8-K

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): October 25, 2004

ALLMERICA FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	1-13754	04-3263626
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

440 Lincoln Street, Worcester, Massachusetts 01653

(Address of principal executive offices)

(Zip Code)

(508) 855-1000

Registrant’s telephone number, including area code:

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

The following information is being furnished under Item 2.02 – Results of Operations and Financial Condition. Such information, including the exhibits attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

On October 25, 2004, Allmerica Financial Corporation issued a press release announcing its financial results for the quarter ended September 30, 2004. The release is furnished as Exhibit 99.1 hereto. Additionally, on October 25, 2004, the Company made available on its website financial information contained in its Statistical Supplement for the period ended September 30, 2004. The supplement is furnished as Exhibit 99.2 hereto.

Item 9.01 Financial Statements and Exhibits.

(a) Not applicable.

(b) Not applicable.

(c) Exhibits.

The following exhibits are furnished herewith.

Exhibit 99.1	Press Release, dated October 25, 2004, announcing the Company’s financial results for the quarter ended September 30, 2004.
Exhibit 99.2	Allmerica Financial Corporation Statistical Supplement for the period ended September 30, 2004.

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SIGNATURES

Pursuant to the requirements of the Securities 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
	(Registrant)
By:	/s/ Edward J. Parry III
	Edward J. Parry III
	Chief Financial Officer,
	Executive Vice President,
	Principal Accounting Officer and Director

Date: October 25, 2004

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Exhibit Index

Exhibit 99.1	Press Release, dated October 25, 2004, announcing the Company’s financial results for the quarter ended September 30, 2004.
Exhibit 99.2	Allmerica Financial Corporation Statistical Supplement for the period ended September 30, 2004.

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EX-99.1

Exhibit 99.1

ALLMERICA FINANCIAL CORPORATION REPORTS

THIRD QUARTER EARNINGS:

NET INCOME OF $0.33 PER SHARE

COMPARED TO $0.21 PER SHARE LAST YEAR

AFTER TAX SEGMENT INCOME OF $0.37 PER SHARE

CONSISTENT WITH PRIOR YEAR—DESPITE HIGHER LOSSES

FROM THE SOUTHEAST HURRICANES

WORCESTER, Mass., October 25, 2004—Allmerica Financial Corporation (NYSE: AFC) today reported third quarter net income of $17.7 million, or $0.33 per share, compared to net income of $11.4 million, or $0.21 per share, in the third quarter of last year.

Total segment income after taxes was $19.6 million, or $0.37 per share, consistent with $19.7 million or $0.37 per share, in the third quarter of last year. Segment income after taxes is presented consistent with the manner in which management evaluates operating results.

The property and casualty business reported solid pre-tax segment earnings in the quarter despite being materially impacted by catastrophe losses primarily related to hurricanes in the Southeast.

During the quarter, the company incurred gross catastrophe losses of approximately $99 million, primarily related to hurricanes in the Southeast. After reinsurance, pre-tax catastrophe losses were approximately $62 million compared to $17 million in the comparable period one year earlier.

“I am proud of the prompt, high quality service we provided to our agents and customers in the aftermath of the recent hurricanes.” said Frederick H. Eppinger, president and chief executive officer of Allmerica Financial Corporation. “Despite the catastrophe losses, I am pleased that we reported strong property and casualty earnings.”

Segment Results

Allmerica Financial consists of property and casualty operations, which represents our ongoing business, and life operations, which is a run-off business consisting primarily of proprietary life

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insurance, annuity and guaranteed investment products previously issued by Allmerica’s life insurance subsidiaries.

The company conducts its business in four operating segments. Property and casualty operations consist of three operating segments: Personal Lines, Commercial Lines, and Other Property and Casualty. The Personal Lines segment markets automobile, homeowners and ancillary coverages to individuals and families. The Commercial Lines segment offers a suite of products targeted at the small to mid-size business markets, which include commercial multiple peril, commercial automobile, workers’ compensation and other commercial coverages. The Other Property and Casualty segment includes a block of run-off voluntary pools business in which we have not actively participated since 1995; AMGRO, Inc., a premium financing business; and Opus Investment Management, Inc., which provides investment management services to institutions, pension funds and other organizations. The Life Companies, our fourth operating segment, includes the results of our run-off business of life and annuity products and guaranteed investment contracts.

The following table shows segment income after taxes, and is presented in a manner consistent with the way management evaluates results and is in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures About Segments of an Enterprise and Related Information”. Segment income after taxes excludes the items listed in the table at the end of this document.

	Quarter ended September 30 (In millions)
	2004			2003
Property & Casualty:
Personal Lines	$	42.1		$	11.5
Commercial Lines		(7.1	)		18.1
Other Property and Casualty		1.7			2.6
Total Property & Casualty		36.7			32.2
Life Companies		(8.7	)		(8.1	)
Interest expense on corporate debt		(10.0	)		(10.0	)
Total pre-tax segment income		18.0			14.1
Federal Income Taxes		1.6			5.6
Total segment income after taxes(1)	$	19.6		$	19.7

(1) See reconciliation of after-tax segment income to net income at the end of this document.

Property and Casualty

Total Property and Casualty segment income was $36.7 million in the third quarter of 2004, compared to $32.2 million in the third quarter of 2003. Pre-tax catastrophe losses were $61.7 million after reinsurance in the quarter, compared to $16.9 million in the prior year’s quarter.

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Excluding net pre-tax catastrophe losses, Property and Casualty segment income was $98.4 million, compared to $49.1 million in the prior year quarter.

The company maintains a property catastrophe aggregate reinsurance treaty that protects against multiple catastrophes within a single year. The treaty provides $50 million of reinsurance coverage in excess of cumulative catastrophe losses in the year of approximately $80 million. For purposes of the approximately $80 million retention, individual events are capped at $30 million. In addition, the company retains 10% of the risk on the $50 million coverage. Under the terms of the reinsurance agreement, the company has approximately $8 million in reinsurance coverage available for eligible catastrophe losses during the fourth quarter of 2004.

Property and Casualty highlights:

n Net premiums written were $581.6 million in the third quarter of 2004, compared to $588.7 million in the third quarter of 2003.

n Net premiums earned were $563.7 million in the third quarter of 2004, compared to $561.2 million in the third quarter of 2003.

n In the third quarter of 2004, net pre-tax catastrophe losses were $61.7 million, compared to $16.9 million in the comparable period one year earlier.

The following table summarizes the components of the statutory combined ratio for the property and casualty business:

	Quarter ended September 30
	2004		2003
Personal lines losses	53.0	%	64.7	%
Commercial lines losses	47.4	%	56.7	%
Other P&C losses	NM		NM
	51.4	%	62.4	%
Catastrophe losses	10.9	%	3.0	%
Loss adjustment expenses	9.7	%	7.8	%
Policy acquisition and other underwriting expenses	31.0	%	29.1	%
Policyholders’ dividends	(0.1	)%	0.1	%
Combined ratio	102.9	%	102.4	%

Personal Lines

Personal Lines segment income was $42.1 million in the quarter compared to $11.5 million in the prior year. Excluding net pre-tax catastrophe losses, Personal Lines segment income was $66.1 million in the quarter, compared to $24.0 million in the prior year quarter.

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Excluding catastrophes, personal lines results improved primarily due to favorable loss performance. The loss ratio excluding catastrophes was twelve points better than the prior year quarter. The major factors driving this improvement were:

Ø Continued impact of rate increases in both personal automobile and homeowners.

Ø Improved frequency of current year losses for the quarter in both personal automobile and homeowners.

Ø A favorable change in development of prior years’ loss reserves, with $7.0 million of favorable development in the current quarter compared to $6.2 million of adverse development in the year ago quarter.

Ø Strategic actions taken to withdraw from less profitable sponsored business in certain states and the continued improvement in the Massachusetts business.

Personal Lines highlights:

n Net premiums written were $394.6 million in the third quarter of 2004, compared to $414.6 million in the third quarter of 2003.

n Net premiums earned were $380.5 million in the third quarter of 2004, compared to $384.7 million in the third quarter of 2003.

n The personal lines statutory combined ratio was 95.8% in the third quarter, versus 102.9% in the same period last year.

n Net pre-tax catastrophe losses were $24.0 million, or 6.3 points of the combined ratio in the third quarter versus $12.5 million, or 3.2 points of the combined ratio in the third quarter of 2003.

Commercial Lines

Commercial Lines produced a segment loss of $7.1 million in the quarter, compared to segment income of $18.1 million in the third quarter of 2003. Excluding net pre-tax catastrophe losses, Commercial Lines segment income was $30.6 million in the quarter compared to $22.5 million in the prior year quarter.

Excluding catastrophes, commercial lines results improved due to favorable underwriting experience which was partially offset by higher expenses. The loss ratio excluding catastrophes was 9 points better than the prior year quarter. The major factors driving this improvement were:

Ø Continued impact of rate increases taken across all product lines, which improved margins

Ø A favorable change in development of prior year loss reserves, with $5.5 million of adverse development in the current quarter compared to $9.1 million in the year ago quarter.

Expenses in this segment were higher in the current quarter primarily due to the lack of favorable development in prior years’ loss adjustment expense reserves. In addition, policy acquisition and other operating expenses increased in the quarter resulting from the increased investment in people and technology associated with the company’s commercial lines growth strategy.

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Commercial Lines highlights:

n Net premiums written were $187.0 million in the third quarter of 2004, compared to $174.8 million in the third quarter of 2003.

n Net premiums earned were $183.2 million in the third quarter of 2004, compared to $177.0 million in the third quarter of 2003.

n The commercial lines statutory combined ratio was 117.0% in the third quarter, compared to 101.6% in the same period last year.

n Net pre-tax catastrophe losses were $37.7 million, or 20.6 points of the combined ratio in the third quarter versus $4.4 million, or 2.5 points of the combined ratio in the third quarter of 2003.

Other Property & Casualty

Other Property & Casualty segment income was $1.7 million in the quarter, compared to $2.6 million in the prior year. Other Property & Casualty includes our run-off voluntary pools, premium financing and investment management operations.

Life Companies

The Life Companies reported a segment loss of $8.7 million in the third quarter of 2004, compared to a segment loss of $8.1 million in the third quarter of 2003. The segment loss in the current quarter was primarily due to the higher amortization of deferred policy acquisition costs (DAC) and higher guaranteed minimum death benefit (GMDB) costs, partially offset by lower operating expenses. Lower equity market returns in the quarter resulted in the higher DAC and GMDB costs versus the prior year quarter.

Segment income excluding certain non-cash items was $37.9 million in the quarter versus $26.9 million in the second quarter of 2004. This increase was primarily due to $5.9 million in derivatives gains related to the GMDB hedge program for the quarter, versus derivatives losses of $5.9 million related to the hedge program in the prior quarter.

The Life Companies segment income is expected to be volatile due to the hedge program and the impact of the new SOP 03-1 rules on GMDB reserve and DAC accounting. The inherent volatility is due to several factors, with the most significant being equity market levels. Life Company segment income is also affected by changes in interest rates, surrenders and any deviation between the performance of the underlying mutual funds and the indices associated with futures contracts in connection with the hedging program.

Life Companies highlights:

· Life Companies segment income excluding certain non-cash items was $37.9 million in the third quarter of 2004 compared to $26.9 million in the second quarter of 2004.

· Total adjusted statutory capital for the combined life insurance subsidiaries at September 30, 2004 was $610.7 million compared to $592.0 million at June 30, 2004.

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· The Risk Based Capital (RBC) ratio of Allmerica Financial Life Insurance and Annuity Company, Allmerica’s lead life insurance company, increased to 465 percent at September 30, 2004, compared to 428 percent at June 30, 2004.

· In the third quarter of 2004, individual annuity redemptions were $491.7 million compared to $555.9 in the second quarter of 2004. The individual annuity redemption rate was 19 percent in the current quarter compared to 20 percent in the second quarter of 2004.

Investment Results

Net investment income was $104.2 million for the third quarter of 2004, compared to $110.5 million in the same period of 2003. Third quarter net investment income decreased $6.3 million, due to a decrease of $9.3 million for the Life Companies offset by a $3.0 million increase for Property and Casualty. Third quarter net investment income increased for Property and Casualty primarily due to an increase in average invested assets, partially offset by a reduction in average pre-tax yields on fixed maturities due to lower prevailing fixed maturity investment rates. Third quarter net investment income decreased for the Life Companies primarily due to lower average invested assets resulting from general account annuity redemptions and a reduction in outstanding guaranteed investment contract balances. Lower prevailing fixed maturity investment rates also contributed to the decline.

Third quarter 2004 pre-tax net realized investment losses were $4.4 million, compared to $8.0 million of pre-tax net realized investment losses in the same period of 2003. In the current quarter, pre-tax net realized investment losses of $12.0 million, primarily from derivative transactions and other-than-temporary impairments on certain fixed maturity securities, were partially offset by $7.6 million of realized gains resulting from sales of fixed maturity and equity securities. In the third quarter of 2003, pre-tax net realized investment losses were principally related to other-than-temporary impairments of $13.2 million on certain fixed maturity and equity securities offset by gains of $5.2 million primarily from the sale of fixed maturity securities.

Balance Sheet

Shareholders’ equity was $2.3 billion, or $43.09 per share at September 30, 2004, compared to $2.2 billion, or $41.89 per share at December 31, 2003. Excluding accumulated other comprehensive income, book value was $42.69 per share at the close of the third quarter, compared to $41.59 per share at December 31, 2003.

Total assets were $23.1 billion at September 30, 2004, compared to $25.1 billion at year-end 2003. Separate account assets were $10.1 billion at September 30, 2004, versus $11.8 billion at December 31, 2003. The declines in total and separate account assets were principally the result of surrenders of individual variable annuities.

Earnings Conference Call

Allmerica Financial Corporation will host a conference call to discuss our third quarter results on Tuesday, October 26^th at 10:00 a.m. Eastern time. Interested investors and others can listen to the call through Allmerica’s web site, located at www.allmerica.com. Web-cast participants should access the web site 15 minutes early to register, download, and install any necessary audio software. A re-broadcast of the conference call will be available on this web site two hours after the call.

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Statistical Supplement

Allmerica Financial Corporation’s third quarter earnings press release and statistical supplement are available in the “investors” section of the Allmerica web site at www.allmerica.com.

Forward-Looking Statements

Certain statements in this release or in the above referenced conference call 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 and which are also available at www.allmerica.com under “investors”. These uncertainties include the possibility of adverse catastrophe experience (including terrorism) and severe weather, the uncertainties in estimating property and casualty losses, adverse loss development and adverse trends in mortality and morbidity, changes in the stock and financial markets, changes from assumed surrender activities and assumed stock market returns, adverse selection in underwriting activities and surrender patterns, investment impairments, heightened competition, adverse and evolving state and federal legislation or regulation and financial ratings actions, and various other factors, which include the anticipated impact and cost of the GMDB hedging program. The performance of the hedging program is dependent on, among other things, the future performance and volatility of the equity market, the extent to which the performance of the various hedging instruments correlate with the investment performance of the underlying annuity sub-accounts, the continued availability of equity index futures and redemption and mortality patterns in the Company’s annuity contracts.

Allmerica Financial Corporation is the holding company for a group of insurance companies headquartered in Worcester, Massachusetts.

CONTACTS: Investors: Sujata Mutalik (508) 855-3457 smutalik@allmerica.com Media: Michael F. Buckley (508) 855-3099 mibuckley@allmerica.com

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ALLMERICA FINANCIAL CORPORATION

(In millions, except per share data)

	Quarter ended September 30
	2004		2003
Net income	$	17.7	$	11.4
Net income per share (diluted)(1)	$	0.33	$	0.21
Weighted average shares		53.6		53.3

The following is a reconciliation of segment income to net income⁽²⁾:

PER SHARE DATA (DILUTED)(1)	Quarter ended September 30
	2004						2003
	$			Per Share			$			Per Share
Property and Casualty
Personal Lines	$	42.1			—		$	11.5			—
Commercial Lines		(7.1	)		—			18.1			—
Other Property & Casualty		1.7			—			2.6			—
Total Property & Casualty		36.7			—			32.2			—
Life Companies		(8.7	)		—			(8.1	)		—
Interest expense on corporate debt(3)		(10.0	)		—			(10.0	)		—
Total segment income	$	18.0		$	0.34		$	14.1		$	0.26
Federal income tax benefit on segment income		1.6			0.03			5.6			0.11
Total segment income after federal income taxes		19.6			0.37			19.7			0.37
Net realized investment losses, net of taxes and amortization		(3.7	)		(0.07	)		(8.2	)		(0.16	)
Gains on derivatives, net of taxes		0.1			—			0.3			0.01
Gain from retirement of funding agreements and trust instruments supported by funding obligations, net of taxes		1.9			0.03			0.4			0.01
Restructuring costs, net of taxes		(0.2	)		—			(0.8	)		(0.02	)
Net income	$	17.7		$	0.33		$	11.4		$	0.21

(1) Basic net income per share was $0.33 and $0.22 for the quarters ended September 30, 2004 and 2003, respectively.

(2) In accordance with Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information, the separate financial information of each segment is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Management evaluates the results of the aforementioned segments based on a pre-tax basis. Segment income is determined by adjusting net income for net realized investment gains and losses including certain gains or losses on derivative instruments, because fluctuations in these gains and losses are determined by interest rates, financial markets and the timing of sales. Also, segment income excludes net gains and losses on disposals of businesses, discontinued operations, restructuring and reorganization costs, extraordinary items, the cumulative effect of accounting changes and certain other items.

(3) In compliance with Statement of Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” and Statement of Accounting Standards No. 131, “Disclosure about Segments of an Enterprise and Related Information”, items previously disclosed as “Minority Interest: distributions on mandatorily redeemable preferred securities of a subsidiary trust” are now included in Interest Expense on Corporate Debt and primarily reflect the interest on the Company’s senior and junior subordinated debentures.

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Net income includes the following items (net of taxes) by segment:

	Quarter ended September 30, 2004
(In millions)	Personal Lines			Commercial Lines			Other Property and Casualty			Life Companies			Total
Net realized investment gains (losses), net of taxes and deferred acquisition cost amortization	$	0.6		$	0.2		$	0.1		$	(4.6	)	$	(3.7	)
Gain from retirement of funding agreements and trust instruments supported by funding obligations		—			—			—			1.9			1.9
Net gains on derivative instruments		—			—			—			0.1			0.1
Restructuring costs		—			—			—			(0.2	)		(0.2	)
	Quarter ended September 30, 2003
	Personal Lines			Commercial Lines			Other Property and Casualty			Life Companies			Total
Net realized investment gains (losses), net of taxes and deferred acquisition cost amortization	$	(2.2	)	$	(2.1	)	$	0.2		$	(3.9	)	$	(8.2	)
Net gains on derivative instruments		—			—			—			0.3			0.3
Gain from retirement of funding agreements and trust instruments supported by funding obligations		—			—			—			0.4			0.4
Restructuring costs		—			—			—			(0.8	)		(0.8	)
	Nine Months ended September 30, 2004
	Personal Lines			Commercial Lines			Other Property and Casualty			Life Companies			Total
Net realized investment gains (losses), net of taxes and deferred acquisition cost amortization	$	4.4		$	4.1		$	2.9		$	(0.5	)	$	10.9
Federal income tax settlement		—			—			—			30.3			30.3
Net gains on derivative instruments		—			—			—			0.3			0.3
Losses from retirement of funding agreements and trust instruments supported by funding obligations		—			—			—			(0.2	)		(0.2	)
Restructuring costs		—			—			—			(3.8	)		(3.8	)
Cumulative effect of change in accounting principle		—			—			—			(57.2	)		(57.2	)
	Nine Months ended September 30, 2003
	Personal Lines			Commercial Lines			Other Property and Casualty			Life Companies			Total
Net realized investment gains (losses), net of taxes and deferred acquisition cost amortization	$	2.7		$	2.7		$	(3.1	)	$	4.1		$	6.4
Net gains on derivative instruments		—			—			—			0.9			0.9
Gain from retirement of funding agreements and trust instruments supported by funding obligations		—			—			—			3.7			3.7
Restructuring costs		—			0.2			—			(4.0	)		(3.8	)
Income from sale of universal life business		—			—			—			3.6			3.6

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The following is a reconciliation of the Life Companies segment loss to the Life Companies segment income excluding certain non-cash items:

	Quarter ended September 30, 2004			Quarter ended June 30, 2004			Quarter ended September 30, 2003
Life Companies segment loss	$	(8.7	)	$	(6.3	)	$	(8.1	)
Deferred acquisition cost operating amortization and amortization of sales inducements, net		44.6			33.6			28.1
VeraVest broker/dealer asset impairment		—			—			11.1
Net change in property, plant and equipment balances		0.6			0.9			0.2
Statement of Position 98-1 amortization, net		1.1			1.1			1.1
Change in guaranteed minimum death benefit reserves		0.3			(2.4	)		(9.4	)
Total segment income excluding certain non-cash items	$	37.9		$	26.9		$	23.0

All figures reported are unaudited.

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EX-99.2

Exhibit 99.2

ALLMERICA FINANCIAL CORPORATION

STATISTICAL SUPPLEMENT

TABLE OF CONTENTS

Financial Highlights	1-2
Consolidated Financial Statements
Income Statements	3
Balance Sheets	4
Property and Casualty
Condensed Income Statements	5
Property and Casualty Consolidated Balance Sheets	6
Statutory Underwriting Results	7-11
Life Companies
Condensed Income Statements	12
Life Companies Consolidated Balance Sheets	13
Segment Income by Product Line	14-15
Segment Income Excluding Certain Non-Cash Items	16
Selected Financial Information-Variable Annuities	17
Future Policy Benefits and Account Balances	18
Investments
Net Investment Income	19
Net Realized Investment Gains (Losses)	20
Unrealized Losses	21
Credit Quality of Fixed Maturities	22
Historical Financial Highlights	23-24
Other Information	Inside back cover
Corporate Information
Market and Dividend Information
Industry Ratings

ALLMERICA FINANCIAL CORPORATION

FINANCIAL HIGHLIGHTS

	Quarter ended September 30								Nine Months ended September 30
(In millions, except per share data)	2004			2003			% Change		2004			2003			% Change
SEGMENT INCOME
Property and Casualty
Personal Lines	$	42.1		$	11.5		N/M		$	88.7		$	9.0		N/M
Commercial Lines		(7.1	)		18.1		N/M			32.0			92.7		(65.5	)
Other		1.7			2.6		(34.6	)		3.7			(18.0	)	N/M
Total Property and Casualty		36.7			32.2		14.0			124.4			83.7		48.6
Life Companies		(8.7	)		(8.1	)	7.4			(5.2	)		3.0		N/M
Interest expense on corporate debt		(10.0	)		(10.0	)	—			(29.9	)		(29.9	)	—
Total segment income		18.0			14.1		27.7			89.3			56.8		57.2
Federal income tax benefit (expense) on segment income		1.6			5.6		(71.4	)		(7.4	)		5.3		N/M
Total segment income after taxes	$	19.6		$	19.7		(0.5	)	$	81.9		$	62.1		31.9
RECONCILIATION FROM SEGMENT INCOME TO NET INCOME
Total segment income after taxes	$	19.6		$	19.7		(0.5	)	$	81.9		$	62.1		31.9
Federal income tax settlement		—			—		—			30.3			—		N/M
Net realized investment (losses) gains, net of taxes and amortization		(3.7	)		(8.2	)	(54.9	)		10.9			6.4		70.3
Gains on derivative instruments, net of taxes		0.1			0.3		(66.7	)		0.3			0.9		(66.7	)
Gains (losses) from retirement of funding agreements and trust instruments supported by funding obligations, net of taxes		1.9			0.4		N/M			(0.2	)		3.7		N/M
Restructuring costs, net of taxes		(0.2	)		(0.8	)	(75.0	)		(3.8	)		(3.8	)	—
Income from sale of universal life business, net of taxes		—			—		—			—			3.6		N/M
Income before effect of accounting change		17.7			11.4		55.3			119.4			72.9		63.8
Cumulative effect of change in accounting principle, net of taxes		—			—		—			(57.2	)		—		N/M
Net income	$	17.7		$	11.4		55.3		$	62.2		$	72.9		(14.7	)
PER SHARE DATA (DILUTED)
Total segment income	$	0.34		$	0.26		30.8		$	1.67		$	1.07		56.1
Federal income taxes on segment income		0.03			0.11		(72.7	)		(0.14	)		0.10		N/M
Total segment income after taxes		0.37			0.37		—			1.53			1.17		30.8
Federal income tax settlement		—			—		—			0.56			—		N/M
Net realized investment (losses) gains, net of taxes and amortization		(0.07	)		(0.16	)	(56.3	)		0.20			0.12		66.7
Gains on derivative instruments, net of taxes		—			0.01		N/M			—			0.02		N/M
Gains (losses) from retirement of funding agreements and trust instruments supported by funding obligations, net of taxes		0.03			0.01		N/M			—			0.07		N/M
Restructuring costs, net of taxes		—			(0.02	)	N/M			(0.07	)		(0.07	)	—
Income from sale of universal life business, net of taxes		—			—		—			—			0.06		N/M
Income before effect of accounting change		0.33			0.21		57.1			2.22			1.37		62.0
Cumulative effect of change in accounting principle, net of taxes		—			—		—			(1.06	)		—		N/M
Net income	$	0.33		$	0.21		57.1		$	1.16		$	1.37		(15.3	)

1

ALLMERICA FINANCIAL CORPORATION

FINANCIAL HIGHLIGHTS

(In millions, except per share data)	September 30 2004			December 31 2003			% Change
BALANCE SHEET
Shareholders’ equity
The Hanover Insurance Company (consolidated)	$	1,633.9		$	1,545.6		5.7
Allmerica Financial Life Insurance and Annuity Company (consolidated)		1,190.2			1,194.9		(0.4	)
AFC Holding Company and other		(529.9	)		(520.3	)	1.8
Total shareholders’ equity	$	2,294.2		$	2,220.2		3.3
Total adjusted statutory capital
The Hanover Insurance Company (consolidated)	$	1,076.2		$	1,001.6		7.4
Allmerica Financial Life Insurance and Annuity Company (consolidated)	$	610.7		$	553.4		10.4
First Allmerica Financial Life Insurance Company	$	198.7		$	176.6		12.5
The Hanover Insurance Company (consolidated) premium to surplus ratio		2.1:1			2.2:1		N/M
Allmerica Financial Life Insurance and Annuity Company (consolidated) estimated risk based capital ratio		465	%		365	%	100.0
Book value per share
The Hanover Insurance Company (consolidated)	$	30.69		$	29.16		5.2
Allmerica Financial Life Insurance and Annuity Company (consolidated)		22.36			22.55		(0.8	)
AFC Holding Company and other		(9.96	)		(9.82	)	1.4
Total book value per share	$	43.09		$	41.89		2.9
Book value per share, excluding accumulated other comprehensive income	$	42.69		$	41.59		2.6
Shares outstanding (1)		53.2			53.0
Stock price	$	26.88		$	30.77		(12.6	)
Price/book value per share		0.6 x			0.7 x		(0.1	) x
Debt/equity		22.2	%		22.5	%	(0.3	) pts
Debt/total capital		18.2	%		18.4	%	(0.2	) pts

(1) Shares outstanding do not include common stock equivalents.

2

ALLMERICA FINANCIAL CORPORATION

CONSOLIDATED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
(In millions, except per share data)	2004			2003			% Change		2004			2003			% Change
REVENUES
Premiums	$	569.9		$	568.2		0.3		$	1,718.7		$	1,711.8		0.4
Universal life and investment product policy fees		67.2			75.8		(11.3	)		214.6			242.7		(11.6	)
Net investment income		104.2			110.5		(5.7	)		315.1			346.6		(9.1	)
Net realized investment (losses) gains		(4.4	)		(8.0	)	(45.0	)		18.3			18.4		(0.5	)
Other income		22.7			42.7		(46.8	)		73.3			143.4		(48.9	)
Total revenues		759.6			789.2		(3.8	)		2,340.0			2,462.9		(5.0	)
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss adjustment expenses		473.6			473.5		—			1,389.1			1,457.8		(4.7	)
Policy acquisition expenses		158.4			146.8		7.9			458.1			460.3		(0.5	)
(Gains) losses from retirement of funding agreements and trust instruments supported by funding obligations		(2.9	)		(0.7	)	N/M			0.3			(5.7	)	N/M
Income from sale of universal life business		—			—		—			—			(5.5	)	N/M
(Gains) losses on derivative instruments		(0.9	)		1.1		N/M			0.4			1.6		(75.0	)
Restructuring costs		0.3			1.2		(75.0	)		5.8			5.8		—
Other operating expenses		115.2			163.4		(29.5	)		386.6			477.5		(19.0	)
Total benefits, losses and expenses		743.7			785.3		(5.3	)		2,240.3			2,391.8		(6.3	)
Income before federal income taxes		15.9			3.9		N/M			99.7			71.1		40.2
Federal income tax benefit		(1.8	)		(7.5	)	(76.0	)		(19.7	)		(1.8	)	N/M
Income before cumulative effect of change in accounting principle		17.7			11.4		55.3			119.4			72.9		63.8
Cumulative effect of change in accounting principle		—			—		—			(57.2	)		—		N/M
Net income	$	17.7		$	11.4		55.3		$	62.2		$	72.9		(14.7	)
PER SHARE DATA (DILUTED)
Income before cumulative effect of change in accounting principle	$	0.33		$	0.21		57.1		$	2.22		$	1.37		62.0
Cumulative effect of change in accounting principle		—			—		—			(1.06	)		—		N/M
Net income (1)	$	0.33		$	0.21		57.1		$	1.16		$	1.37		(15.3	)
Weighted average shares outstanding		53.6			53.3					53.7			53.1

(1) Basic net income per share was $0.33 and $0.22 for the quarters ended September 30, 2004 and 2003, respectively and $1.17 and $1.38 for the nine months ended September 30, 2004 and 2003, respectively.

3

ALLMERICA FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)	September 30, 2004			December 31, 2003			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $7,511.2 and $7,346.3)	$	7,788.7		$	7,646.5		1.9
Equity securities, at fair value (cost of $13.7 and $9.1)		15.9			15.3		3.9
Mortgage loans		127.5			175.1		(27.2	)
Policy loans		258.2			268.0		(3.7	)
Other long-term investments		62.8			80.7		(22.2	)
Total investments		8,253.1			8,185.6		0.8
Cash and cash equivalents		217.6			380.5		(42.8	)
Accrued investment income		119.0			126.5		(5.9	)
Premiums, accounts and notes receivable, net		498.1			480.9		3.6
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		2,033.7			2,111.2		(3.7	)
Deferred policy acquistion costs		926.1			1,115.5		(17.0	)
Deferred federal income taxes		410.3			381.0		7.7
Goodwill		128.2			128.2		—
Other assets		434.9			367.7		18.3
Separate account assets		10,086.0			11,835.4		(14.8	)
Total assets	$	23,107.0		$	25,112.5		(8.0	)
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	3,561.3		$	3,556.8		0.1
Outstanding claims, losses and loss adjustment expenses		3,196.4			3,124.9		2.3
Unearned premiums		1,083.0			1,032.5		4.9
Contractholder deposit funds and other policy liabilities		377.2			683.7		(44.8	)
Total policy liabilities and accruals		8,217.9			8,397.9		(2.1	)
Expenses and taxes payable		844.4			822.7		2.6
Reinsurance premiums payable		107.6			136.5		(21.2	)
Trust instruments supported by funding obligations		1,048.1			1,200.3		(12.7	)
Long-term debt		508.8			499.5		1.9
Separate account liabilities		10,086.0			11,835.4		(14.8	)
Total liabilities		20,812.8			22,892.3		(9.1	)
SHAREHOLDERS’ EQUITY
Preferred stock, par value $.01 per share; authorized 20.0 million shares; issued none		—			—		—
Common stock, par value $.01 per share; authorized 300.0 million shares; issued 60.4 million shares		0.6			0.6		—
Additional paid-in capital		1,782.0			1,775.6		(0.4	)
Accumulated other comprehensive income		21.8			16.1		35.4
Retained earnings		882.1			833.1		5.9
Treasury stock at cost (7.2 and 7.4 million shares)		(392.3	)		(405.2	)	(3.2	)
Total shareholders’ equity		2,294.2			2,220.2		3.3
Total liabilities and shareholders’ equity	$	23,107.0		$	25,112.5		(8.0	)

4

PROPERTY & CASUALTY

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

CONDENSED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
(In millions)	2004			2003			% Change		2004			2003			% Change
REVENUES
Net premiums written	$	581.6		$	588.7		(1.2	)	$	1,723.0		$	1,710.2		0.7
Change in unearned premiums, net of prepaid reinsurance premiums		(17.9	)		(27.5	)	(34.9	)		(36.8	)		(33.0	)	11.5
Net premiums earned		563.7			561.2		0.4			1,686.2			1,677.2		0.5
Net investment income		48.0			45.3		6.0			146.0			138.2		5.6
Other income		13.0			12.9		0.8			39.4			42.5		(7.3	)
Total segment revenue		624.7			619.4		0.9			1,871.6			1,857.9		0.7
LOSSES AND OPERATING EXPENSES
Policy benefits, claims, losses and loss adjustment expenses (1)		404.4			411.3		(1.7	)		1,188.6			1,251.7		(5.0	)
Policy acquisition expenses		118.5			113.7		4.2			353.1			338.6		4.3
Other operating expenses		65.1			62.2		4.7			205.5			183.9		11.7
Total losses and operating expenses		588.0			587.2		0.1			1,747.2			1,774.2		(1.5	)
Segment income before federal income taxes	$	36.7		$	32.2		14.0		$	124.4		$	83.7		48.6

(1) Policy benefits, claims, losses and loss adjustment expenses for the nine months ended September 30, 2003 include a $21.9 million charge resulting from an adverse arbitration decision in the second quarter of 2003 related to an insurance pool in which one of Allmerica Financial Corporation's subsidiaries, The Hanover Insurance Company, was formerly a participant.

5

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

CONSOLIDATED BALANCE SHEETS (1)

(In millions, except per share data)	September 30 2004		December 31 2003		% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $3,649.1 and $3,383.9)	$	3,760.4	$	3,506.2	7.3
Equity securities, at fair value (cost of $0.9 and $2.9)		2.1		5.1	(58.8	)
Mortgage loans		51.9		53.8	(3.5	)
Other long-term investments		0.6		0.7	(14.3	)
Total investments		3,815.0		3,565.8	7.0
Cash and cash equivalents		100.8		113.0	(10.8	)
Accrued investment income		52.5		49.4	6.3
Premiums, accounts, and notes receivable, net		497.4		477.2	4.2
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,033.5		1,070.4	(3.4	)
Deferred policy acquistion costs		221.7		220.9	0.4
Deferred federal income tax asset		181.6		160.8	12.9
Goodwill		121.4		121.4	—
Other assets		187.3		198.7	(5.7	)
Total assets	$	6,211.2	$	5,977.6	3.9
LIABILITIES AND SHAREHOLDER’S EQUITY
LIABILITIES
Policy liabilities and accruals:
Outstanding claims, losses and loss adjustment expenses	$	3,083.3	$	3,018.9	2.1
Unearned premiums		1,079.6		1,029.0	4.9
Contractholder deposit funds and other policy liabilities		8.0		8.2	(2.4	)
Total policy liabilities and accruals		4,170.9		4,056.1	2.8
Expenses and taxes payable		309.8		251.5	23.2
Reinsurance premiums payable		96.6		124.4	(22.3	)
Total liabilities		4,577.3		4,432.0	3.3
SHAREHOLDER’S EQUITY
Common stock, par value $1.00 per share; authorized 20.9 million shares; issued 5.0 million shares		5.0		5.0	—
Additional paid-in capital		169.2		169.2	—
Accumulated other comprehensive income		52.1		60.0	(13.2	)
Retained earnings		1,407.6		1,311.4	7.3
Total shareholder’s equity		1,633.9		1,545.6	5.7
Total liabilities and shareholder’s equity	$	6,211.2	$	5,977.6	3.9

(1) Property and Casualty Companies includes The Hanover Insurance Company and Citizens Insurance Company of America, and their subsidiaries.

6

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING PROFIT (LOSS) RECONCILED TO SEGMENT INCOME (LOSS)

	Quarter ended September 30, 2004												Quarter ended September 30, 2003												% Change
(In millions)	Personal Lines			Commercial Lines			Other Property and Casualty			Total			Personal Lines			Commercial Lines			Other Property and Casualty			Total			Personal Lines		Commercial Lines		Other Property and Casualty		Total
Underwriting profit (loss), excluding prior year reserve development and catastrophes	$	29.2		$	10.5		$	(1.3	)	$	38.4		$	(0.9	)	$	11.5		$	(0.2	)	$	10.4		N/M		(8.7	)	N/M		N/M
Prior year reserve development (favorable) unfavorable		(7.0	)		5.5			—			(1.5	)		6.2			9.1			—			15.3		N/M		(39.6	)	—		N/M
Pre-tax catastrophe losses		24.0			37.7			—			61.7			12.5			4.4			—			16.9		92.0		N/M		—		N/M
Statutory underwriting profit (loss)		12.2			(32.7	)		(1.3	)		(21.8	)		(19.6	)		(2.0	)		(0.2	)		(21.8	)	N/M		N/M		N/M		—
Net investment income		23.7			23.8			0.5			48.0			22.3			22.6			0.4			45.3		6.3		5.3		25.0		6.0
Fee income		—			—			6.1			6.1			—			—			6.7			6.7		—		—		(9.0	)	(9.0	)
Other statutory to GAAP adjustments		6.2			1.8			(3.6	)		4.4			8.8			(2.5	)		(4.3	)		2.0		(29.5	)	N/M		(16.3	)	N/M
Segment income (loss) before federal income taxes	$	42.1		$	(7.1	)	$	1.7		$	36.7		$	11.5		$	18.1		$	2.6		$	32.2		N/M		N/M		(34.6	)	14.0

	Nine Months ended September 30, 2004												Nine Months ended September 30, 2003												% Change
	Personal Lines			Commercial Lines			Other Property and Casualty			Total			Personal Lines			Commercial Lines			Other Property and Casualty			Total			Personal Lines		Commercial Lines		Other Property and Casualty		Total
Underwriting profit (loss), excluding prior year reserve development and catastrophes	$	44.4		$	(2.2	)	$	(3.4	)	$	38.8		$	(25.0	)	$	16.6		$	(1.8	)	$	(10.2	)	N/M		N/M		88.9		N/M
Prior year reserve development (favorable) unfavorable		(16.0	)		(4.2	)		—			(20.2	)		18.9			(25.8	)		23.0			16.1		N/M		(83.7	)	N/M		N/M
Pre-tax catastrophe losses		50.5			47.4			—			97.9			31.0			18.3			—			49.3		62.9		N/M		—		98.6
Statutory underwriting profit (loss)		9.9			(45.4	)		(3.4	)		(38.9	)		(74.9	)		24.1			(24.8	)		(75.6	)	N/M		N/M		(86.3	)	(48.5	)
Net investment income		72.0			72.4			1.6			146.0			67.9			68.8			1.5			138.2		6.0		5.2		6.7		5.6
Fee income		—			—			18.8			18.8			—			—			19.8			19.8		—		—		(5.1	)	(5.1	)
Other statutory to GAAP adjustments		6.8			5.0			(13.3	)		(1.5	)		16.0			(0.2	)		(14.5	)		1.3		(57.5	)	N/M		(8.3	)	N/M
Segment income (loss) before federal income taxes	$	88.7		$	32.0		$	3.7		$	124.4		$	9.0		$	92.7		$	(18.0	)	$	83.7		N/M		(65.5	)	N/M		48.6

7

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RESULTS

	Quarter ended September 30, 2004
	Personal Lines											Commercial Lines
(In millions)	Personal Automobile			Homeowners			Other Personal Lines		Total Personal Lines			Workers’ Compensation		Commercial Automobile			Commercial Multiple Peril			Other Commercial Lines		Total Commercial Lines			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	263.7		$	119.9		$	11.0	$	394.6		$	30.4	$	47.1		$	83.2		$	26.3	$	187.0		$	—		$	581.6
Net premiums earned	$	267.1		$	103.0		$	10.4	$	380.5		$	31.6	$	45.7		$	82.7		$	23.2	$	183.2		$	—		$	563.7
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		162.1			40.2			5.2		207.5			21.9		18.8			35.2			5.3		81.2			1.2			289.9
Prior year reserve development (favorable) unfavorable		(4.8	)		(2.3	)		0.1		(7.0	)		4.5		1.9			(4.8	)		3.9		5.5			—			(1.5	)
Pre-tax catastrophe losses		1.2			22.1			0.7		24.0			—		0.1			36.5			1.1		37.7			—			61.7
Loss adjustment expenses excluding prior year reserve development		24.0			9.8			0.3		34.1			4.5		3.6			11.8			1.6		21.5			—			55.6
Policy acquisition and other underwriting expenses										109.7													70.5			0.1			180.3
Policyholders’ dividends										—													(0.5	)		—			(0.5	)
Statutory underwriting profit (loss)									$	12.2												$	(32.7	)	$	(1.3	)	$	(21.8	)
	Quarter ended September 30, 2003
	Personal Lines											Commercial Lines
	Personal Automobile			Homeowners			Other Personal Lines		Total Personal Lines			Workers’ Compensation		Commercial Automobile			Commercial Multiple Peril			Other Commercial Lines		Total Commercial Lines			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	285.7		$	116.7		$	12.2	$	414.6		$	29.0	$	44.0		$	79.5		$	22.3	$	174.8		$	—		$	589.4
Net premiums earned	$	277.8		$	95.8		$	11.1	$	384.7		$	31.1	$	45.1		$	79.5		$	21.3	$	177.0		$	—		$	561.7
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		189.8			45.7			5.3		240.8			20.4		21.4			39.6			4.6		86.0			1.1			327.9
Prior year reserve development unfavorable (favorable)		4.2			2.0			—		6.2			6.3		(2.2	)		(3.1	)		8.1		9.1			—			15.3
Pre-tax catastrophe losses		0.7			11.6			0.2		12.5			—		—			4.0			0.4		4.4			—			16.9
Loss adjustment expenses excluding prior year reserve development		26.5			7.1			0.4		34.0			1.9		2.7			10.7			2.5		17.8			(0.9	)		50.9
Policy acquisition and other underwriting expenses										110.8													60.9			—			171.7
Policyholders’ dividends										—													0.8			—			0.8
Statutory underwriting (loss) profit									$	(19.6	)											$	(2.0	)	$	(0.2	)	$	(21.8	)

8

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RESULTS

	Nine Months ended September 30, 2004
	Personal Lines												Commercial Lines
(In millions)	Personal Automobile			Homeowners			Other Personal Lines			Total Personal Lines			Workers’ Compensation		Commercial Automobile			Commercial Multiple Peril			Other Commercial Lines			Total Commercial Lines			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	802.2		$	312.0		$	31.7		$	1,145.9		$	99.6	$	145.0		$	256.1		$	76.8		$	577.5		$	0.2		$	1,723.6
Net premiums earned	$	808.0		$	304.8		$	32.0		$	1,144.8		$	95.0	$	134.7		$	242.2		$	69.9		$	541.8		$	0.2		$	1,686.8
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		525.0			137.4			17.7			680.1			66.1		67.5			111.1			19.8			264.5			3.0			947.6
Prior year reserve development (favorable) unfavorable		(10.4	)		(4.9	)		(0.7	)		(16.0	)		6.5		(4.5	)		(18.8	)		12.6			(4.2	)		—			(20.2	)
Pre-tax catastrophe losses		1.9			47.2			1.4			50.5			—		0.2			46.6			0.6			47.4			—			97.9
Loss adjustment expenses excluding prior year reserve development		74.8			23.7			1.6			100.1			14.2		10.7			34.5			4.4			63.8			0.4			164.3
Policy acquisition and other underwriting expenses											320.2														215.6			0.2			536.0
Policyholders' dividends											—														0.1			—			0.1
Statutory underwriting profit (loss)										$	9.9													$	(45.4	)	$	(3.4	)	$	(38.9	)
	Nine Months ended September 30, 2003
	Personal Lines												Commercial Lines
	Personal Automobile			Homeowners			Other Personal Lines			Total Personal Lines			Workers’ Compensation		Commercial Automobile			Commercial Multiple Peril			Other Commercial Lines			Total Commercial Lines			Other Property and Casualty			Total Property and Casualty
Net premiums written	$	841.8		$	295.1		$	33.0		$	1,169.9		$	98.1	$	133.0		$	241.8		$	67.5		$	540.4		$	0.3		$	1,710.6
Net premiums earned	$	823.1		$	278.4		$	32.9		$	1,134.4		$	99.8	$	137.9		$	235.3		$	69.7		$	542.7		$	0.3		$	1,677.4
Policy benefits, claims, losses excluding prior year reserve development and catastrophe losses		584.6			143.3			11.7			739.6			67.2		72.5			121.0			22.0			282.7			2.2			1,024.5
Prior year reserve development unfavorable (favorable)		15.8			3.1			—			18.9			4.7		(5.9	)		(24.3	)		(0.3	)		(25.8	)		23.0			16.1
Pre-tax catastrophe losses		1.9			28.5			0.6			31.0			—		0.3			15.9			2.1			18.3			—			49.3
Loss adjustment expenses excluding prior year reserve development		80.3			22.5			0.9			103.7			10.2		8.0			32.3			5.7			56.2			(0.3	)		159.6
Policy acquisition and other underwriting expenses											316.1														184.8			0.2			501.1
Policyholders’ dividends											—														2.4			—			2.4
Statutory underwriting (loss) profit										$	(74.9	)												$	24.1		$	(24.8	)	$	(75.6	)

9

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

	Quarter ended September 30, 2004
	Personal Lines								Commercial Lines
(In millions)	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses	59.0	%	37.7	%	51.0	%	53.0	%	85.8	%	46.2	%	38.3	%	30.2	%	47.4	%	—	51.4	%
Catastrophe losses	0.4	%	21.5	%	6.7	%	6.3	%	—		0.2	%	44.1	%	4.7	%	20.6	%	—	10.9	%
Loss adjustment expenses	8.9	%	8.6	%	2.9	%	8.7	%	12.0	%	7.0	%	12.7	%	16.4	%	11.6	%	—	9.7	%
Policy acquisition and other underwriting expenses							27.8	%									37.7	%	—	31.0	%
Policyholders’ dividends							—										(0.3	)%	—	(0.1	)%
Combined							95.8	%									117.0	%	—	102.9	%
Policies in force	(10.0	)%	(6.5	)%	(6.4	)%	(8.2	)%	(0.5	)%	(1.8	)%	(1.3	)%	(2.3	)%	(1.7	)%	—	(7.5	)%
Retention (1)	78.7	%	81.3	%	N/M		80.1	%	72.5	%	77.5	%	80.7	%	N/M		77.6	%
	Quarter ended September 30, 2003
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses	70.1	%	51.0	%	47.7	%	64.7	%	83.6	%	42.8	%	51.2	%	67.3	%	56.7	%	—	62.4	%
Catastrophe losses	0.3	%	12.1	%	1.8	%	3.2	%	—		—		5.0	%	1.9	%	2.5	%	—	3.0	%
Loss adjustment expenses	9.3	%	6.2	%	3.6	%	8.3	%	8.4	%	5.8	%	8.2	%	4.2	%	7.2	%	—	7.8	%
Policy acquisition and other underwriting expenses							26.7	%									34.8	%	—	29.1	%
Policyholders’ dividends							—										0.4	%	—	0.1	%
Combined							102.9	%									101.6	%	—	102.4	%
Policies in force	(5.2	)%	(1.9	)%	(5.5	)%	(3.8	)%	(5.6	)%	(10.6	)%	(4.4	)%	(20.6	)%	(11.7	)%	—	(4.8	)%
Retention (1)	80.2	%	82.5	%	N/M		81.4	%	64.8	%	74.2	%	74.1	%	N/M		72.2	%

(1) The retention rate for personal lines is a twelve month rolling average calculation based on policies in force; the retention rate for commercial lines is based on direct voluntary written premiums, based on processed policies in the current period versus the same period in the prior year. Additionally, the retention rates have been adjusted to exclude the effect of our strategic termination of specialty commercial programs which resulted from an extensive review during the fourth quarter of 2001.

10

ALLMERICA FINANCIAL CORPORATION

PROPERTY AND CASUALTY

STATUTORY UNDERWRITING RATIOS

	Nine Months ended September 30, 2004
	Personal Lines								Commercial Lines
(In millions)	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses	63.7	%	44.2	%	53.1	%	58.2	%	79.2	%	48.3	%	40.6	%	45.6	%	49.9	%	—	55.7	%
Catastrophe losses	0.2	%	15.5	%	4.4	%	4.4	%	N/M		0.1	%	19.2	%	0.9	%	8.7	%	—	5.8	%
Loss adjustment expenses	9.3	%	7.0	%	5.0	%	8.5	%	12.2	%	6.4	%	11.8	%	7.0	%	9.9	%	—	9.0	%
Policy acquisition and other underwriting expenses							27.9	%									37.3	%	—	31.1	%
Policyholders’ dividends							—										—		—	—
Combined							99.0	%									105.8	%	—	101.6	%
Policies in force	(10.0	)%	(6.5	)%	(6.4	)%	(8.2	)%	(0.5	)%	(1.8	)%	(1.3	)%	(2.3	)%	(1.7	)%	—	(7.5	)%
Retention (1)	78.7	%	81.3	%	N/M		80.1	%	75.0	%	78.3	%	78.8	%	N/M		77.9	%
	Nine Months ended September 30, 2003
	Personal Lines								Commercial Lines
	Personal Automobile		Homeowners		Other Personal Lines		Total Personal Lines		Workers’ Compensation		Commercial Automobile		Commercial Multiple Peril		Other Commercial Lines		Total Commercial Lines		Other Property and Casualty	Total Property and Casualty
Losses, excluding catastrophe losses	73.1	%	53.9	%	35.6	%	67.3	%	74.8	%	49.6	%	46.8	%	33.9	%	51.0	%	—	63.5	%
Catastrophe losses	0.2	%	10.2	%	1.8	%	2.7	%	N/M		0.2	%	6.8	%	3.0	%	3.4	%	—	2.9	%
Loss adjustment expenses	9.6	%	6.8	%	2.7	%	8.7	%	7.4	%	4.5	%	8.0	%	5.5	%	6.7	%	—	8.1	%
Policy acquisition and other underwriting expenses							27.0	%									34.2	%	—	29.3	%
Policyholders’ dividends							N/M										0.4	%	—	0.1	%
Combined							105.7	%									95.7	%	—	103.9	%
Policies in force	(5.2	)%	(1.9	)%	(5.5	)%	(3.8	)%	(5.6	)%	(10.6	)%	(4.4	)%	(20.6	)%	(11.7	)%	—	(4.8	)%
Retention (1)	80.2	%	82.5	%	N/M		81.4	%	67.7	%	72.7	%	75.0	%	N/M		72.9	%

(1) The retention rate for personal lines is a twelve month rolling average calculation based on policies in force; the retention rate for commercial lines is based on direct voluntary written premiums, based on processed policies in the current period versus the same period in the prior year. Additionally, the retention rates have been adjusted to exclude the effect of our strategic termination of specialty commercial programs which resulted from an extensive review during the fourth quarter of 2001.

11

LIFE COMPANIES

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

CONDENSED INCOME STATEMENTS

	Quarter ended September 30								Nine Months ended September 30
(In millions)	2004			2003			% Change		2004			2003		% Change
REVENUES
Premiums	$	6.2		$	7.0		(11.4	)	$	32.5		$	34.6	(6.1	)
Fees:
Fees from surrenders		11.1			13.3		(16.5	)		37.2			54.3	(31.5	)
Other proprietary product fees		56.1			62.5		(10.2	)		177.4			188.4	(5.8	)
Net investment income		56.1			65.4		(14.2	)		168.9			209.1	(19.2	)
Brokerage and investment management income (1)		5.1			24.0		(78.8	)		17.7			86.6	(79.6	)
Other income		7.8			7.1		9.9			23.1			19.8	16.7
Total segment revenue		142.4			179.3		(20.6	)		456.8			592.8	(22.9	)
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		69.0			62.1		11.1			200.2			201.7	(0.7	)
Policy acquisition expenses		39.6			31.0		27.7			103.0			115.2	(10.6	)
Brokerage and investment management variable expenses (1)		2.3			14.4		(84.0	)		8.9			56.2	(84.2	)
Other operating expenses		40.2			79.9		(49.7	)		149.9			216.7	(30.8	)
Total policy benefits, claims and operating expenses		151.1			187.4		(19.4	)		462.0			589.8	(21.7	)
Segment (loss) income before federal income taxes	$	(8.7	)	$	(8.1	)	7.4		$	(5.2	)	$	3.0	N/M

(1) Brokerage and investment management income for 2004 primarily reflect fees earned from the management of assets for proprietary products. Brokerage and investment management income for 2003 primarily reflect fees earned from the distribution of non-proprietary insurance products. Variable expenses for 2004 consist primarily of subadvisory fees while these expenses primarily reflect commissions in 2003. The Company no longer sells non-proprietary products through its brokerage sales force.

12

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

CONSOLIDATED BALANCE SHEETS (1)

(In millions, except per share data)	September 30 2004		December 31 2003			% Change
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost of $3,813.2 and $3,912.6)	$	3,973.8	$	4,080.1		(2.6	)
Equity securities, at fair value (cost of $3.5 and $6.2)		4.6		10.3		(55.3	)
Mortgage loans		76.1		122.3		(37.8	)
Policy loans		258.2		268.0		(3.7	)
Other long-term investments		62.2		80.0		(22.3	)
Total investments		4,374.9		4,560.7		(4.1	)
Cash and cash equivalents		97.7		242.8		(59.8	)
Accrued investment income		66.0		76.2		(13.4	)
Premiums, accounts, and notes receivable, net		0.7		3.8		(81.6	)
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums		1,000.2		1,042.9		(4.1	)
Deferred policy acquisition costs (2)		704.4		894.6		(21.3	)
Deferred federal income tax asset		238.3		223.8		6.5
Goodwill		6.8		6.8		—
Other assets (2)		229.6		150.6		52.5
Separate account assets		10,086.0		11,835.4		(14.8	)
Total assets	$	16,804.6	$	19,037.6		(11.7	)
LIABILITIES AND SHAREHOLDER’S EQUITY
LIABILITIES
Policy liabilities and accruals:
Future policy benefits	$	3,561.3	$	3,556.8		0.1
Outstanding claims, losses and loss adjustment expenses		113.1		105.2		7.5
Unearned premiums		3.4		3.5		(2.86	)
Contract holder deposit funds and other policy liabilities		369.2		675.5		(45.3	)
Total policy liabilities and accruals		4,047.0		4,341.0		(6.8	)
Expenses and taxes payable		422.3		453.9		(7.0	)
Reinsurance premiums payable		11.0		12.1		(9.1	)
Trust instruments supported by funding obligations		1,048.1		1,200.3		(12.7	)
Separate account liabilities		10,086.0		11,835.4		(14.8	)
Total liabilities		15,614.4		17,842.7		(12.5	)
SHAREHOLDER’S EQUITY
Common stock, par value $1,000 per share; authorized 10,000 shares; issued 2,526 shares		2.5		2.5		—
Additional paid-in capital		1,075.0		1,075.0		—
Accumulated other comprehensive income (loss)		9.9		(23.5	)	N/M
Retained earnings		102.8		140.9		(27.0	)
Total shareholder’s equity		1,190.2		1,194.9		(0.4	)
Total liabilities and shareholder’s equity	$	16,804.6	$	19,037.6		(11.7	)

(1) The Life Companies include Allmerica Financial Life Insurance and Annuity Company and First Allmerica Financial Life Insurance Company, and their subsidiaries. First Allmerica Financial Life Insurance Company includes assets related to our discontinued operations (Group Life & Health).

(2) Other assets at September 30, 2004 include a reclassification of $82.5 million from deferred policy acquisition costs as a result of the implementation of SOP 03-1 at January 1, 2004.

13

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

SEGMENT INCOME BY PRODUCT LINE

	Quarter ended September 30, 2004										Quarter ended September 30, 2003
(In millions)	Variable Annuities			Variable Universal Life		Other (3)		Total			Variable Annuities		Variable Universal Life		Other (3)		Total
REVENUES
Premiums	$	—		$	—	$	6.2	$	6.2		$	—	$	—	$	7.0	$	7.0
Fees:
Fees from surrenders		8.6			2.5		—		11.1			10.4		2.9		—		13.3
Other proprietary product fees		35.6			20.4		0.1		56.1			39.4		22.7		0.4		62.5
Net investment income		17.9			4.4		33.8		56.1			14.1		3.8		47.5		65.4
Brokerage and investment management income (1)		4.0			0.9		0.2		5.1			3.2		1.0		19.8		24.0
Other income		2.9			0.7		4.2		7.8			2.5		0.4		4.2		7.1
Total segment revenue		69.0			28.9		44.5		142.4			69.6		30.8		78.9		179.3
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		36.5			12.6		19.9		69.0			24.7		11.6		25.8		62.1
Policy acquisition expenses		33.4			5.7		0.5		39.6			27.0		3.1		0.9		31.0
Variable operating expenses		7.1			1.0		12.0		20.1			6.9		1.7		26.4		35.0
Gain on hedge derivatives (2)		(5.9	)		—		—		(5.9	)		—		—		—		—
		71.1			19.3		32.4		122.8			58.6		16.4		53.1		128.1
Segment (loss) income before other operating expenses	$	(2.1	)	$	9.6	$	12.1		19.6		$	11.0	$	14.4	$	25.8		51.2
Other operating expenses									28.3									59.3
Segment loss before federal income taxes								$	(8.7	)							$	(8.1	)

(1) Brokerage and investment management income for 2004 primarily reflect fees earned from the management of assets for proprietary products. Brokerage and investment management income for 2003 primarily reflect fees earned from the distribution of non-proprietary insurance products. Variable expenses for 2004 consist primarily of subadvisory fees while these expenses primarily reflect commissions in 2003. The Company no longer sells non-proprietary products through its brokerage sales force.

(2) Gain on hedge derivatives relates to the economic hedging program implemented in the fourth quarter of 2003 involving exchange traded futures contracts used to hedge against increased GMDB claims that could arise from declines in the equity market below levels at December 3, 2003.

(3) Other includes results from guaranteed investment contracts, closed block, universal life, traditional life, yearly renewable term life, individual health, other insurance and group retirement products, and our broker/dealer, VeraVest Investments, Inc.

14

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

SEGMENT INCOME BY PRODUCT LINE

	Nine Months ended September 30, 2004									Nine Months ended September 30, 2003
(In millions)	Variable Annuities		Variable Universal Life		Other (3)		Total			Variable Annuities		Variable Universal Life		Other (3)		Total
REVENUES
Premiums	$	—	$	—	$	32.5	$	32.5		$	—	$	—	$	34.6	$	34.6
Fees:
Fees from surrenders		28.4		8.8		—		37.2			43.9		10.4		—		54.3
Other proprietary product fees		113.8		62.7		0.9		177.4			116.7		69.7		2.0		188.4
Net investment income		51.9		13.4		103.6		168.9			45.9		11.3		151.9		209.1
Brokerage and investment management income (1)		13.0		2.8		1.9		17.7			13.4		3.0		70.2		86.6
Other income		8.9		2.0		12.2		23.1			6.8		3.5		9.5		19.8
Total segment revenue		216.0		89.7		151.1		456.8			226.7		97.9		268.2		592.8
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES
Policy benefits, claims and losses		94.4		34.4		71.4		200.2			77.9		30.6		93.2		201.7
Policy acquisition expenses		82.4		19.2		1.4		103.0			99.0		14.8		1.4		115.2
Variable operating expenses		23.0		4.0		39.3		66.3			23.4		4.4		89.0		116.8
Loss on hedge derivatives (2)		5.4		—		—		5.4			—		—		—		—
		205.2		57.6		112.1		374.9			200.3		49.8		183.6		433.7
Segment income before other
operating expenses	$	10.8	$	32.1	$	39.0		81.9		$	26.4	$	48.1	$	84.6		159.1
Other operating expenses								87.1									156.1
Segment (loss) income before federal income taxes							$	(5.2	)							$	3.0

(1) Brokerage and investment management income for 2004 primarily reflect fees earned from the management of assets for proprietary products. Brokerage and investment management income for 2003 primarily reflect fees earned from the distribution of non-proprietary insurance products. Variable expenses for 2004 consist primarily of subadvisory fees while these expenses primarily reflect commissions in 2003. The Company no longer sells non-proprietary products through its brokerage sales force.

(2) Loss on hedge derivatives relates to the economic hedging program implemented in the fourth quarter of 2003 involving exchange traded futures contracts used to hedge against increased GMDB claims that could arise from declines in the equity market below levels at December 3, 2003.

(3) Other includes results from guaranteed investment contracts, closed block, universal life, traditional life, yearly renewable term life, individual health, other insurance and group retirement products, and our broker/dealer, VeraVest Investments, Inc.

15

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

SEGMENT INCOME EXCLUDING CERTAIN NON-CASH ITEMS

	Quarter ended
(In millions)	September 30, 2004			June 30, 2004			September 30, 2003
Segment loss before federal income taxes	$	(8.7	)	$	(6.3	)	$	(8.1	)
Deferred acquisition cost operating amortization and amortization of sales inducements, net		44.6			33.6			28.1
Property, plant and equipment, net		0.6			0.9			0.2
Statement of Position 98-1 amortization, net		1.1			1.1			1.1
VeraVest asset impairment		—			—			11.1
Change in guaranteed minimum death benefit reserves		0.3			(2.4	)		(9.4	)
Total segment income excluding certain non-cash items	$	37.9		$	26.9		$	23.0
				Nine Months ended
				September 30, 2004			September 30, 2003
Segment (loss) income before federal income taxes				$	(5.2	)	$	3.0
Deferred acquisition cost operating amortization and amortization of sales inducements, net					116.2			107.3
Property, plant and equipment, net					2.4			1.6
Statement of Position 98-1 amortization, net					3.4			3.0
VeraVest asset impairment					—			11.1
Change in guaranteed minimum death benefit reserves					(11.7	)		(49.2	)
Total segment income excluding certain non-cash items				$	105.1		$	76.8

16

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

SELECTED FINANCIAL INFORMATION - VARIABLE ANNUITIES

	Quarter ended September 30								Nine Months ended September 30
(In millions)	2004			2003			% Change		2004			2003			% Change
SEPARATE ACCOUNT INDIVIDUAL ANNUITIES
Balance at beginning of period	$	9,579.6		$	10,196.6		(6.1	)	$	10,545.8		$	10,611.9			(0.6	)
Direct premiums and deposits		8.7			27.9		(68.8	)		43.0			82.9			(48.1	)
Redemptions		(425.0	)		(425.7	)	(0.2	)		(1,468.0	)		(1,695.4	)		(13.4	)
Market (depreciation) appreciation		(145.2	)		258.3		N/M			50.8			1,042.1			(95.1	)
Transfers and other (1)		(44.7	)		(22.2	)	N/M			(198.2	)		(6.6	)		N/M
Balance at end of period	$	8,973.4		$	10,034.9		(10.6	)	$	8,973.4		$	10,034.9			(10.6	)
									Quarter ended
									September 30, 2004			June 30, 2004			September 30, 2003
VARIABLE INDIVIDUAL ANNUITIES (2)
Redemptions									$	491.7		$	555.9		$	493.6
Redemption rates (3)										19	%		20	%		17	%
									September 30 2004			December 31 2003			% Change
VARIABLE INDIVIDUAL ANNUITIES
Account values									$	10,172.6		$	11,742.6			(13.4	)
Net amount at risk									$	2,489.8		$	2,551.2			(2.4	)
Deferred acquisition cost asset and capitalized sales inducements									$	564.3		$	660.2			(14.5	)
Value of surrender charges (inforce block)									$	363.1		$	458.3			(20.8	)

(1) Reserves for individual annuities at September 30, 2004 include a reclassification of $107.1 million to general account liabilities as a result of the implementation of SOP 03-1 on January 1, 2004.

(2) Includes both full policy and partial policy surrenders, withdrawals and death benefits (to the extent equal to account value).

(3) Redemption rates are annualized based on the average account value in the quarter.

17

ALLMERICA FINANCIAL CORPORATION

LIFE COMPANIES

FUTURE POLICY BENEFITS AND ACCOUNT BALANCES

(In millions)	September 30 2004		December 31 2003		% Change
GENERAL ACCOUNT RESERVES
Insurance
Traditional life	$	823.6	$	845.8	(2.6	)
Universal life (1)		595.9		633.0	(5.9	)
Variable universal life (2)		245.2		249.8	(1.8	)
Individual health (3)		262.5		260.3	0.8
Total insurance		1,927.2		1,988.9	(3.1	)
Annuities
Individual annuities (4)		1,449.7		1,363.1	6.4
Group annuities		430.3		572.5	(24.8	)
Total annuities		1,880.0		1,935.6	(2.9	)
Guaranteed investment contracts
Contractholder deposit funds and other policy liabilities		29.4		207.5	(85.8	)
Total general account reserves	$	3,836.6	$	4,132.0	(7.1	)
Trust instruments supported by funding obligations	$	1,048.1	$	1,200.3	(12.7	)
SEPARATE ACCOUNT LIABILITIES
Variable universal life	$	966.0	$	1,053.2	(8.3	)
Variable individual annuities (4)		8,973.4		10,545.8	(14.9	)
Total individual		9,939.4		11,599.0	(14.3	)
Group variable universal life		51.4		127.0	(59.5	)
Group annuities		95.2		109.4	(13.0	)
Total group		146.6		236.4	(38.0	)
Total separate account liabilities	$	10,086.0	$	11,835.4	(14.8	)

(1) Universal life reserves include reinsured balances of $594.1 and $631.7 million at September 30, 2004 and December 31, 2003, respectively.

(2) Variable universal life reserves include group variable universal life reserves of $11.1 and $13.2 million September 30, 2004 and December 31, 2003, respectively.

(3) Individual health reserves include reinsured balances of $261.8 and $258.9 million at September 30, 2004 and December 31, 2003, respectively.

(4) Reserves for individual annuities at September 30, 2004 include a reclassification of $107.1 million from separate account liabilities as a result of the implementation of SOP 03-1 on January 1, 2004.

18

INVESTMENTS

ALLMERICA FINANCIAL CORPORATION

NET INVESTMENT INCOME

	Nine Months ended September 30, 2004
(In millions, except yields)	Property and Casualty (1)			Yield		Life Companies			Yield		Total			Yield
Fixed maturities	$	148.5		5.70	%	$	164.3		5.90	%	$	312.8		5.80	%
Equity securities		1.5		N/M			—		—			1.5		N/M
Mortgages		3.2		8.18	%		6.1		7.86	%		9.3		7.97	%
All other		(3.9	)	—			3.6		—			(0.3	)	—
Investment expenses		(3.1	)	—			(5.1	)	—			(8.2	)	—
Total	$	146.2		5.42	%	$	168.9		5.35	%	$	315.1		5.38	%
	Nine Months ended September 30, 2003
	Property and Casualty (1)			Yield		Life Companies			Yield		Total			Yield
Fixed maturities	$	141.9		6.07	%	$	179.2		6.06	%	$	321.1		6.06	%
Equity securities		0.5		5.22	%		0.5		3.23	%		1.0		4.03	%
Mortgages		5.1		8.60	%		9.6		8.05	%		14.7		8.23	%
All other		(7.1	)	—			23.8		—			16.7		—
Investment expenses		(2.9	)	—			(4.0	)	—			(6.9	)	—
Total	$	137.5		5.57	%	$	209.1		5.99	%	$	346.6		5.82	%

(1) Includes purchase accounting adjustments of $2.4 million and $2.5 million for the nine months ended September 30, 2004 and 2003, respectively. Also includes corporate eliminations of $0.4 million and $0.7 million for the nine months ended September 30, 2004 and 2003, respectively.

19

ALLMERICA FINANCIAL CORPORATION

COMPONENTS OF NET REALIZED INVESTMENT GAINS (LOSSES)

	Quarter ended September 30
	2004									2003
	Net Realized Gains (Losses)									Net Realized Gains (Losses)
(In millions)	Property and Casualty			Life Companies			Total			Property and Casualty			Life Companies			Total
Net gains on securities transactions	$	3.5		$	4.1		$	7.6		$	3.2		$	2.0		$	5.2
Other than temporary impairments		(1.2	)		(2.5	)		(3.7	)		(8.1	)		(5.1	)		(13.2	)
Other		(0.7	)		(7.6	)		(8.3	)		(0.3	)		0.3			—
Net realized investment gains (losses)	$	1.6		$	(6.0	)	$	(4.4	)	$	(5.2	)	$	(2.8	)	$	(8.0	)
	Nine Months ended September 30
	2004									2003
	Net Realized Gains (Losses)									Net Realized Gains (Losses)
	Property and Casualty			Life Companies			Total			Property and Casualty			Life Companies			Total
Net gains on securities transactions	$	19.3		$	14.1		$	33.4		$	18.0		$	59.0		$	77.0
Other than temporary impairments		(1.9	)		(4.2	)		(6.1	)		(15.8	)		(40.4	)		(56.2	)
Other		(0.7	)		(8.3	)		(9.0	)		0.6			(3.0	)		(2.4	)
Net realized investment gains	$	16.7		$	1.6		$	18.3		$	2.8		$	15.6		$	18.4

20

ALLMERICA FINANCIAL CORPORATION

AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE

(In millions)	September 30, 2004
	Gross Unrealized Losses						Fair Value
	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
INVESTMENT GRADE FIXED MATURITIES:
0 - 6 months	$	3.0	$	2.4	$	5.4	$	314.0	$	310.7	$	624.7
7 - 12 months		2.3		2.4		4.7		83.8		77.2		161.0
Greater than 12 months		9.0		6.6		15.6		214.9		167.0		381.9
Total investment grade fixed maturities		14.3		11.4		25.7		612.7		554.9		1,167.6
BELOW INVESTMENT GRADE FIXED MATURITIES:
0 - 6 months		2.8		1.3		4.1		38.4		15.4		53.8
7 - 12 months		1.5		0.3		1.8		11.9		2.0		13.9
Greater than 12 months		—		3.8		3.8		—		3.5		3.5
Total below investment grade fixed maturities		4.3		5.4		9.7		50.3		20.9		71.2
Equity securities		0.1		0.1		0.2		0.2		1.2		1.4
Total fixed maturities and equity securities	$	18.7	$	16.9	$	35.6	$	663.2	$	577.0	$	1,240.2
	December 31, 2003
	Gross Unrealized Losses						Fair Value
	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
INVESTMENT GRADE FIXED MATURITIES:
0 - 6 months	$	11.0	$	6.8	$	17.8	$	565.2	$	458.3	$	1,023.5
7 - 12 months		4.9		10.8		15.7		92.7		239.0		331.7
Greater than 12 months		1.2		3.7		4.9		21.8		74.5		96.3
Total investment grade fixed maturities		17.1		21.3		38.4		679.7		771.8		1,451.5
BELOW INVESTMENT GRADE FIXED MATURITIES:
0 - 6 months		0.5		0.7		1.2		18.1		20.4		38.5
7 - 12 months		—		2.5		2.5		—		8.2		8.2
Greater than 12 months		0.5		5.2		5.7		8.1		29.0		37.1
Total below investment grade fixed maturities		1.0		8.4		9.4		26.2		57.6		83.8
Equity securities		—		0.1		0.1		0.5		1.3		1.8
Total fixed maturities and equity securities	$	18.1	$	29.8	$	47.9	$	706.4	$	830.7	$	1,537.1

21

ALLMERICA FINANCIAL CORPORATION

CREDIT QUALITY OF FIXED MATURITIES

(In millions)		September 30, 2004
		Amortized Cost						Fair Value
NAIC Designation	Rating Agency Equivalent Designation	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
1	Aaa/Aa/A	$	2,563.7	$	2,323.4	$	4,887.1	$	2,644.3	$	2,397.9	$	5,042.2
2	Baa		918.7		1,291.8		2,210.5		945.1		1,358.4		2,303.5
3	Ba		102.2		126.8		229.0		106.6		136.0		242.6
4	B		80.8		48.7		129.5		83.6		51.2		134.8
5	Caa and lower		29.3		12.6		41.9		31.7		17.5		49.2
6	In or near default		3.3		9.9		13.2		3.6		12.8		16.4
Total fixed maturities		$	3,698.0	$	3,813.2	$	7,511.2	$	3,814.9	$	3,973.8	$	7,788.7
		December 31, 2003
		Amortized Cost						Fair Value
NAIC Designation	Rating Agency Equivalent Designation	Property and Casualty		Life Companies		Total		Property and Casualty		Life Companies		Total
1	Aaa/Aa/A	$	2,360.7	$	2,341.9	$	4,702.6	$	2,442.5	$	2,417.4	$	4,859.9
2	Baa		874.8		1,346.9		2,221.7		902.5		1,427.3		2,329.8
3	Ba		91.0		134.4		225.4		97.0		138.8		235.8
4	B		75.9		64.5		140.4		83.9		65.9		149.8
5	Caa and lower		25.9		14.3		40.2		34.6		19.4		54.0
6	In or near default		5.4		10.6		16.0		5.9		11.3		17.2
Total fixed maturities		$	3,433.7	$	3,912.6	$	7,346.3	$	3,566.4	$	4,080.1	$	7,646.5

22

ALLMERICA FINANCIAL CORPORATION

HISTORICAL FINANCIAL HIGHLIGHTS

(In millions, except per share data)	Q3 04			Q2 04			Q1 04			2003			Q4 03			Q3 03			Q2 03			Q1 03
SEGMENT INCOME (1)
Property and Casualty
Personal Lines	$	42.1		$	35.8		$	10.8		$	34.3		$	25.3		$	11.5		$	0.2		$	(2.7	)
Commercial Lines		(7.1	)		12.6			26.5			98.7			6.0			18.1			35.2			39.4
Other		1.7			0.7			1.3			(15.5	)		2.5			2.6			(22.1	)		1.5
Total Property and Casualty		36.7			49.1			38.6			117.5			33.8			32.2			13.3			38.2
Life Companies		(8.7	)		(6.3	)		9.8			8.7			5.7			(8.1	)		13.5			(2.4	)
Interest expense on corporate debt		(10.0	)		(9.9	)		(10.0	)		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)
Total segment income before federal income taxes	$	18.0		$	32.9		$	38.4		$	86.3		$	29.5		$	14.1		$	16.9		$	25.8
Federal income tax benefit (expense) on segment income		1.6			(3.8	)		(5.2	)		6.1			0.8			5.6			1.8			(2.1	)
Total segment income after federal income taxes		19.6			29.1			33.2			92.4			30.3			19.7			18.7			23.7
Federal income tax settlement		—			0.2			30.1			—			—			—			—			—
Net realized investment (losses) gains, net of amortization and taxes		(3.7	)		4.4			10.2			10.4			4.0			(8.2	)		6.6			8.0
Gains (losses) from retirement of funding agreements and trust instruments supported by funding obligations, net of taxes		1.9			—			(2.1	)		3.7			—			0.4			0.3			3.0
Income from sale of universal life business, net of taxes		—			—			—			3.6			—			—			—			3.6
Gains (losses) on derivative instruments, net of taxes		0.1			0.2			—			(4.5	)		(5.4	)		0.3			(0.4	)		1.0
Restructuring costs, net of taxes		(0.2	)		(1.5	)		(2.1	)		(18.7	)		(14.9	)		(0.8	)		(0.8	)		(2.2	)
Income before cumulative effect of accounting change		17.7			32.4			69.3			86.9			14.0			11.4			24.4			37.1
Cumulative effect of change in accounting principle, net of taxes		—			—			(57.2	)		—			—			—			—			—
NET INCOME	$	17.7		$	32.4		$	12.1		$	86.9		$	14.0		$	11.4		$	24.4		$	37.1
PER SHARE DATA (DILUTED)
NET INCOME	$	0.33		$	0.60		$	0.23		$	1.63		$	0.26		$	0.21		$	0.46		$	0.70
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED)		53.6			53.7			53.7			53.2			53.5			53.3			53.0			53.0
BALANCE SHEET
Total investments	$	8,253.1		$	8,091.3		$	8,239.5					$	8,185.6		$	8,279.5		$	8,219.0		$	8,172.2
Separate account assets	$	10,086.0		$	10,740.3		$	11,304.9					$	11,835.4		$	11,546.0		$	11,719.0		$	11,016.2
Total assets	$	23,107.0		$	23,664.2		$	24,380.4					$	25,112.5		$	25,008.0		$	25,173.2		$	24,372.8
Total shareholders’ equity	$	2,294.2		$	2,207.2		$	2,289.3					$	2,220.2		$	2,196.6		$	2,225.6		$	2,115.9
Book value per share	$	43.09		$	41.48		$	43.04					$	41.89		$	41.42		$	41.96		$	39.86
Book value per share, excluding accumulated other comprehensive income	$	42.69		$	42.36		$	41.77					$	41.59		$	41.30		$	41.07		$	40.59

(1) Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty, Life Companies and Corporate Debt. In accordance with Statement of Financial Accounting Standards No.131, the separate financial information of each segment is presented consistent with the manner in which results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

23

ALLMERICA FINANCIAL CORPORATION

HISTORICAL FINANCIAL HIGHLIGHTS

(In millions, except per share data)	2002			Q4 02			Q3 02			Q2 02			Q1 02
SEGMENT INCOME (LOSS) (1)
Property and Casualty
Personal Lines	$	40.2		$	(6.7	)	$	13.3		$	24.3		$	9.3
Commercial Lines		124.2			40.7			37.2			21.1			25.2
Other		5.8			(3.7	)		3.9			4.4			1.2
Total Property and Casualty		170.2			30.3			54.4			49.8			35.7
Life Companies		(634.7	)		2.2			(544.1	)		(118.3	)		25.5
Interest expense on corporate debt		(39.9	)		(10.0	)		(10.0	)		(9.9	)		(10.0	)
Total segment (loss) income before federal income taxes	$	(504.4	)	$	22.5		$	(499.7	)	$	(78.4	)	$	51.2
Federal income tax benefit (expense) on segment (loss) income		229.0			(0.6	)		184.7			50.7			(5.8	)
Total segment (loss) income after federal income taxes		(275.4	)		21.9			(315.0	)		(27.7	)		45.4
Net realized investment (losses) gains, net of amortization and taxes		(89.4	)		(45.8	)		(0.7	)		(38.5	)		(4.4	)
Gains from retirement of funding agreements and trust instruments supported by funding obligations, net of taxes		66.7			66.7			—			—			—
Loss from sale of universal life business, net of taxes		(20.3	)		(20.3	)		—			—			—
Gains on derivative instruments, net of taxes		26.2			6.5			—			9.1			10.6
Restructuring costs, net of taxes		(9.6	)		(9.6	)		—			—			—
Other items, net of taxes		(0.6	)		(4.5	)		2.3			1.6			—
(Loss) income before cumulative effect of accounting change		(302.4	)		14.9			(313.4	)		(55.5	)		51.6
Cumulative effect of change in accounting principle, net of taxes		(3.7	)		—			—			—			(3.7	)
NET (LOSS) INCOME	$	(306.1	)	$	14.9		$	(313.4	)	$	(55.5	)	$	47.9
PER SHARE DATA (DILUTED)
NET (LOSS) INCOME	$	(5.79	)	$	0.28		$	(5.93	)	$	(1.05	)	$	0.90
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (2)		52.9			52.9			52.9			52.9			53.1
BALANCE SHEET
Total investments				$	8,806.8		$	9,816.0		$	9,844.9		$	9,977.2
Separate account assets				$	12,343.4		$	12,152.9		$	14,054.3		$	15,085.9
Total assets				$	26,578.9		$	27,528.6		$	29,157.3		$	30,292.2
Total shareholders’ equity				$	2,072.2		$	2,105.4		$	2,391.7		$	2,384.8
Book value per share				$	39.12		$	39.69		$	45.07		$	44.98
Book value per share, excluding accumulated other comprehensive income				$	39.83		$	39.47		$	45.32		$	46.32

(1) Represents income or loss of the Company’s operating segments: Personal Lines, Commercial Lines, Other Property and Casualty, Life Companies and Corporate Debt. In accordance with Statement of Financial Accounting Standards No.131, the separate financial information of each segment is presented consistent with the manner in which results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

(2) Excludes 0.2 million shares for the year ended December 31, 2002, 0.1 million shares for the quarter ended September 30, 2002 and 0.4 million shares for the quarter ended June 30, 2002 due to antidilution.

24

CORPORATE OFFICES AND

PRINCIPAL SUBSIDIARIES

Allmerica Financial

440 Lincoln Street

Worcester, MA 01653

The Hanover Insurance Company

440 Lincoln Street

Worcester, MA 01653

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	2004
	Price Range
	High		Low		Dividends Per Share
March 31	$	38.25	$	30.84	—
June 30	$	36.10	$	30.71	—
September 30	$	34.61	$	26.05	—
December 31
Quarter Ended	2003
	Price Range
	High		Low		Dividends Per Share
March 31	$	16.43	$	9.84	—
June 30	$	18.53	$	13.75	—
September 30	$	24.90	$	17.74	—
December 31	$	31.29	$	24.65	—

INDUSTRY RATINGS AS OF OCTOBER 25, 2004

Financial Strength Ratings	A.M. Best	Standard & Poor’s	Moody’s
Property and Casualty Insurance Companies:
The Hanover Insurance Company	A-	BBB+	Baa1
Citizens Insurance Company of America	A-	BBB+	—
Life Insurance Companies:
Allmerica Financial Life Insurance and Annuity Company	B+	BB	Ba1
First Allmerica Financial Life Insurance Company	B+	BB	Ba1
Debt Ratings	A.M. Best	Standard & Poor’s	Moody’s
Allmerica Financial Corporation	bb+	BB	Ba1
Senior Debt
Allmerica Financial Corporation	bb-	B	Ba2
Capital Securities
Allmerica Financial Corporation	AMB-3	—	NP
Short Term Debt
First Allmerica Financial Life Insurance Company Short Term Insurance Financial Strength Rating	—	—	NP

TRANSFER AGENT

EquiServe, LP

PO Box 43076

Providence, RI 02940-3076

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

Sujata Mutalik

Vice President, Investor Relations

(508) 855-3457

smutalik@Allmerica.com

William J. Steglitz, CPA

Director, 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 http:// www.Allmerica.com