WORCESTER, Mass., Oct. 18 /PRNewswire-FirstCall/ -- Allmerica Financial
Corporation (NYSE: AFC) announced today that its estimated after-tax loss from
Hurricane Katrina will be approximately $140 million, or $2.62 per share. The
after-tax loss of $140 million is net of reinsurance and includes the cost of
reinsurance reinstatement premiums, loss adjustment expense, as well as an
estimate for the Louisiana Citizens Fair Plan assessment.
Allmerica estimates its gross direct loss and loss adjustment expense from
Hurricane Katrina to be $485 million, with approximately two-thirds of the
losses sustained in its commercial lines business and one-third attributed to
its personal lines business.
Allmerica's loss estimate for Hurricane Katrina was developed using an
analysis of the claims reported to date and estimated values of properties in
the affected areas. Wind-speed data, flood maps and information provided by
on-the-ground staff and independent adjusters were used to project anticipated
claims and damage projections. Anticipated costs for demand surge were also
included in the estimate. However, estimating losses following a major
catastrophe is an inherently uncertain process, which is made more difficult
by the unprecedented nature of this event. Factors that add to the complexity
in this event include the legal and regulatory uncertainty, difficulty in
accessing portions of the affected areas, the complexity of factors
contributing to the losses, delays in claim reporting, the exacerbating
circumstances of Hurricane Rita and a slower pace of recovery resulting from
the extent of damage sustained in the affected areas. As a result, there can
be no assurance that the company's ultimate costs associated with this event
will not be substantially different from these estimates.
"The damage and devastation caused by Hurricane Katrina has placed
unprecedented demands on our industry and our company," said Fred Eppinger,
President and Chief Executive Officer of Allmerica Financial Corporation. "At
Hanover, our people have worked tirelessly in response, taking reports,
assessing and settling claims, and at times, just listening and providing
comfort. They are committed to do what it takes to serve our agents and their
customers."
Allmerica's third quarter results also will be impacted by Hurricane Rita.
The company estimates its losses from Hurricane Rita to be approximately $30
million on a pre-tax basis and $19.5 million after taxes, or $0.37 per share.
Eligible losses resulting from Hurricanes Katrina and Rita, together with
other catastrophe losses incurred to date, puts the company's eligible
catastrophe losses at the maximum retention level such that losses from other
catastrophic events occurring in 2005 will be subject to its aggregate
reinsurance program. Under this program, the company is protected against
multiple catastrophes within a calendar year. The treaty provides $50 million
of reinsurance coverage in excess of cumulative losses in the year of
approximately $80 million. For purposes of the $80 million retention,
individual events are capped at $30 million. The company retains 10% of the
risk on the $50 million coverage.
With the payment of the reinstatement premium, the company will also
continue to maintain a property catastrophe occurrence treaty which serves to
protect the company from other significant aggregate losses arising in 2005
from a single event, as in Hurricane Katrina. The catastrophe occurrence
treaty provides $365 million of reinsurance coverage in excess of $45 million
of losses. The company retains approximately 15% of the risk on the $365
million coverage.
Allmerica Financial Corporation expects to announce its third quarter
financial results on Tuesday, October 25, 2005 with a conference call to
follow on Wednesday, October 26, 2005.
The company's estimate of gross and net losses from Hurricanes Katrina and
Rita are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. The company cautions investors that any such
forward-looking statements are estimates which involve significant judgment
and actual results could differ materially. Investors should consider the
risks and uncertainties in our business that may affect such estimates and
future performance, including the difficulties in arriving at such estimates
noted above and that are otherwise 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 "Investor Relations."
Allmerica Financial Corporation is the holding company for a group of
insurance companies headquartered in Worcester, Massachusetts.
CONTACTS:
Investors: Media:
Sujata Mutalik Michael F. Buckley
(508) 855-3457 (508) 855-3099
smutalik@allmerica.commibuckley@allmerica.com
SOURCE Allmerica Financial Corporation
-0- 10/18/2005
/CONTACT: Sujata Mutalik, +1-508-855-3457, smutalik@allmerica.com, or
Michael F. Buckley, +1-508-855-3099, mibuckley@allmerica.com, both of
Allmerica/
/Website: http://www.allmerica.com /
(AFC)
CO: Allmerica Financial Corporation
ST: Louisiana, Massachusetts, Texas
IN: FIN INS
SU:
AC-CP
-- NETU035 --
6295 10/18/200516:11 EDThttp://www.prnewswire.com