Allmerica Financial Corporation Reports First Quarter Operating Earnings of $0.70 Per Share

Apr 30, 2001, 01:00 ET from Allmerica Financial Corporation

    WORCESTER, Mass., April 30 /PRNewswire/ -- Allmerica Financial Corporation
 (NYSE:   AFC) today reported operating earnings per share from continuing
 operations for the first quarter of 2001.
 
     First quarter highlights:
     --Net operating income per share from continuing operations was $0.70, or
       $37.2 million, compared to $1.22 per share, or $66.4 million in 2000.
       Net operating income excludes net realized investment gains and losses
       and other non-recurring gains and charges, net of taxes.
     --Asset Accumulation pre-tax operating earnings were $50.3 million, versus
       $59.5 million for the same period in 2000.
     --Variable annuity sales were $731.1 million, compared to sales of $821.1
       million and $720.2 million in the first quarter and fourth quarter of
       2000, respectively.
     --New variable life insurance sales were $34.7 million in the quarter, up
       27.6 percent compared to the first quarter of 2000.
     --Risk Management pre-tax operating earnings were $16.2 million, down from
       $43.1 million reported in the first quarter of 2000.
     --Net income was $23.2 million, or $0.44 per share versus $30.2 million,
       or $0.56 per share in 2000.
 
     "In spite of lower first quarter profits in our Asset Accumulation
 business, we are confident in our long term ability to achieve sustained
 growth.  We are continuing to expand our distribution base, enhance our
 technology platform, and further our new product development initiatives,"
 said John F. O'Brien, president and chief executive officer of Allmerica.
 "Although our Risk Management business had a disappointing quarter, we
 continued to achieve top-line growth in our core markets and manage expenses
 effectively."
 
     Segment Results
     Allmerica Financial operates in two primary businesses: Asset Accumulation
 and Risk Management.  Asset Accumulation markets insurance and retirement
 savings products and services to individual and institutional clients through
 Allmerica Financial Services, and investment management services to
 institutions, pension funds, and other organizations through Allmerica Asset
 Management, Inc.  Risk Management markets property and casualty insurance
 products on a regional basis through The Hanover Insurance Company and
 Citizens Insurance Company of America, with distribution channels in Standard
 Markets, Sponsored Markets and Specialty Markets.
 
     Asset Accumulation
     First quarter pre-tax operating earnings for the Asset Accumulation
 business were $50.3 million versus $59.5 million in 2000.
     Allmerica Financial Services' pre-tax operating earnings were $44.3
 million in the quarter, down from $54.4 million in the first quarter of 2000.
 Earnings decreased in the quarter due to higher growth related expenses and
 lower average variable annuity assets under management and related fee income.
     Allmerica Asset Management's pre-tax operating earnings rose to $6.0
 million, from $5.1 million in the same period of the prior year. Earnings
 increased due to higher levels of spread-based assets, resulting from
 increased sales of funding agreements.
 
     Asset Accumulation highlights:
     --Variable annuity sales were $731.1 million in 2001, compared to $821.1
       million and $720.2 million in the first quarter and fourth quarter of
       2000, respectively.
     --Variable product separate account assets were $15.6 billion at March 31,
       2001, compared to $18.6 billion at March 31, 2000.  Average variable
       product separate account assets decreased by 6.2 percent to $16.7
       billion in the first quarter of 2001 from $17.8 billion for the
       comparable quarter in 2000.
     --Variable annuity fees totaled $55.0 million versus $57.5 million in the
       first quarter of 2000. The decline in fees is principally related to
       reduced average variable annuity assets under management, partially
       offset by the impact of new sales.
     --New sales of funding agreements in the first quarter of 2001 were $793.5
       million, compared to $331.3 million one year earlier.
 
     Risk Management
     Risk Management pre-tax operating earnings were $16.2 million, compared to
 $43.1 million for the first quarter of 2000. Earnings decreased in the quarter
 principally due to the absence of favorable development on prior years' loss
 reserves and increased non-catastrophe weather-related losses in personal
 lines; partially offset by higher earned premiums primarily due to rate
 increases and to lower catastrophe losses.
 
     Property and Casualty highlights:
     --Net premiums written increased 7.4 percent in the first quarter to
       $566.7 million, compared to $527.6 million in the first quarter of 2000.
     --Net earned premiums for the first quarter were $538.0 million, up 8.2
       percent from $497.0 million in 2000.
     --The statutory expense ratio improved to 26.4 percent in the quarter,
       compared to 26.9 percent for the first quarter of last year and 26.5
       percent for the full year in 2000.
     --Pre-tax catastrophe losses were $6.8 million versus $15.2 million in the
       first quarter of 2000.
     --Adverse development of prior years' loss reserves was $19.4 million in
       the first quarter versus favorable development of $43.7 million in the
       first quarter of 2000.  Reserve development for the fourth quarter of
       2000 was effectively nil.  The adverse development of $19.4 million in
       the first quarter of 2001 primarily represents the full development of
       fourth quarter 2000 non-catastrophe weather-related losses.  The first
       quarter 2000 favorable development of $43.7 million did not recur given
       the relatively high level of redundant reserves in 2000 from our claims
       redesign effort and deterioration in certain commercial lines results.
 
     Corporate
     Corporate segment net expenses were $16.2 million in the first quarter of
 2001, compared to $14.5 million in 2000.
 
     Investment Results
     Net investment income was $165.8 million for the first quarter of 2001, an
 increase of 6.6 percent compared to $155.5 million in the same period in 2000.
     First quarter net realized investment losses were $17.4 million, compared
 to $47.1 million of net realized investment losses in the first quarter of
 2000.  Net realized investment losses in the first quarter of 2001 related
 primarily to impairments on certain fixed income securities.  Net realized
 investment losses in the comparable period in 2000 related primarily to the
 sale of securities pursuant to the Company's tax strategy to increase
 portfolio yields and to impairments on certain fixed income securities.
 
     Net Income
     Net income was $23.2 million, or $0.44 per share in the first quarter of
 2001, compared to $30.2 million, or $0.56 per share in 2000.
     First quarter 2001 net income included net realized investment losses of
 $12.4 million, or $0.23 per share, related primarily to impairments on certain
 fixed income securities, a gain of $1.6 million on derivatives, and a $3.2
 million charge related to the adoption of Statement of Financial Accounting
 Standard No. 133, "Accounting for Derivative Instruments and Hedging
 Activities."  In 2000, the net realized investment losses of $36.2 million, or
 $0.66 per share related to portfolio management actions to increase portfolio
 yields and impairments on certain fixed income securities.
 
     Balance Sheet
     Shareholders' equity was $2.5 billion, or $47.44 per share at March 31,
 2001, compared to $2.4 billion, or $45.74 per share at December 31, 2000.
 Excluding the impact of SFAS No. 115, book value was $46.23 per share at the
 close of the first quarter, compared to $45.84 per share at December 31, 2000.
     Total assets were $30.6 billion at March 31, 2001, down from $31.6 billion
 at year-end 2000. Separate account assets were $15.6 billion at March 31,
 2001, down from $17.4 billion at December 31, 2000.
 
     Business Outlook
     The following business outlook is intended to provide investors and
 analysts with management's current expectations regarding key drivers to our
 businesses.  As such, the following statements are based on current business
 conditions and are forward looking.
     Net operating earnings for 2001 are expected to be in a range of $4.35 per
 share to $4.60 per share.
     Quarterly operating earnings for Allmerica Financial Services are expected
 to be within a range from those for the first quarter of 2001 to up slightly.
 Inherent in this range is the expectation of an equity market valuation level
 consistent with the value at the end of the first quarter of 2001 as measured
 by the S&P 500, an annuity withdrawal rate consistent with the 12.1%
 experienced in the first quarter of 2001, a sales trend of variable annuity
 products consistent with industry results and overall expense levels in a
 range from those in the first quarter of 2001 to slightly up.
     Operating results for Risk Management are expected to increase during 2001
 over those of the first quarter assuming the following.  The first quarter of
 2001 included significant weather related losses of approximately $24 million
 that are not expected to recur.  Additionally, price increases are expected to
 incrementally benefit each successive quarter of 2001 by about $5 million.
 Further, the development of prior year losses are expected to have little to
 no impact on quarterly results for the remainder of the year.  Lastly, net
 catastrophe losses are expected to be in line with historical averages.
     Allmerica Financial Corporation will be hosting a conference call to
 discuss the Company's first quarter results on Tuesday, May 1st at 10:00 a.m.
 local time.  Interested investors and others can listen to the call through
 Allmerica's web site, located at 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 rebroadcast 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 Statistical Supplement is
 also available at 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.  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, heightened competition, adverse
 state and federal legislation or regulation, and various other factors.
     Interim information is unaudited.
     Allmerica Financial Corporation is the holding company for a diversified
 group of insurance and financial services companies headquartered in
 Worcester, Mass.
 
     ALLMERICA FINANCIAL CORPORATION
     (In millions, except per share data)
                                                            Quarter ended
                                                              March 31
                                                         2001           2000
     Net income                                         $23.2          $30.2
     Net income per share                               $0.44          $0.56
     Weighted average shares                             53.1           54.3
 
 
 
 The following is a reconciliation from net operating income to net income per
 share:
 
     PER SHARE DATA (DILUTED) (1)                          Quarter ended
                                                              March 31
                                                         2001           2000
     Net operating income (2)                           $0.70          $1.22
     Net realized losses
      on investments, net of taxes
      and amortization                                 (0.23)         (0.66)
     Gains on derivatives                                0.03              -
     Cumulative effect of change
      in accounting principle, net of taxes            (0.06)              -
 
     Net income                                         $0.44          $0.56
 
     (1) Basic net income per share was $0.44 and $0.56 for the quarters ended
 March 31, 2001 and 2000, respectively.
 
     (2) Net operating income represents net income adjusted for certain items
 which management believes are not indicative of overall operating trends,
 including net realized investment gains (losses), net gains and losses on
 disposals of businesses, extraordinary items, the cumulative effect of
 accounting changes, restructuring costs, and certain other items.  While these
 items may be significant components in understanding and assessing the
 Company's financial performance, management believes net operating income
 enhances an investor's understanding of the Company's results of operations by
 highlighting net income attributable to the normal, recurring operations of
 the business.  However, net operating income should not be construed as a
 substitute for net income as determined in accordance with generally accepted
 accounting principles.
 
     All figures reported are unaudited and are in accordance with generally
 accepted accounting principles.
 
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SOURCE Allmerica Financial Corporation
    WORCESTER, Mass., April 30 /PRNewswire/ -- Allmerica Financial Corporation
 (NYSE:   AFC) today reported operating earnings per share from continuing
 operations for the first quarter of 2001.
 
     First quarter highlights:
     --Net operating income per share from continuing operations was $0.70, or
       $37.2 million, compared to $1.22 per share, or $66.4 million in 2000.
       Net operating income excludes net realized investment gains and losses
       and other non-recurring gains and charges, net of taxes.
     --Asset Accumulation pre-tax operating earnings were $50.3 million, versus
       $59.5 million for the same period in 2000.
     --Variable annuity sales were $731.1 million, compared to sales of $821.1
       million and $720.2 million in the first quarter and fourth quarter of
       2000, respectively.
     --New variable life insurance sales were $34.7 million in the quarter, up
       27.6 percent compared to the first quarter of 2000.
     --Risk Management pre-tax operating earnings were $16.2 million, down from
       $43.1 million reported in the first quarter of 2000.
     --Net income was $23.2 million, or $0.44 per share versus $30.2 million,
       or $0.56 per share in 2000.
 
     "In spite of lower first quarter profits in our Asset Accumulation
 business, we are confident in our long term ability to achieve sustained
 growth.  We are continuing to expand our distribution base, enhance our
 technology platform, and further our new product development initiatives,"
 said John F. O'Brien, president and chief executive officer of Allmerica.
 "Although our Risk Management business had a disappointing quarter, we
 continued to achieve top-line growth in our core markets and manage expenses
 effectively."
 
     Segment Results
     Allmerica Financial operates in two primary businesses: Asset Accumulation
 and Risk Management.  Asset Accumulation markets insurance and retirement
 savings products and services to individual and institutional clients through
 Allmerica Financial Services, and investment management services to
 institutions, pension funds, and other organizations through Allmerica Asset
 Management, Inc.  Risk Management markets property and casualty insurance
 products on a regional basis through The Hanover Insurance Company and
 Citizens Insurance Company of America, with distribution channels in Standard
 Markets, Sponsored Markets and Specialty Markets.
 
     Asset Accumulation
     First quarter pre-tax operating earnings for the Asset Accumulation
 business were $50.3 million versus $59.5 million in 2000.
     Allmerica Financial Services' pre-tax operating earnings were $44.3
 million in the quarter, down from $54.4 million in the first quarter of 2000.
 Earnings decreased in the quarter due to higher growth related expenses and
 lower average variable annuity assets under management and related fee income.
     Allmerica Asset Management's pre-tax operating earnings rose to $6.0
 million, from $5.1 million in the same period of the prior year. Earnings
 increased due to higher levels of spread-based assets, resulting from
 increased sales of funding agreements.
 
     Asset Accumulation highlights:
     --Variable annuity sales were $731.1 million in 2001, compared to $821.1
       million and $720.2 million in the first quarter and fourth quarter of
       2000, respectively.
     --Variable product separate account assets were $15.6 billion at March 31,
       2001, compared to $18.6 billion at March 31, 2000.  Average variable
       product separate account assets decreased by 6.2 percent to $16.7
       billion in the first quarter of 2001 from $17.8 billion for the
       comparable quarter in 2000.
     --Variable annuity fees totaled $55.0 million versus $57.5 million in the
       first quarter of 2000. The decline in fees is principally related to
       reduced average variable annuity assets under management, partially
       offset by the impact of new sales.
     --New sales of funding agreements in the first quarter of 2001 were $793.5
       million, compared to $331.3 million one year earlier.
 
     Risk Management
     Risk Management pre-tax operating earnings were $16.2 million, compared to
 $43.1 million for the first quarter of 2000. Earnings decreased in the quarter
 principally due to the absence of favorable development on prior years' loss
 reserves and increased non-catastrophe weather-related losses in personal
 lines; partially offset by higher earned premiums primarily due to rate
 increases and to lower catastrophe losses.
 
     Property and Casualty highlights:
     --Net premiums written increased 7.4 percent in the first quarter to
       $566.7 million, compared to $527.6 million in the first quarter of 2000.
     --Net earned premiums for the first quarter were $538.0 million, up 8.2
       percent from $497.0 million in 2000.
     --The statutory expense ratio improved to 26.4 percent in the quarter,
       compared to 26.9 percent for the first quarter of last year and 26.5
       percent for the full year in 2000.
     --Pre-tax catastrophe losses were $6.8 million versus $15.2 million in the
       first quarter of 2000.
     --Adverse development of prior years' loss reserves was $19.4 million in
       the first quarter versus favorable development of $43.7 million in the
       first quarter of 2000.  Reserve development for the fourth quarter of
       2000 was effectively nil.  The adverse development of $19.4 million in
       the first quarter of 2001 primarily represents the full development of
       fourth quarter 2000 non-catastrophe weather-related losses.  The first
       quarter 2000 favorable development of $43.7 million did not recur given
       the relatively high level of redundant reserves in 2000 from our claims
       redesign effort and deterioration in certain commercial lines results.
 
     Corporate
     Corporate segment net expenses were $16.2 million in the first quarter of
 2001, compared to $14.5 million in 2000.
 
     Investment Results
     Net investment income was $165.8 million for the first quarter of 2001, an
 increase of 6.6 percent compared to $155.5 million in the same period in 2000.
     First quarter net realized investment losses were $17.4 million, compared
 to $47.1 million of net realized investment losses in the first quarter of
 2000.  Net realized investment losses in the first quarter of 2001 related
 primarily to impairments on certain fixed income securities.  Net realized
 investment losses in the comparable period in 2000 related primarily to the
 sale of securities pursuant to the Company's tax strategy to increase
 portfolio yields and to impairments on certain fixed income securities.
 
     Net Income
     Net income was $23.2 million, or $0.44 per share in the first quarter of
 2001, compared to $30.2 million, or $0.56 per share in 2000.
     First quarter 2001 net income included net realized investment losses of
 $12.4 million, or $0.23 per share, related primarily to impairments on certain
 fixed income securities, a gain of $1.6 million on derivatives, and a $3.2
 million charge related to the adoption of Statement of Financial Accounting
 Standard No. 133, "Accounting for Derivative Instruments and Hedging
 Activities."  In 2000, the net realized investment losses of $36.2 million, or
 $0.66 per share related to portfolio management actions to increase portfolio
 yields and impairments on certain fixed income securities.
 
     Balance Sheet
     Shareholders' equity was $2.5 billion, or $47.44 per share at March 31,
 2001, compared to $2.4 billion, or $45.74 per share at December 31, 2000.
 Excluding the impact of SFAS No. 115, book value was $46.23 per share at the
 close of the first quarter, compared to $45.84 per share at December 31, 2000.
     Total assets were $30.6 billion at March 31, 2001, down from $31.6 billion
 at year-end 2000. Separate account assets were $15.6 billion at March 31,
 2001, down from $17.4 billion at December 31, 2000.
 
     Business Outlook
     The following business outlook is intended to provide investors and
 analysts with management's current expectations regarding key drivers to our
 businesses.  As such, the following statements are based on current business
 conditions and are forward looking.
     Net operating earnings for 2001 are expected to be in a range of $4.35 per
 share to $4.60 per share.
     Quarterly operating earnings for Allmerica Financial Services are expected
 to be within a range from those for the first quarter of 2001 to up slightly.
 Inherent in this range is the expectation of an equity market valuation level
 consistent with the value at the end of the first quarter of 2001 as measured
 by the S&P 500, an annuity withdrawal rate consistent with the 12.1%
 experienced in the first quarter of 2001, a sales trend of variable annuity
 products consistent with industry results and overall expense levels in a
 range from those in the first quarter of 2001 to slightly up.
     Operating results for Risk Management are expected to increase during 2001
 over those of the first quarter assuming the following.  The first quarter of
 2001 included significant weather related losses of approximately $24 million
 that are not expected to recur.  Additionally, price increases are expected to
 incrementally benefit each successive quarter of 2001 by about $5 million.
 Further, the development of prior year losses are expected to have little to
 no impact on quarterly results for the remainder of the year.  Lastly, net
 catastrophe losses are expected to be in line with historical averages.
     Allmerica Financial Corporation will be hosting a conference call to
 discuss the Company's first quarter results on Tuesday, May 1st at 10:00 a.m.
 local time.  Interested investors and others can listen to the call through
 Allmerica's web site, located at 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 rebroadcast 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 Statistical Supplement is
 also available at 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.  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, heightened competition, adverse
 state and federal legislation or regulation, and various other factors.
     Interim information is unaudited.
     Allmerica Financial Corporation is the holding company for a diversified
 group of insurance and financial services companies headquartered in
 Worcester, Mass.
 
     ALLMERICA FINANCIAL CORPORATION
     (In millions, except per share data)
                                                            Quarter ended
                                                              March 31
                                                         2001           2000
     Net income                                         $23.2          $30.2
     Net income per share                               $0.44          $0.56
     Weighted average shares                             53.1           54.3
 
 
 
 The following is a reconciliation from net operating income to net income per
 share:
 
     PER SHARE DATA (DILUTED) (1)                          Quarter ended
                                                              March 31
                                                         2001           2000
     Net operating income (2)                           $0.70          $1.22
     Net realized losses
      on investments, net of taxes
      and amortization                                 (0.23)         (0.66)
     Gains on derivatives                                0.03              -
     Cumulative effect of change
      in accounting principle, net of taxes            (0.06)              -
 
     Net income                                         $0.44          $0.56
 
     (1) Basic net income per share was $0.44 and $0.56 for the quarters ended
 March 31, 2001 and 2000, respectively.
 
     (2) Net operating income represents net income adjusted for certain items
 which management believes are not indicative of overall operating trends,
 including net realized investment gains (losses), net gains and losses on
 disposals of businesses, extraordinary items, the cumulative effect of
 accounting changes, restructuring costs, and certain other items.  While these
 items may be significant components in understanding and assessing the
 Company's financial performance, management believes net operating income
 enhances an investor's understanding of the Company's results of operations by
 highlighting net income attributable to the normal, recurring operations of
 the business.  However, net operating income should not be construed as a
 substitute for net income as determined in accordance with generally accepted
 accounting principles.
 
     All figures reported are unaudited and are in accordance with generally
 accepted accounting principles.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X31671865
 
 SOURCE  Allmerica Financial Corporation