WORCESTER, Mass., April 28 /PRNewswire-FirstCall/ --
Allmerica Financial Corporation (NYSE: AFC) today reported net income for the
first quarter of $37.1 million, or $0.70 per share, compared to $47.9 million,
or $0.90 per share in the first three months of 2002.
"We are very pleased with our first quarter results," said Edward J.
Parry, III, President of Allmerica's Asset Accumulation Company and Allmerica
Financial Corporation's Chief Financial Officer. "Our performance was in line
with expectations and demonstrates the effectiveness of the restructuring plan
we initiated during the fourth quarter of last year."
Robert P. Restrepo, Jr., President of Allmerica's Property and Casualty
Companies said, "The improvement in our first quarter property and casualty
earnings was the direct result of the effective execution of our operating
plan. We are particularly encouraged with the ongoing improvement in
commercial lines, where we continue to benefit from rate increases and
improvements to our underwriting process."
"Our financial services operation performed well in the quarter, making
continued progress on the development of VeraVest Investments, Inc., our
newly-formed, independent broker-dealer," Parry said.
The following table illustrates net income and certain other items:
Quarter Ended March 31
(In millions, except per share data)
2003 2002
Per Per
$ Share $ Share
Net income $37.1 $0.70$47.9 $0.90
Net income includes the following items
(net of taxes):
Net realized investment gains
(losses) $8.0 $0.14 $(4.4) $(0.08)
Gains on derivative
instruments 1.0 0.02 10.6 0.20
Restructuring costs (2.2) (0.04) - -
Income from the sale
of universal life
business 3.6 0.07 - -
Gain from retirement of trust
instruments supported
by funding obligations 3.0 0.06 - -
Cumulative effect of change in
accounting principle - - (3.7) (0.07)
Total of included items $13.4 $0.25$2.5 $0.05
Segment Results Allmerica Financial conducts business in three operating segments. These
segments are Property and Casualty (formerly described as "Risk Management"),
Allmerica Financial Services (including VeraVest Investments, Inc.), and Asset
Management (formerly "Allmerica Asset Management"). Previously, Allmerica
Financial Services and Asset Management were grouped together under the
heading "Asset Accumulation".
Property and Casualty markets property and casualty insurance products on
a regional basis through The Hanover Insurance Company and Citizens Insurance
Company of America. Allmerica Financial Services manages a portfolio of
proprietary life insurance and annuity products previously issued through
Allmerica's two life insurance subsidiaries, and markets non-proprietary
insurance and retirement savings products and services primarily to
individuals through VeraVest Investments, Inc., a registered broker-dealer.
The Asset Management segment markets investment management services to
institutions, pension funds, and other organizations through Opus Investment
Management, Inc., and manages a portfolio of guaranteed investment contracts
issued through Allmerica's life insurance subsidiaries.
The following table shows segment income which is presented consistent
with the manner in which 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 represents
income before income taxes and minority interest and excludes the items listed
in the net income table above.
Quarter ended
March 31
(In Millions)
2003 2002
Property and Casualty $44.2 $39.0
Allmerica Financial
Services 2.4 29.7
Asset Management 2.5 5.1
Corporate (17.1) (16.4)
Total Segment Income $32.0 $57.4
Property and Casualty Property and Casualty segment income was $44.2 million in the first
quarter of 2003, as compared to $39.0 million in the first quarter of 2002.
Earnings were higher in the quarter due to rate increases in all lines, and
favorable development on prior years' reserves in most lines. These items were
partially offset by increased current year frequency of losses and poor
weather, primarily in personal lines, higher policy acquisition expenses, and
lower net investment income.
Property and Casualty highlights:
-- Net premiums written were $550.5 million in the first quarter of 2003,
compared to $554.9 million in the first quarter of 2002.
-- Net premiums earned were $554.2 million in the first quarter of 2003,
compared to $558.1 million in the first quarter of 2002.
-- Pre-tax catastrophe losses were $11.2 million in both the first quarter
of 2003 and the comparable period one year earlier.
The following table summarizes the components of the statutory combined
ratio for the Property and Casualty segment:
Quarter Ended
March 31
2003 2002
Losses 64.7% 66.7%
Loss adjustment expenses 8.3% 9.0%
Policy acquisition
and other
underwriting expense 29.3% 28.5%
Policyholders' dividends 0.2% 0.1%
Combined Ratio 102.5% 104.3%
Allmerica Financial Services Allmerica Financial Services reported segment income of $2.4 million in
the first quarter of 2003, as compared to $29.7 million in the first quarter
of 2002. Income for the quarter decreased principally due to higher
amortization of deferred policy acquisition costs.
Allmerica Financial Services highlights:
-- The Risk Based Capital ratio of Allmerica Financial Life Insurance and
Annuity Company, Allmerica's lead life insurance company, increased to
266 percent at March 31, 2003, up from 244 percent at December 31,
2002.
-- Total adjusted statutory capital at March 31, 2003 was approximately
$472.3 million for the combined life insurance subsidiaries, compared
to $481.9 million at December 31, 2002.
-- In the first quarter, individual annuity redemptions were $1.0 billion,
compared to $1.3 billion in the fourth quarter of 2002.
Asset Management Asset Management's first quarter segment income was $2.5 million, as
compared to $5.1 million in the same period in the prior year. Income declined
primarily due to lower earnings on guaranteed investment contracts and higher
borrowing costs for AMGRO, Inc., the Company's property and casualty premium
financing business.
Corporate
Corporate segment net expenses were $17.1 million in the first quarter of
2003, compared to $16.4 million in the comparable period in 2002, principally
due to a decline in net investment income.
Investment Results
Net investment income was $118.7 million for the first quarter of 2003,
compared to $150.5 million in the same period in 2002. In the current quarter,
net investment income decreased principally due to lower average outstanding
assets resulting from lower spread-based assets in the guaranteed investment
contract business, surrenders from the general account, and transfers to the
separate accounts from the general account related to the annuity business.
Additionally, invested assets in Allmerica Financial Services were lower due
to the sale of the Company's fixed universal life insurance block of business.
Additionally, portfolio yields decreased due to lower prevailing fixed
maturity investment rates.
First quarter 2003 pre-tax net realized investment gains were $13.2
million, compared to $12.3 million of pre-tax net realized investment losses
in 2002. In the current quarter, pre-tax net realized investment gains were
principally related to realized gains of $42.4 million on the sale of certain
fixed income securities, partially offset by realized losses of $23.5 million
on impairments of fixed income securities and realized losses on derivative
instruments of $6.2 million. In the first quarter of 2002, pre-tax net
realized investment losses were principally related to impairments of $22.4
million on fixed income securities and realized losses of $13.4 million on
derivative instruments, partially offset by realized gains of $23.6 million on
the sale of certain fixed income and equity securities.
Balance Sheet and Other
Shareholders' equity was $2.1 billion, or $39.86 per share at March 31,
2003, compared to $2.1 billion, or $39.12 per share at December 31, 2002.
Excluding accumulated other comprehensive income, book value was $40.59 per
share at the close of the first quarter, compared to $39.83 per share at
December 31, 2002.
Total assets were $24.4 billion at March 31, 2003, compared to $26.6
billion at year-end 2002. Separate account assets were $11.0 billion at March
31, 2003, versus $12.3 billion at December 31, 2002. The declines in total and
separate account assets were principally the result of surrenders of
individual variable annuities and the decline in the equity market.
Life Insurance Company Statutory Capital Position
The Risk Based Capital (RBC) ratio of Allmerica Financial Life Insurance
and Annuity Company, Allmerica's lead life insurance company, increased to 266
percent at March 31, 2003, from 244 percent at December 31, 2002 due to the
more favorable risk profile of the company's investment portfolio. RBC is a
regulatory method of measuring the minimum amount of capital appropriate for
an insurance company. The first level of regulatory involvement required for
life insurance companies as a result of RBC levels, the so-called "Company
Action Level", is between 100 percent and 125 percent. Regulated insurance
companies with RBC ratios that fall below the Company Action Level are
required to prepare and submit an RBC plan that is acceptable to the insurance
commissioner in the state of domicile. Total adjusted statutory capital at
March 31, 2003 declined about 2 percent to approximately $472.3 million for
the combined life insurance subsidiaries, from $481.9 million at December 31,
2002, principally due to the decline in the equity market. Statutory capital
is the measure of capital utilized by insurance industry regulators.
Chief Executive Officer Search Update
The Board of Directors is continuing its search and consideration of a
President and Chief Executive Officer for the Company. In order to allow the
Board sufficient time to consider candidates for this position, it is not
expected that the selection will be made prior to the annual meeting of the
Company.
There are several highly qualified candidates for this position, including
both internal and external candidates. The Search Committee of the Board has
been interviewing and evaluating these candidates, and expects to continue to
do so. The Directors recognize the importance of this decision and have
elected to extend the process in the interest of full and complete evaluation
of all candidates.
Allmerica Financial Corporation will host a conference call to discuss the
Company's first quarter results on Tuesday, April 29th at 10:00 a.m. Eastern
Time. Interested investors and others can listen to the call through
Allmerica's web site, located at http://www.allmerica.com. Web-cast
participants should go to 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 for one week
following its posting.
Allmerica Financial Corporation's First Quarter Earnings Press Release and
Statistical Supplement are also available in the Financial News section at
http://www.allmerica.com.
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 and which are also
available at http://www.allmerica.com under "Financial News". These
uncertainties include the possibility of adverse catastrophe experience and
severe weather, 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
surrender patterns, investment impairments, heightened competition, adverse
state and federal legislation or regulation, financial ratings actions, and
various other factors, including the effect of the Company's restructuring
actions.
Allmerica Financial Corporation is the holding company for a diversified
group of insurance and financial services companies headquartered in
Worcester, Massachusetts.
CONTACTS:
Investors: Media:
Henry P. St. Cyr Michael F. Buckley
(508) 855-2959 (508) 855-3099
hstcyr@allmerica.commibuckley@allmerica.comALLMERICA FINANCIAL CORPORATION
(In millions, except per share data)
Quarter ended
March 31
2003 2002
Net income $37.1 $47.9
Net income per share (diluted) (1) $0.70$0.90
Weighted average shares 53.0 53.1
The following is a reconciliation from segment income to net income (2):
Quarter ended
March 31
2003 2002
Property and Casualty $44.2 $39.0
Allmerica Financial Services 2.4 29.7
Asset Management 2.5 5.1
Corporate (17.1) (16.4)
Total segment income 32.0 57.4
Federal income taxes on segment income (4.3) (8.0)
Minority interest on preferred dividends (4.0) (4.0)
Total segment income after federal income
taxes and minority interest 23.7 45.4
Net realized investment gains (losses),
net of taxes and amortization 8.0 (4.4)
Income from sale of universal life business,
net of taxes 3.6 --
Gain from retirement of trust instruments
supported by funding obligations, net of taxes 3.0 --
Gains on derivative instruments, net of taxes 1.0 10.6
Restructuring costs, net of tax (2.2) --
Cumulative effect of change
in accounting principle,
net of taxes -- (3.7)
Net income $37.1 $47.9
(1) Basic net income per share was $0.70 and $0.91 for the quarters ended
March 31, 2003 and 2002, 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 makers
in deciding how to allocate resources and in assessing performance. Management
evaluates the results of the aforementioned segments based on a pre-tax and
pre-minority interest basis. Segment income (loss) 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 (loss) 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. Although the items excluded from segment
income (loss) may be significant components in understanding and assessing
each segment's financial performance, management believes segment income
(loss) enhances an investor's understanding of the segment's results of
operations by highlighting net income (loss) attributable to the normal,
recurring operations of the business, consistent with industry practice.
All figures reported are unaudited.
SOURCE Allmerica Financial Corporation
-0- 04/28/2003
/CONTACT: Investors: Henry P. St. Cyr, +1-508-855-2959,
hstcyr@allmerica.com, or Media: Michael F. Buckley, +1-508-855-3099,
mibuckley@allmerica.com, both of Allmerica/
(AFC)
CO: Allmerica Financial Corporation
ST: Massachusetts
IN: FIN INS
SU: ERN CCA
CP-ES
-- NEM045 --
9421 04/28/200317:08 EDThttp://www.prnewswire.com