WORCESTER, Mass., July 28 /PRNewswire-FirstCall/-- Allmerica Financial
Corporation (NYSE: AFC) today reported net income for the second quarter of
$24.4 million, or $0.46 per share, compared to a net loss of $55.5 million, or
$1.05 per share in the second quarter of 2002.
"We are pleased with our second quarter results and the further
improvements in the capital position of our life insurance companies," said
Edward J. Parry, III, President of Allmerica's Asset Accumulation Company and
Allmerica Financial Corporation's Chief Financial Officer.
Robert P. Restrepo, Jr., President of Allmerica's Property and Casualty
Companies added, "Our core earnings in the second quarter were solid and
reflect our efforts to improve underwriting results. However, our reported
earnings for the quarter were negatively impacted by the arbitration ruling we
announced earlier in the quarter relating to business we exited in 1996."
The following table illustrates net income (loss) and certain other items:
Quarter ended June 30
(In millions, except per share data)
2003 2002
$ Per $ Per
Share Share
Net income (loss) $24.4 $0.46 $(55.5) $(1.05)
Net income (loss)
includes the
following items
(net of taxes):
Net realized investment
gains (losses), net of
taxes and deferred
acquisition cost
amortization $6.6 $0.13 $(38.5) $(0.73)
Gain from retirement
of trust instruments
supported by funding
obligations 0.3 - - -
Restructuring costs (0.8) (0.01) - -
(Losses) gains on
derivative instruments (0.4) (0.01) 9.1 0.17
Other items - - 1.6 0.03
Total of included items $5.7 $0.11 $(27.8) $(0.53)
Segment Results Allmerica Financial conducts business in three operating segments:
Property and Casualty, Allmerica Financial Services, and Asset Management.
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 one of 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
June 30
(In Millions)
2003 2002
Property and Casualty $20.6 $51.6
Allmerica Financial Services 18.4 (113.8)
Asset Management 2.5 5.1
Corporate (18.5) (15.2)
Total Segment Income (Loss)(1) $23.0 $(72.3)
(1) See reconciliation from segment income (loss) to net income (loss) at
the end of this document.
Property and Casualty Property and Casualty segment income was $20.6 million in the second
quarter of 2003, as compared to $51.6 million in the second quarter of 2002.
Earnings were lower in the quarter due principally to a pre-tax charge of
$23.0 million resulting from a recent adverse arbitration decision related to
an insurance pool we exited in 1996. In addition, pre-tax catastrophe losses
were higher in the current quarter when compared to the second quarter of
2002, when catastrophe losses were unusually low.
Property and Casualty highlights:
-- Net premiums written were $571.0 million in the second quarter of 2003,
compared to $572.1 million in the second quarter of 2002.
-- Net premiums earned were $561.8 million in the second quarter of 2003,
compared to $570.6 million in the second quarter of 2002.
-- Pre-tax catastrophe losses were $21.2 million in the second quarter of
2003, versus $8.6 million in 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
June 30
2003 2002
Losses* 69.1% 64.4%
Loss adjustment expenses 8.2% 8.9%
Policy acquisition and other
underwriting expense 29.4% 28.2%
Policyholders' dividends 0.1% 0.1%
Combined Ratio 106.8% 101.6%
* Loss ratio excluding the adverse arbitration ruling was 65.0% in 2003.
Allmerica Financial Services Allmerica Financial Services reported segment income of $18.4 million in
the second quarter of 2003, as compared to a segment loss of $113.8 million in
the second quarter of 2002. Segment results in the second quarter of 2002 were
materially impacted by a $141.9 million pre-tax write-off of deferred
acquisition costs. Segment income in the current quarter was positively
impacted by improved equity market conditions, which reduced the amortization
of deferred acquisition costs.
Allmerica Financial Services highlights:
-- The Risk Based Capital (RBC) ratio of Allmerica Financial Life
Insurance and Annuity Company, Allmerica's lead life insurance company,
increased to 344 percent at June 30, 2003, up from 266 percent at March
31, 2003 and 244 percent at December 31, 2002.
-- Total adjusted statutory capital for the combined life insurance
subsidiaries at June 30, 2003 increased to $535.6 million, up from
$472.3 million at March 31, 2003 and $481.9 million at December 31,
2002.
-- In the second quarter, individual annuity redemptions were $552.5
million, compared to approximately $1.0 billion in the first quarter of
2003 and approximately $1.3 billion in the fourth quarter of 2002.
Asset Management Asset Management's second quarter segment income was $2.5 million,
compared to $5.1 million in the same period in the prior year. Income declined
primarily due to fewer outstanding guaranteed investment contracts.
Corporate
Corporate segment net expenses were $18.5 million in the second quarter of
2003, compared to $15.2 million in the comparable period in 2002, principally
due to higher fringe benefit costs, primarily pension related, and lower net
investment income.
Investment Results
Net investment income was $117.4 million for the second quarter of 2003,
compared to $149.6 million in the same period in 2002. In the current quarter,
net investment income decreased primarily due to lower invested assets
resulting from surrenders in the general account, a reduction in outstanding
guaranteed investment contracts and the sale of the Company's fixed universal
life insurance block of business.
Second quarter 2003 pre-tax net realized investment gains were $13.2
million, compared to $63.8 million of pre-tax net realized investment losses
in 2002. In the current quarter, pre-tax net realized investment gains were
principally related to gains of $29.0 million on the sale of certain fixed
income and equity securities, and gains on derivative instruments of $2.0
million, partially offset by realized losses of $19.5 million due to
impairments of fixed income securities. In the second quarter of 2002, pre-
tax net realized investment losses related primarily to impairments on certain
fixed income and equity securities and losses from derivative instruments.
Sale of Below Investment Grade Fixed-Income Securities
During the second quarter of 2003, the Company sold approximately $270.0
million par value of below investment grade fixed-income securities. As a
result this action, at June 30, 2003 the Company's holdings of below
investment grade fixed-income securities were reduced to 6.2 percent of the
fixed income portfolio and 5.7 percent of total invested assets; from 10.0
percent and 9.2 percent, respectively, at the end of the first quarter of
2003.
Balance Sheet and Other
Shareholders' equity was $2.2 billion, or $41.96 per share at June 30,
2003, compared to $2.1 billion, or $39.12 per share at December 31, 2002.
Excluding accumulated other comprehensive income, book value was $41.07 per
share at the close of the second quarter, compared to $39.83 per share at
December 31, 2002.
Total assets were $25.2 billion at June 30, 2003, compared to $26.6
billion at year-end 2002. Separate account assets were $11.7 billion at June
30, 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 as well as the sale of the Company's fixed
universal life insurance block of business.
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 344
percent at June 30, 2003, from 266 percent at March 31, 2003, and 244 percent
at December 31, 2002 principally due to the sale of below investment grade
securities and increases in equity market values. RBC is a regulatory method
of measuring the minimum amount of capital appropriate for an insurance
company. Total adjusted statutory capital at June 30, 2003 increased to
$535.6 million for the combined life insurance subsidiaries, from $472.3
million at March 31, 2003, and from $481.9 million at December 31, 2002,
principally due to the improvement in equity market values. Statutory capital
is the measure of capital utilized by insurance industry regulators.
Allmerica Financial Corporation will host a conference call to discuss the
Company's second quarter results on Tuesday, July 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.
Allmerica Financial Corporation's Second 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
June 30
2003 2002
Net income (loss) $24.4 $(55.5)
Net income (loss) per share (1) $0.46 $(1.05)
Weighted average shares 53.0 52.9
The following is a reconciliation from segment income (loss) to net income
(loss)(2):
Quarter ended
June 30
2003 2002
Property and Casualty $20.6 $51.6
Allmerica Financial Services 18.4 (113.8)
Asset Management 2.5 5.1
Corporate (18.5) (15.2)
Total segment income (loss) 23.0 (72.3)
Federal income tax (expense)
benefit on segment income (0.3) 48.6
Minority interest on preferred dividends (4.0) (4.0)
Total segment income (loss) after
federal income taxes and minority interest 18.7 (27.7)
Net realized investment gains (losses),
net of taxes and deferred acquisition
cost amortization 6.6 (38.5)
Gain from retirement of trust instruments
supported by funding agreement
obligations, net of taxes 0.3 -
(Losses) gains on derivative instruments,
net of taxes (0.4) 9.1
Restructuring costs (0.8) -
Other items - 1.6
Net income (loss) $24.4 $(55.5)
Net income (loss) includes the following items (net of taxes) by segment:
Quarter ended June 30, 2003
Allmerica
Property & Financial Asset
Casualty Services Management Corporate Total
Net realized
investment
gains (losses),
net of taxes
and deferred
acquisition
cost
amortization $1.5 $(1.4) $6.6 $(0.1) $6.6
Gain from
retirement
of trust
instruments
supported by
funding
obligations - - 0.3 - 0.3
(Losses) gains
on derivative
instruments - - (0.4) - (0.4)
Restructuring
costs - (0.8) - - (0.8)
Quarter ended June 30, 2002
Allmerica
Property & Financial Asset
Casualty Services Management Corporate Total
Net realized
investment
gains (losses),
net of taxes
and deferred
acquisition
cost
amortization $(2.3) $(19.7) $(17.7) $1.2 $(38.5)
(Losses) gains
on derivative
instruments - - 9.1 - 9.1
Other items - 1.6 - - 1.6
(1) Basic net income (loss) per share was $0.46 and $(1.05) for the
quarters ended June 30, 2003 and 2002, respectively. Per share data
for the quarter ended June 30, 2002 represents basic loss per share
due to antidilution.
(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.
All figures reported are unaudited.
SOURCE Allmerica Financial Corporation
-0- 07/28/2003
/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 Financial Corporation/
(AFC)
CO: Allmerica Financial Corporation
ST: Massachusetts
IN: FIN
SU: ERN
ES-CP
-- NEM035 --
8032 07/28/200316:48 EDThttp://www.prnewswire.com