---------------------------------------------------------------------- Consolidated net operating income $ 74.5 $ 66.4 $ 280.9 $ 80.8 $ 75.8 $ 73.0 $ 51.3 ======================================================================= INCOME FROM CONTINUING OPERATIONS $ 47.6 $ 30.2 $ 345.1 $ 68.4 $ 59.1 $ 66.8 $ 150.8 ======================================================================= NET INCOME $ 47.6 $ 30.2 $ 295.8 $ 68.4 $ 13.1 $ 60.2 $ 154.1 ======================================================================= PER SHARE DATA (DILUTED) NET OPERATING INCOME $ 1.37 $ 1.22 $ 5.06 $ 1.48 $ 1.39 $ 1.32 $ 0.89 INCOME FROM CONTINUING OPERATIONS $ 0.88 $ 0.56 $ 6.21 $ 1.25 $ 1.08 $ 1.21 $ 2.61 NET INCOME $ 0.88 $ 0.56 $ 5.33 $ 1.25 $ 0.24 $ 1.09 $ 2.67 DIVIDENDS $ 0.00 $ 0.00 $ 0.25 $ 0.00 $ 0.25 $ 0.00 $ 0.00 WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) 54.1 54.3 55.5 54.6 54.7 55.1 57.7 BALANCE SHEET Total investments $ 8,321.4 $ 8,147.7 $ 7,888.7 $ 8,265.7 $ 9,043.7 $ 9,163.1 Separate account assets $18,477.5 $18,595.5 $17,629.6 $15,102.9 $15,635.9 $14,329.4 Total assets $32,088.6 $31,854.1 $30,769.6 $29,080.0 $29,826.4 $28,461.2 Total shareholders' equity $ 2,288.6 $ 2,267.7 $ 2,240.2 $ 2,213.2 $ 2,248.7 $ 2,387.5 Book value per share $ 42.98 $ 42.27 $ 41.32 $ 40.86 $ 41.49 $ 42.30 Book value per share, excluding SFAS No.115 $ 44.17 $ 43.13 $ 42.71 $ 41.76 $ 41.45 $ 40.97 Net operating income excludes net realized gains (losses) and other non- operating items, net of taxes and minority interest.
PAGE 22 ALLMERICA FINANCIAL CORPORATION HISTORICAL FINANCIAL HIGHLIGHTS
(In millions, except per share data) 1998 Q4 98 Q3 98 Q2 98 Q1 98 1997 Q4 97 Q3 97 Q2 97 Q1 97 NET OPERATING INCOME BEFORE TAXES AND MINORITY INTEREST Risk Management $ 149.6 $ 52.4 $ 24.6 $ 34.9 $ 37.7 $ 174.2 $ 54.7 $ 36.1 $ 45.6 $ 37.8 ------------------------------------------------------------------------------------------------- Asset Accumulation Allmerica Financial Services 169.0 43.5 39.1 44.2 42.2 134.6 35.0 37.8 32.0 29.8 Allmerica Asset Management 23.7 6.7 6.9 6.2 3.9 18.4 4.6 5.2 5.4 3.2 ------------------------------------------------------------------------------------------------- 192.7 50.2 46.0 50.4 46.1 153.0 39.6 43.0 37.4 33.0 ------------------------------------------------------------------------------------------------- Corporate (50.9) (15.3) (10.6) (12.7) (12.3) (48.0) (17.2) (11.8) (8.0) (11.0) ------------------------------------------------------------------------------------------------- Total net operating income before federal income taxes and minority interest 291.4 87.3 60.0 72.6 71.5 279.2 77.1 67.3 75.0 59.8 Federal income taxes on operating income (53.1) (13.8) (10.7) (12.2) (16.4) (63.4) (16.7) (16.0) (18.9) (11.8) Minority interest: Distributions on mandatorily redeemable preferred securities of a subsidiary trust (16.0) (4.0) (4.0) (4.0) (4.0) (14.5) (4.0) (4.1) (4.0) (2.4) Equity in earnings (9.8) (2.4) (1.9) (1.7) (3.8) (37.0) (5.4) (0.5) (16.5) (14.6) ------------------------------------------------------------------------------------------------- Consolidated net operating income $ 212.5 $ 67.1 $ 43.4 $ 54.7 $ 47.3 $ 164.3 $ 51.0 $ 46.7 $ 35.6 $ 31.0 ================================================================================================= INCOME FROM CONTINUING OPERATIONS $ 214.7 $ 67.7 $ 24.3 $ 59.2 $ 63.5 $ 192.6 $ 89.6 $ 55.6 $ 33.9 $ 13.5 ================================================================================================ NET INCOME $ 201.2 $ 65.9 $ 8.2 $ 60.3 $ 66.8 $ 209.2 $ 94.9 $ 60.7 $ 37.7 $ 15.9 ================================================================================================ PER SHARE DATA (DILUTED) NET OPERATING INCOME $ 3.52 $ 1.12 $ 0.71 $ 0.91 $ 0.78 $ 3.00 $ 0.85 $ 0.80 $ 0.71 $ 0.62 INCOME FROM CONTINUING OPERATIONS $ 3.56 $ 1.13 $ 0.40 $ 0.98 $ 1.05 $ 3.52 $ 1.49 $ 0.95 $ 0.67 $ 0.27 NET INCOME $ 3.33 $ 1.10 $ 0.13 $ 1.00 $ 1.11 $ 3.82 $ 1.58 $ 1.04 $ 0.75 $ 0.32 DIVIDENDS $ 0.15 $ 0.00 $ 0.05 $ 0.05 $ 0.05 $ 0.20 $ 0.05 $ 0.05 $ 0.05 $ 0.05 WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) 60.3 59.9 60.6 60.5 60.3 54.8 60.2 58.4 50.3 50.2 BALANCE SHEET Total investments $ 9,057.6 $ 9,169.0 $ 9,274.0 $ 8,923.8 $ 8,700.7 $ 8,741.1 $ 8,808.4 $ 8,758.3 Separate account assets $13,697.7 $11,424.9 $12,260.5 $11,425.4 $ 9,755.4 $ 9,233.6 $ 8,036.3 $ 6,705.8 Total assets $27,653.1 $25,233.5 $25,816.4 $24,511.8 $22,549.0 $21,967.2 $20,963.5 $19,625.6 Total shareholders' equity $ 2,458.6 $ 2,480.3 $ 2,539.4 $ 2,468.8 $ 2,381.3 $ 2,263.4 $ 1,782.5 $ 1,672.0 Book value per share $ 41.95 $ 41.02 $ 42.04 $ 40.94 $ 39.71$ 37.74 $ 35.47 $ 33.35 Book value per share, excluding SFAS No.115 $ 38.87 $ 38.08 $ 38.01 $ 37.07 $ 36.08 $ 34.54 $ 32.66 $ 31.97 Net operating income excludes net realized gains (losses) and other non- operating items, net of taxes and minority interest.
PAGE 23 ALLMERICA FINANCIAL CORPORATION HISTORICAL FINANCIAL HIGHLIGHTS
(In millions, except per share data) 1996 Q4 96 Q3 96 Q2 96 Q1 96 1995 Q4 95 Q3 95 Q2 95 Q1 95 NET OPERATING INCOME BEFORE TAXES AND MINORITY INTEREST Risk Management $ 173.1 $ 43.6 $ 63.0 $ 40.0 $ 26.5 $ 212.0 $ 54.6 $ 58.0 $ 51.4 $ 48.0 ------------------------------------------------------------------------------------------------- Asset Accumulation Allmerica Financial Services 106.8 28.2 27.4 28.0 23.2 60.0 15.4 16.0 11.4 17.2 Allmerica Asset Management 11.5 5.4 2.8 2.1 1.2 12.2 3.5 2.5 3.8 2.4 ------------------------------------------------------------------------------------------------- 118.3 33.6 30.2 30.1 24.4 72.2 18.9 18.5 15.2 19.6 ------------------------------------------------------------------------------------------------- Corporate (58.0) (21.8) (10.4) (11.5) (14.3) (47.8) (15.4) (11.7) (9.6) (11.1) ------------------------------------------------------------------------------------------------- Total net operating income before federal income taxes and minority interest 233.4 55.4 82.8 58.6 36.6 236.4 58.1 64.8 57.0 56.5 Federal income taxes on operating income (50.8) (11.2) (21.5) (14.8) (3.3) (67.4) (20.2) (17.8) (14.1) (15.3) Minority interest: Distributions on mandatorily redeemable preferred securities of a subsidiary trust 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Equity in earnings (61.5) (14.9) (21.7) (13.3) (11.6) (69.2) (15.4) (19.4) (18.3) (16.1) ------------------------------------------------------------------------------------------------- Consolidated net operating income $ 121.1 $ 29.3 $ 39.6 $ 30.5 $ 21.7 $ 99.8 $ 22.5 $ 27.6 $ 24.6 $ 25.1 ================================================================================================ INCOME FROM CONTINUING OPERATIONS $ 164.4 $ 37.4 $ 43.6 $ 39.7 $ 43.7 $ 117.9 $ 34.2 $ 25.6 $ 24.2 $ 33.9 ================================================================================================ NET INCOME $ 181.9 $ 45.3 $ 46.7 $ 42.6 $ 47.3 $ 133.9 $ 40.7 $ 30.1 $ 26.4 $ 36.7 ================================================================================================ PER SHARE DATA (DILUTED) NET OPERATING INCOME $ 2.41 $ 0.58 $ 0.79 $ 0.61 $ 0.43 $ 1.99 $ 0.45 $ 0.55 $ 0.49 $ 0.50 INCOME FROM CONTINUING OPERATIONS $ 3.29 $ 0.76 $ 0.87 $ 0.79 $ 0.87 $ 2.35 $ 0.68 $ 0.51 $ 0.48 $ 0.68 NET INCOME $ 3.63 $ 0.91 $ 0.93 $ 0.85 $ 0.94 $ 2.67 $ 0.81 $ 0.60 $ 0.53 $ 0.73 DIVIDENDS $ 0.20 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.00 $ 0.00 $ 0.00 WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) 50.1 50.1 50.1 50.1 50.1 50.1 50.1 50.1 50.1 50.1 BALANCE SHEET Total investments $ 8,993.4 $ 9,247.2 $ 9,439.6 $ 9,479.2 $ 9,430.7 $ 9,898.1 $ 9,941.5 $ 0.0 Separate account Assets $ 6,233.0 $ 5,586.8 $ 5,197.9 $ 4,761.6 $ 4,348.8 $ 4,076.7 $ 3,659.2 $ 0.0 Total assets $18,970.3 $18,728.5 $18,506.1 $18,162.7 $17,757.7 $17,163.8 $16,798.7 $ 0.0 Total shareholders' equity $ 1,724.7 $ 1,633.0 $ 1,563.5 $ 1,555.9 $ 1,574.2 $ 1,255.5 $ 1,230.1 $ 0.0 Book value per share $ 34.40 $ 32.57 $ 31.20 $ 31.03 $ 31.40 $ 25.04 $ 24.54 $ 0.0 Book value per share, excluding SFAS No.115 $ 31.78 $ 30.92 $ 30.04 $ 29.24 $ 28.35 $ 23.23 $ 22.63 $ 0.0 Net operating income excludes net realized gains (losses) and other non- operating items, net of taxes and minority interest.
PAGE 24 CORPORATE OFFICES AND PRINCIPAL SUBSIDIARIES Allmerica Financial 440 Lincoln Street Worcester, MA 01653 The Hanover Insurance Company 100 North Parkway Worcester, MA 01605 Citizens Insurance Company of America 645 West Grand River Howell, MI 48843 MARKET AND DIVIDEND INFORMATION The following information shows trading activity for the Company for the periods indicated:
Quarter Ended 2000 Price Range Dividends High Low Per Share March 31 $53.50 $35.31 $0.00 June 30 $60.13 $46.31 $0.00 September 30 December 31
Quarter Ended 1999 Price Range Dividends High Low Per Share March 31 $57.88 $50.19 $0.00 June 30 $62.25 $54.50 $0.00 September 30 $64.44 $47.56 $0.25 December 31 $59.69 $46.50 $0.00
INDUSTRY RATINGS A.M. Standard Duff & Claims Paying Best & Poor's Moody's Phelps ----------------------------------------------------------------------------- First Allmerica Financial Life Insurance Company A AA- A1 AA ----------------------------------------------------------------------------- Allmerica Financial Life Insurance and Annuity Company A AA- A1 AA ----------------------------------------------------------------------------- The Hanover Insurance Company A AA- A1 - ----------------------------------------------------------------------------- Citizens Insurance Company of America A - - - ----------------------------------------------------------------------------- Standard Duff & Debt Ratings & Poor's Moody's Phelps ----------------------------------------------------------------------------- Allmerica Financial Corporation Senior Debt A- A2 A+ ----------------------------------------------------------------------------- Allmerica Financial Corporation Capital Securities BBB a2 A ----------------------------------------------------------------------------- Allmerica Financial Corporation Short Term Debt A1+ P1 - ----------------------------------------------------------------------------- First Allmerica Financial Life Insurance Company Short Term Debt A1+ P1 - ----------------------------------------------------------------------------- First Allmerica Financial Life Insurance Company Short Term Insurance Financial Strength Rating A1+ P1 - ----------------------------------------------------------------------------- TRANSFER AGENT First Chicago Trust Company of New York A Division of EquiServe, LP 525 Washington Boulevard Jersey City, NJ 07303-2512 1-800-317-4454 COMMON STOCK Common stock of Allmerica Financial Corporation is traded on the New York Stock Exchange under the symbol "AFC". INQUIRIES Henry P. St. Cyr, CFA Vice President, Investor Relations (508) 855-2959 hstcyr@Allmerica.com William J. Steglitz, CPA Manager, Investor Relations (508) 855-3883 wsteglitz@Allmerica.com INVESTOR INFORMATION LINE Dial 1-800-407-5222 to receive additional printed information, fax-on-demand services or other prerecorded messages. Please visit our internet site at www.Allmerica.com