EXHIBIT 99.2
ALLMERICA FINANCIAL CORPORATION
STATISTICAL SUPPLEMENT
TABLE OF CONTENTS
| Page | ||
Financial Highlights | 1 | |
Consolidated Financial Statements | ||
Income Statements | 2 | |
Balance Sheets | 3 | |
Segment Results | ||
Income Statement Highlights | 4 | |
Balance Sheet Highlights | 5 | |
Property and Casualty | ||
Condensed Income Statements | 6 | |
Statutory Underwriting Profit/(Loss), reconciled to GAAP | 7 | |
Selected Statutory Product Information | 8 | |
Allmerica Financial Services | ||
Condensed Income Statements | 9 | |
Segment Income By Product Line | 10-11 | |
Selected Financial Information-Variable Annuities | 12 | |
Future Policy Benefits and Account Balances | 13 | |
Asset Management | ||
Condensed Income Statements and Supplemental Information | 14 | |
Corporate | ||
Condensed Income Statements | 15 | |
Investment Results | ||
Net Investment Income | 16 | |
Aging of Gross Unrealized Losses on Securities Available for Sale | 17 | |
Credit Quality of Fixed Maturities | 18 | |
Historical Financial Highlights | 19-21 | |
Other Information | ||
Corporate Information | Inside back cover | |
Market and Dividend Information | ||
Industry Ratings |
ALLMERICA FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions, except per share data) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
RECONCILIATION FROM SEGMENT INCOME TO NET INCOME | ||||||||||||||||||||||
Segment income (loss)(1) | $ | 29.5 | $ | 22.5 | 31.1 | $ | 86.3 | $ | (504.4 | ) | N/M | |||||||||||
Federal income tax benefit (expense) on segment income | 0.8 | (0.6 | ) | N/M | 6.1 | 229.0 | (97.3 | ) | ||||||||||||||
Net realized investment gains (losses), net of taxes and amortization | 4.0 | (45.8 | ) | N/M | 10.4 | (89.4 | ) | N/M | ||||||||||||||
(Loss) gain on derivative instruments, net of taxes | (5.4 | ) | 6.5 | N/M | (4.5 | ) | 26.2 | N/M | ||||||||||||||
Gain from retirement of trust instruments supported by funding obligations, net of taxes | — | 66.7 | N/M | 3.7 | 66.7 | (94.5 | ) | |||||||||||||||
Restructuring costs, net of taxes | (14.9 | ) | (9.6 | ) | 55.2 | (18.7 | ) | (9.6 | ) | 94.8 | ||||||||||||
Other reorganization expenses, net of taxes | — | (4.5 | ) | N/M | — | (4.5 | ) | N/M | ||||||||||||||
(Loss) income from sale of universal life business, net of taxes | — | (20.3 | ) | N/M | 3.6 | (20.3 | ) | N/M | ||||||||||||||
Additional consideration received from sale of defined contribution business, net of taxes | — | — | — | — | 2.3 | N/M | ||||||||||||||||
Sales practice litigation, net of taxes | — | — | — | — | 1.6 | N/M | ||||||||||||||||
Income (loss) before effect of accounting change | 14.0 | 14.9 | (6.0 | ) | 86.9 | (302.4 | ) | N/M | ||||||||||||||
Cumulative effect of change in accounting principle, net of taxes | — | — | — | — | (3.7 | ) | N/M | |||||||||||||||
Net income (loss) | $ | 14.0 | $ | 14.9 | (6.0 | ) | $ | 86.9 | $ | (306.1 | ) | N/M | ||||||||||
PER SHARE DATA (DILUTED) | ||||||||||||||||||||||
Segment income (loss)(1) | $ | 0.55 | $ | 0.43 | 27.9 | $ | 1.62 | $ | (9.54 | ) | N/M | |||||||||||
Federal income tax benefit (expense) on segment income | 0.02 | (0.01 | ) | N/M | 0.12 | 4.33 | (97.2 | ) | ||||||||||||||
Net realized investment gains (losses), net of taxes and amortization | 0.07 | (0.87 | ) | N/M | 0.19 | (1.69 | ) | N/M | ||||||||||||||
(Loss) gain on derivative instruments, net of taxes | (0.10 | ) | 0.12 | N/M | (0.08 | ) | 0.50 | N/M | ||||||||||||||
Gain from retirement of trust instruments supported by funding obligations, net of taxes | — | 1.26 | N/M | 0.07 | 1.26 | (94.4 | ) | |||||||||||||||
Restructuring costs, net of taxes | (0.28 | ) | (0.18 | ) | 55.6 | (0.35 | ) | (0.18 | ) | 94.4 | ||||||||||||
Other reorganization expenses, net of taxes | — | (0.09 | ) | N/M | — | (0.09 | ) | N/M | ||||||||||||||
(Loss) income from sale of universal life business, net of taxes | — | (0.38 | ) | N/M | 0.06 | (0.38 | ) | N/M | ||||||||||||||
Additional consideration received from sale of defined contribution business, net of taxes | — | — | — | — | 0.04 | N/M | ||||||||||||||||
Sales practice litigation, net of taxes | — | — | — | — | 0.03 | N/M | ||||||||||||||||
Income (loss) before effect of accounting change | 0.26 | 0.28 | (7.1 | ) | 1.63 | (5.72 | ) | N/M | ||||||||||||||
Cumulative effect of change in accounting principle, net of taxes | — | — | — | — | (0.07 | ) | N/M | |||||||||||||||
Net income (loss) | $ | 0.26 | $ | 0.28 | (7.1 | ) | $ | 1.63 | $ | (5.79 | ) | N/M | ||||||||||
December 31 2003 | December 31 2002 | % Change | |||||||||
BALANCE SHEET | |||||||||||
Total adjusted statutory capital | |||||||||||
The Hanover Insurance Company (consolidated) | $ | 1,001.6 | $ | 830.3 | 20.6 | ||||||
Allmerica Financial Life Insurance and Annuity Company (consolidated) | $ | 553.4 | $ | 481.9 | 14.8 | ||||||
First Allmerica Financial Life Insurance Company | $ | 176.6 | $ | 200.0 | (11.7 | ) | |||||
Shareholders’ equity | |||||||||||
The Hanover Insurance Company (consolidated) | $ | 1,545.6 | $ | 1,400.9 | 10.3 | ||||||
Allmerica Financial Life Insurance and Annuity Company (consolidated) | 1,194.9 | 1,197.9 | (0.3 | ) | |||||||
AFC Holding Company and other | (520.3 | ) | (526.6 | ) | (1.2 | ) | |||||
Total shareholders’ equity | $ | 2,220.2 | $ | 2,072.2 | 7.1 | ||||||
Book value per share | |||||||||||
The Hanover Insurance Company (consolidated) | $ | 29.16 | $ | 26.39 | 10.5 | ||||||
Allmerica Financial Life Insurance and Annuity Company (consolidated) | 22.55 | 22.64 | (0.4 | ) | |||||||
AFC Holding Company and other | (9.82 | ) | (9.91 | ) | (0.9 | ) | |||||
Total book value per share | $ | 41.89 | $ | 39.12 | 7.1 | ||||||
Book value per share, excluding accumulated other comprehensive income | $ | 41.59 | $ | 39.83 | 4.4 | ||||||
Shares outstanding(2) | 53.0 | 52.9 | |||||||||
Stock price | $ | 30.77 | $ | 10.10 | N/M | ||||||
Price/book value per share | 0.7 | x | 0.3 | x | 0.4 | x | |||||
Debt/equity(3) | 22.5 | % | 9.6 | % | 12.9 | pts | |||||
Debt/total capital(3) | 18.4 | % | 7.8 | % | 10.6 | pts | |||||
Debt plus preferred securities of a subsidiary trust/total capital | 18.4 | % | 19.4 | % | (1.0 | )pts | |||||
| (1) | Represents income or loss of the Company’s three operating segments: Property and Casualty, Allmerica Financial Services and Asset Management. 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. In addition, segment income or loss reflects those results related to the Corporate segment, which consists of income and expenses related to invested assets, corporate debt, preferred securities of a subsidiary trust and corporate overhead expenses. Corporate overhead expenses reflect costs not attributable to a particular segment, such as those related to certain officers and directors, technology, finance, human resources and legal. |
| (2) | Shares outstanding do not include common stock equivalents. |
| (3) | Debt includes the mandatorily redeemable preferred securities of a subsidiary trust in 2003 in accordance with Statement of Financial Accounting Standards No. 150. |
1
ALLMERICA FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions, except per share data) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
REVENUES | ||||||||||||||||||||||
Premiums | $ | 570.5 | $ | 583.9 | (2.3 | ) | $ | 2,282.3 | $ | 2,320.1 | (1.6 | ) | ||||||||||
Universal life and investment product policy fees | 76.6 | 117.9 | (35.0 | ) | 319.3 | 409.8 | (22.1 | ) | ||||||||||||||
Net investment income | 109.1 | 137.3 | (20.5 | ) | 455.7 | 590.2 | (22.8 | ) | ||||||||||||||
Net realized investment gains (losses) | 5.7 | (78.4 | ) | N/M | 24.1 | (162.3 | ) | N/M | ||||||||||||||
Other income | 38.8 | 53.3 | (27.2 | ) | 182.2 | 158.8 | 14.7 | |||||||||||||||
Total revenues | 800.7 | 814.0 | (1.6 | ) | 3,263.6 | 3,316.6 | (1.6 | ) | ||||||||||||||
BENEFITS, LOSSES AND EXPENSES | ||||||||||||||||||||||
Policy benefits, claims, losses and loss adjustment expenses | 460.9 | 532.1 | (13.4 | ) | 1,918.7 | 2,202.0 | (12.9 | ) | ||||||||||||||
Policy acquisition expenses | 142.3 | 167.8 | (15.2 | ) | 602.6 | 1,080.4 | (44.2 | ) | ||||||||||||||
Gain from retirement of trust instruments supported by funding obligations | — | (102.6 | ) | N/M | (5.7 | ) | (102.6 | ) | (94.4 | ) | ||||||||||||
(Loss) income from sale of universal life business | — | 31.3 | N/M | (5.5 | ) | 31.3 | N/M | |||||||||||||||
Losses (gains) on derivative instruments | 8.7 | (10.0 | ) | N/M | 10.3 | (40.3 | ) | N/M | ||||||||||||||
Restructuring costs | 22.9 | 14.8 | 54.7 | 28.7 | 14.8 | 93.9 | ||||||||||||||||
Other operating expenses | 157.5 | 162.7 | (3.2 | ) | 635.0 | 652.2 | (2.6 | ) | ||||||||||||||
Total benefits, losses and expenses | 792.3 | 796.1 | (0.5 | ) | 3,184.1 | 3,837.8 | (17.0 | ) | ||||||||||||||
Income (loss) before federal income taxes | 8.4 | 17.9 | (53.1 | ) | 79.5 | (521.2 | ) | N/M | ||||||||||||||
Federal income tax benefit | (5.6 | ) | (1.0 | ) | N/M | (7.4 | ) | (234.8 | ) | (96.8 | ) | |||||||||||
Income (loss) before minority interest and cumulative effect of change in accounting principle | 14.0 | 18.9 | (25.9 | ) | 86.9 | (286.4 | ) | N/M | ||||||||||||||
Minority interest: | ||||||||||||||||||||||
Distributions on mandatorily redeemable preferred securities of a subsidiary trust(3) | — | (4.0 | ) | N/M | — | (16.0 | ) | N/M | ||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | 14.0 | 14.9 | (6.0 | ) | 86.9 | (302.4 | ) | N/M | ||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | (3.7 | ) | N/M | |||||||||||||||
Net income (loss) | $ | 14.0 | $ | 14.9 | (6.0 | ) | $ | 86.9 | $ | (306.1 | ) | N/M | ||||||||||
PER SHARE DATA (DILUTED)(2) | ||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 0.26 | $ | 0.28 | (7.1 | ) | $ | 1.63 | $ | (5.72 | ) | N/M | ||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | (0.07 | ) | N/M | |||||||||||||||
Net income (loss)(1) | $ | 0.26 | $ | 0.28 | (7.1 | ) | $ | 1.63 | $ | (5.79 | ) | N/M | ||||||||||
Weighted average shares outstanding | 53.5 | 52.9 | 53.2 | 52.9 | ||||||||||||||||||
| (1) | Basic net income (loss) per share was $0.26 and $0.28 for the quarters ended December 31, 2003 and 2002, respectively and $1.64 and $(5.79) for the years ended December 31, 2003 and 2002, respectively. |
| (2) | Excludes 0.2 million shares due to antidilution for the year ended December 31, 2002. |
| (3) | In 2003, these costs are reflected in other operating expenses in accordance with Statement of Financial Accounting Standards No. 150. |
2
ALLMERICA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data) | December 31 2003 | December 31 2002 | % Change | ||||||||
ASSETS | |||||||||||
Investments: | |||||||||||
Fixed maturities, at fair value (amortized cost of $7,346.3 and $7,715.9) | $ | 7,646.5 | $ | 8,003.1 | (4.5 | ) | |||||
Equity securities, at fair value (cost of $9.1 and $49.1) | 15.3 | 52.8 | (71.0 | ) | |||||||
Mortgage loans | 175.1 | 259.8 | (32.6 | ) | |||||||
Policy loans | 268.0 | 361.4 | (25.8 | ) | |||||||
Other long-term investments | 80.7 | 129.7 | (37.8 | ) | |||||||
Total investments | 8,185.6 | 8,806.8 | (7.1 | ) | |||||||
Cash and cash equivalents | 380.5 | 389.8 | (2.4 | ) | |||||||
Accrued investment income | 126.5 | 138.3 | (8.5 | ) | |||||||
Premiums, accounts, and notes receivable, net | 480.9 | 564.7 | (14.8 | ) | |||||||
Reinsurance receivable on paid and unpaid losses, benefits and unearned premiums | 2,111.2 | 2,075.8 | 1.7 | ||||||||
Deferred policy acquisition costs | 1,115.5 | 1,242.2 | (10.2 | ) | |||||||
Deferred federal income tax asset | 381.0 | 413.2 | (7.8 | ) | |||||||
Goodwill | 128.2 | 131.2 | (2.3 | ) | |||||||
Other assets | 367.7 | 473.5 | (22.3 | ) | |||||||
Separate account assets | 11,835.4 | 12,343.4 | (4.1 | ) | |||||||
Total assets | $ | 25,112.5 | $ | 26,578.9 | (5.5 | ) | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
LIABILITIES | |||||||||||
Policy liabilities and accruals: | |||||||||||
Future policy benefits | $ | 3,556.8 | $ | 3,935.7 | (9.6 | ) | |||||
Outstanding claims, losses and loss adjustment expenses | 3,124.9 | 3,066.5 | 1.9 | ||||||||
Unearned premiums | 1,032.5 | 1,047.0 | (1.4 | ) | |||||||
Contractholder deposit funds and other policy liabilities | 683.7 | 737.2 | (7.3 | ) | |||||||
Total policy liabilities and accruals | 8,397.9 | 8,786.4 | (4.4 | ) | |||||||
Expenses and taxes payable | 822.7 | 1,115.5 | (26.2 | ) | |||||||
Reinsurance premiums payable | 136.5 | 559.1 | (75.6 | ) | |||||||
Trust instruments supported by funding obligations | 1,200.3 | 1,202.8 | (0.2 | ) | |||||||
Long-term debt (1) | 499.5 | 199.5 | N/M | ||||||||
Separate account liabilities | 11,835.4 | 12,343.4 | (4.1 | ) | |||||||
Total liabilities | 22,892.3 | 24,206.7 | (5.4 | ) | |||||||
MINORITY INTEREST | |||||||||||
Mandatorily redeemable preferred securities of a subsidiary trust(1) | — | 300.0 | N/M | ||||||||
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 | 1,775.6 | 1,768.4 | 0.4 | ||||||||
Accumulated other comprehensive income (loss) | 16.1 | (37.4 | ) | N/M | |||||||
Retained earnings | 833.1 | 746.2 | 11.6 | ||||||||
Treasury stock at cost (7.4 and 7.5 million shares) | (405.2 | ) | (405.6 | ) | (0.1 | ) | |||||
Total shareholders’ equity | 2,220.2 | 2,072.2 | 7.1 | ||||||||
Total liabilities and shareholders’ equity | $ | 25,112.5 | $ | 26,578.9 | (5.5 | ) | |||||
| (1) | Long-term debt includes the mandatorily redeemable preferred securities of a subsidiary trust in 2003 in accordance with Statement of Financial Accounting Standards No. 150. |
3
ALLMERICA FINANCIAL CORPORATION
SEGMENT RESULTS
INCOME STATEMENT HIGHLIGHTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
SEGMENT REVENUES (1) | ||||||||||||||||||||||
Property and Casualty | $ | 617.0 | $ | 633.2 | (2.6 | ) | $ | 2,453.6 | $ | 2,498.7 | (1.8 | ) | ||||||||||
Allmerica Financial Services | 159.3 | 230.7 | (30.9 | ) | 703.7 | 854.7 | (17.7 | ) | ||||||||||||||
Asset Management | 20.1 | 31.2 | (35.6 | ) | 88.4 | 127.2 | (30.5 | ) | ||||||||||||||
Corporate | 0.5 | 0.7 | (28.6 | ) | 1.9 | 5.0 | (62.0 | ) | ||||||||||||||
Eliminations and other | (2.3 | ) | (3.5 | ) | (34.3 | ) | (11.5 | ) | (10.3 | ) | 11.7 | |||||||||||
Total segment revenues | $ | 794.6 | $ | 892.3 | (10.9 | ) | $ | 3,236.1 | $ | 3,475.3 | (6.9 | ) | ||||||||||
SEGMENT INCOME (2) | ||||||||||||||||||||||
Property and Casualty | $ | 40.2 | $ | 35.2 | 14.2 | $ | 143.6 | $ | 184.3 | (22.1 | ) | |||||||||||
Allmerica Financial Services | 11.9 | (0.7 | ) | N/M | 26.9 | (625.0 | ) | N/M | ||||||||||||||
Asset Management | 1.1 | 8.5 | (87.1 | ) | 11.3 | 24.4 | (53.7 | ) | ||||||||||||||
Corporate | (23.7 | ) | (20.5 | ) | 15.6 | (95.5 | ) | (88.1 | ) | 8.4 | ||||||||||||
Total segment income (loss) before federal income taxes | $ | 29.5 | $ | 22.5 | 31.1 | $ | 86.3 | $ | (504.4 | ) | N/M | |||||||||||
| Year ended December 31 | ||||||||||||||||||||
(In millions) | 2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||||||
SEGMENT REVENUES (1) | ||||||||||||||||||||
Property and Casualty | $ | 2,453.6 | $ | 2,498.7 | $ | 2,454.8 | $ | 2,307.7 | $ | 2,189.4 | ||||||||||
Allmerica Financial Services | 703.7 | 854.7 | 826.5 | 867.2 | 808.3 | |||||||||||||||
Asset Management | 88.4 | 127.2 | 155.2 | 149.2 | 150.5 | |||||||||||||||
Corporate | 1.9 | 5.0 | 6.7 | 6.3 | 6.0 | |||||||||||||||
Eliminations and other | (11.5 | ) | (10.3 | ) | (7.5 | ) | (7.0 | ) | (5.9 | ) | ||||||||||
Total segment revenues | $ | 3,236.1 | $ | 3,475.3 | $ | 3,435.7 | $ | 3,323.4 | $ | 3,148.3 | ||||||||||
SEGMENT INCOME (2) | ||||||||||||||||||||
Property and Casualty | $ | 143.6 | $ | 184.3 | $ | 93.5 | $ | 190.0 | $ | 199.6 | ||||||||||
Allmerica Financial Services | 26.9 | (625.0 | ) | 143.0 | 222.8 | 205.5 | ||||||||||||||
Asset Management | 11.3 | 24.4 | 20.7 | 22.5 | 23.5 | |||||||||||||||
Corporate | (95.5 | ) | (88.1 | ) | (88.4 | ) | (85.4 | ) | (83.9 | ) | ||||||||||
Total segment income (loss) before federal income taxes | $ | 86.3 | $ | (504.4 | ) | $ | 168.8 | $ | 349.9 | $ | 344.7 | |||||||||
| (1) | Represents revenues generated by the Company’s three operating segments, as well as the Corporate segment. |
| (2) | Represents income or loss of the Company’s three operating segments: Property and Casualty, Allmerica Financial Services and Asset Management. 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. In addition, segment income or loss reflects those results related to the Corporate segment, which consists of income and expenses related to invested assets, corporate debt, preferred securities of a subsidiary trust and corporate overhead expenses. Corporate overhead expenses reflect costs not attributable to a particular segment, such as those related to certain officers and directors, technology, finance, human resources and legal. |
4
ALLMERICA FINANCIAL CORPORATION
SEGMENT RESULTS
BALANCE SHEET HIGHLIGHTS
| December 31, 2003 | ||||||||||||||||
(In millions) | Property and Casualty | Allmerica Financial Services | Asset Management | Corporate(1) | Total | |||||||||||
Cash and investments | $ | 3,799.4 | $ | 3,368.1 | $ | 1,329.9 | $ | 68.7 | $ | 8,566.1 | ||||||
Reinsurance receivables | 1,177.3 | 933.9 | — | — | 2,111.2 | |||||||||||
Deferred policy acquisition costs | 223.5 | 892.0 | — | — | 1,115.5 | |||||||||||
Separate account assets | — | 11,835.4 | — | — | 11,835.4 | |||||||||||
Other assets | 1,032.6 | 358.9 | 139.6 | (46.8 | ) | 1,484.3 | ||||||||||
Total assets | $ | 6,232.8 | $ | 17,388.3 | $ | 1,469.5 | $ | 21.9 | $ | 25,112.5 | ||||||
Policy liabilities and accruals: | ||||||||||||||||
Future policy benefits | $ | 105.6 | $ | 3,451.2 | $ | — | $ | — | $ | 3,556.8 | ||||||
Outstanding claims, losses and loss adjustment expenses | 3,099.1 | 25.8 | — | — | 3,124.9 | |||||||||||
Unearned premiums | 1,030.8 | 1.7 | — | 1,032.5 | ||||||||||||
Contractholder deposit funds and other policy liabilities | 30.4 | 445.8 | 207.5 | — | 683.7 | |||||||||||
Total policy liabilities and accruals | $ | 4,265.9 | $ | 3,924.5 | $ | 207.5 | $ | — | $ | 8,397.9 | ||||||
Trust instruments supported by funding obligations | $ | — | $ | — | $ | 1,200.3 | $ | — | $ | 1,200.3 | ||||||
Separate account liabilities | $ | — | $ | 11,835.4 | $ | — | $ | — | $ | 11,835.4 | ||||||
| December 31, 2002 | ||||||||||||||||
Property and Casualty | Allmerica Financial Services | Asset Management | Corporate(1) | Total | ||||||||||||
Cash and investments | $ | 3,604.7 | $ | 4,160.2 | $ | 1,368.3 | $ | 63.4 | $ | 9,196.6 | ||||||
Reinsurance receivables | 1,101.0 | 974.8 | — | — | 2,075.8 | |||||||||||
Deferred policy acquisition costs | 215.1 | 1,027.1 | — | — | 1,242.2 | |||||||||||
Separate account assets | — | 12,343.4 | — | — | 12,343.4 | |||||||||||
Other assets | 1,135.3 | 466.1 | 191.5 | (72.0 | ) | 1,720.9 | ||||||||||
Total assets | $ | 6,056.1 | $ | 18,971.6 | $ | 1,559.8 | $ | (8.6 | ) | $ | 26,578.9 | |||||
Policy liabilities and accruals: | ||||||||||||||||
Future policy benefits | $ | 106.5 | $ | 3,829.2 | $ | — | $ | — | $ | 3,935.7 | ||||||
Outstanding claims, losses and loss adjustment expenses | 3,035.9 | 30.6 | — | — | 3,066.5 | |||||||||||
Unearned premiums | 1,045.2 | 1.8 | — | — | 1,047.0 | |||||||||||
Contractholder deposit funds and other policy liabilities | 14.2 | 514.9 | 208.1 | — | 737.2 | |||||||||||
Total policy liabilities and accruals | $ | 4,201.8 | $ | 4,376.5 | $ | 208.1 | $ | — | $ | 8,786.4 | ||||||
Trust instruments supported by funding obligations | $ | — | $ | — | $ | 1,202.8 | $ | — | $ | 1,202.8 | ||||||
Separate account liabilities | $ | — | $ | 12,343.4 | $ | — | $ | — | $ | 12,343.4 | ||||||
| (1) | Total assets include corporate eliminations of $(48.9) million and $(78.9) million at December 31, 2003 and December 31, 2002, respectively. |
5
ALLMERICA FINANCIAL CORPORATION
PROPERTY AND CASUALTY
CONDENSED INCOME STATEMENT
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||
(In millions) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||
REVENUES | ||||||||||||||||||
Net premiums written | $ | 524.0 | $ | 543.5 | (3.6 | ) | $ | 2,234.2 | $ | 2,267.3 | (1.5 | ) | ||||||
Change in unearned premiums, net of prepaid reinsurance premiums | 39.2 | 31.5 | 24.4 | 6.2 | 4.7 | 31.9 | ||||||||||||
Net premiums earned | 563.2 | 575.0 | (2.1 | ) | 2,240.4 | 2,272.0 | (1.4 | ) | ||||||||||
Net investment income | 46.8 | 48.6 | (3.7 | ) | 183.5 | 202.0 | (9.2 | ) | ||||||||||
Other income | 7.0 | 9.6 | (27.1 | ) | 29.7 | 24.7 | 20.2 | |||||||||||
Total segment revenue | 617.0 | 633.2 | (2.6 | ) | 2,453.6 | 2,498.7 | (1.8 | ) | ||||||||||
LOSSES AND OPERATING EXPENSES | ||||||||||||||||||
Policy benefits, claims, losses and loss adjustment expenses(1) | 401.8 | 437.3 | (8.1 | ) | 1,653.5 | 1,683.5 | (1.8 | ) | ||||||||||
Policy acquisition expenses | 119.0 | 108.3 | 9.9 | 457.6 | 424.5 | 7.8 | ||||||||||||
Other operating expenses | 56.0 | 52.4 | 6.9 | 198.9 | 206.4 | (3.6 | ) | |||||||||||
Total losses and operating expenses | 576.8 | 598.0 | (3.5 | ) | 2,310.0 | 2,314.4 | (0.2 | ) | ||||||||||
Segment income before federal income taxes | $ | 40.2 | $ | 35.2 | 14.2 | $ | 143.6 | $ | 184.3 | (22.1 | ) | |||||||
| (1) | Policy benefits, claims, losses and loss adjustment expenses for the twelve months ended December 31, 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. |
6
ALLMERICA FINANCIAL CORPORATION
PROPERTY AND CASUALTY
STATUTORY UNDERWRITING PROFIT/(LOSS), RECONCILED TO GAAP
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
Net premiums earned | $ | 564.0 | $ | 575.5 | (2.0 | ) | $ | 2,241.4 | $ | 2,273.2 | (1.4 | ) | ||||||||||
Policy benefits, claims, losses and loss adjustment expenses(1) | 401.4 | 442.4 | (9.3 | ) | 1,650.9 | 1,688.0 | (2.2 | ) | ||||||||||||||
Policy acquisition and other underwriting expenses | 177.2 | 160.4 | 10.5 | 678.3 | 651.9 | 4.0 | ||||||||||||||||
Policyholders’ dividends | (3.3 | ) | 2.7 | N/M | (0.9 | ) | 3.9 | N/M | ||||||||||||||
Underwriting loss | $ | (11.3 | ) | $ | (30.0 | ) | N/M | $ | (86.9 | ) | $ | (70.6 | ) | 23.1 | ||||||||
Net investment income | 46.8 | 48.6 | (3.7 | ) | 183.5 | 202.0 | (9.2 | ) | ||||||||||||||
Other income and expenses, net | 6.3 | 4.9 | 28.6 | 24.8 | 17.4 | 42.5 | ||||||||||||||||
Net deferred acquisition costs | (1.9 | ) | 0.9 | N/M | 8.8 | 16.1 | (45.3 | ) | ||||||||||||||
Other Statutory to GAAP adjustments | 0.3 | 10.8 | (97.2 | ) | 13.4 | 19.4 | (30.9 | ) | ||||||||||||||
Segment income before federal income taxes - GAAP Basis | $ | 40.2 | $ | 35.2 | 14.2 | $ | 143.6 | $ | 184.3 | (22.1 | ) | |||||||||||
PRETAX CATASTROPHE LOSSES | $ | 10.1 | $ | 7.5 | 34.7 | $ | 59.4 | $ | 31.3 | 89.8 | ||||||||||||
| (1) | Policy benefits, claims, losses and loss adjustment expenses for the twelve months ended December 31, 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. |
7
ALLMERICA FINANCIAL CORPORATION
PROPERTY AND CASUALTY
SELECTED STATUTORY PRODUCT INFORMATION
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions, except ratios) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
NET PREMIUMS WRITTEN | ||||||||||||||||||||||
Personal automobile | $ | 253.9 | $ | 252.4 | 0.6 | $ | 1,088.5 | $ | 1,090.1 | (0.1 | ) | |||||||||||
Homeowners | 99.4 | 89.5 | 11.1 | 386.9 | 351.9 | 9.9 | ||||||||||||||||
Other personal | 9.7 | 10.1 | (4.0 | ) | 42.0 | 43.3 | (3.0 | ) | ||||||||||||||
Total personal lines | 363.0 | 352.0 | 3.1 | 1,517.4 | 1,485.3 | 2.2 | ||||||||||||||||
Workers’ compensation | 26.5 | 34.2 | (22.5 | ) | 127.7 | 152.0 | (16.0 | ) | ||||||||||||||
Commercial automobile | 38.6 | 48.9 | (21.1 | ) | 172.3 | 197.9 | (12.9 | ) | ||||||||||||||
Commercial multiple peril | 75.9 | 85.1 | (10.8 | ) | 329.2 | 333.8 | (1.4 | ) | ||||||||||||||
Other commercial | 20.6 | 23.7 | (13.1 | ) | 88.6 | 99.4 | (10.9 | ) | ||||||||||||||
Total commercial lines | 161.6 | 191.9 | (15.8 | ) | 717.8 | 783.1 | (8.3 | ) | ||||||||||||||
Total | $ | 524.6 | $ | 543.9 | (3.5 | ) | $ | 2,235.2 | $ | 2,268.4 | (1.5 | ) | ||||||||||
NET PREMIUMS EARNED | ||||||||||||||||||||||
Personal automobile | $ | 275.1 | $ | 275.1 | — | $ | 1,091.0 | $ | 1,073.9 | 1.6 | ||||||||||||
Homeowners | 97.2 | 86.7 | 12.1 | 368.0 | 328.7 | 12.0 | ||||||||||||||||
Other personal | 10.5 | 11.1 | (5.4 | ) | 42.7 | 43.7 | (2.3 | ) | ||||||||||||||
Total personal lines | 382.8 | 372.9 | 2.7 | 1,501.7 | 1,446.3 | 3.8 | ||||||||||||||||
Workers’ compensation | 31.2 | 38.9 | (19.8 | ) | 134.1 | 169.0 | (20.7 | ) | ||||||||||||||
Commercial automobile | 44.4 | 53.1 | (16.4 | ) | 183.0 | 216.5 | (15.5 | ) | ||||||||||||||
Commercial multiple peril | 82.9 | 85.3 | (2.8 | ) | 329.7 | 338.7 | (2.7 | ) | ||||||||||||||
Other commercial | 22.7 | 25.3 | (10.3 | ) | 92.9 | 102.7 | (9.5 | ) | ||||||||||||||
Total commercial lines | 181.2 | 202.6 | (10.6 | ) | 739.7 | 826.9 | (10.5 | ) | ||||||||||||||
Total | $ | 564.0 | $ | 575.5 | (2.0 | ) | $ | 2,241.4 | $ | 2,273.2 | (1.4 | ) | ||||||||||
POLICY BENEFITS, CLAIMS AND LOSSES | ||||||||||||||||||||||
Personal automobile | $ | 192.4 | $ | 219.6 | (12.4 | ) | $ | 796.0 | $ | 785.9 | 1.3 | |||||||||||
Homeowners | 48.7 | 53.0 | (8.1 | ) | 227.2 | 207.3 | 9.6 | |||||||||||||||
Other personal | 6.1 | 6.5 | (6.2 | ) | 18.4 | 20.4 | (9.8 | ) | ||||||||||||||
Total personal lines | 247.2 | 279.1 | (11.4 | ) | 1,041.6 | 1,013.6 | 2.8 | |||||||||||||||
Workers’ compensation | 44.2 | 19.3 | 129.0 | 119.5 | 109.2 | 9.4 | ||||||||||||||||
Commercial automobile | 20.5 | 32.6 | (37.1 | ) | 89.2 | 129.7 | (31.2 | ) | ||||||||||||||
Commercial multiple peril | 38.3 | 42.4 | (9.7 | ) | 164.4 | 185.1 | (11.2 | ) | ||||||||||||||
Other commercial(1) | 8.1 | 26.8 | (69.8 | ) | 57.5 | 59.2 | (2.9 | ) | ||||||||||||||
Total commercial lines | 111.1 | 121.1 | (8.3 | ) | 430.6 | 483.2 | (10.9 | ) | ||||||||||||||
Total | $ | 358.3 | $ | 400.2 | (10.5 | ) | $ | 1,472.2 | $ | 1,496.8 | (1.6 | ) | ||||||||||
LOSS ADJUSTMENT EXPENSES | $ | 43.1 | $ | 42.2 | 2.1 | $ | 178.7 | $ | 191.2 | (6.5 | ) | |||||||||||
RATIOS | ||||||||||||||||||||||
LOSSES | ||||||||||||||||||||||
Personal automobile | 69.9 | % | 79.8 | % | (9.9 | )pts | 73.0 | % | 73.2 | % | (0.2 | )pts | ||||||||||
Homeowners | 50.1 | % | 61.1 | % | (11.0 | )pts | 61.7 | % | 63.1 | % | (1.4 | )pts | ||||||||||
Other personal | 58.1 | % | 58.6 | % | (0.5 | )pts | 43.1 | % | 46.7 | % | (3.6 | )pts | ||||||||||
Total personal lines | 64.6 | % | 74.8 | % | (10.2 | )pts | 69.4 | % | 70.1 | % | (0.7 | )pts | ||||||||||
Workers’ compensation | 141.7 | % | 49.6 | % | 92.1 | pts | 89.1 | % | 64.6 | % | 24.5 | pts | ||||||||||
Commercial automobile | 46.2 | % | 61.4 | % | (15.2 | )pts | 48.7 | % | 59.9 | % | (11.2 | )pts | ||||||||||
Commercial multiple peril | 46.2 | % | 49.7 | % | (3.5 | )pts | 49.9 | % | 54.7 | % | (4.8 | )pts | ||||||||||
Other commercial(1) | 35.7 | % | 105.9 | % | (70.2 | )pts | 61.9 | % | 57.6 | % | 4.3 | pts | ||||||||||
Total commercial lines | 61.3 | % | 59.8 | % | 1.5 | pts | 58.2 | % | 58.4 | % | (0.2 | )pts | ||||||||||
Total | 63.5 | % | 69.5 | % | (6.0 | )pts | 65.7 | % | 65.8 | % | (0.1 | )pts | ||||||||||
LOSS ADJUSTMENT EXPENSES | 7.6 | % | 7.3 | % | 0.3 | pts | 8.0 | % | 8.4 | % | (0.4 | )pts | ||||||||||
POLICY ACQUISITION AND OTHER UNDERWRITING EXPENSES | 33.8 | % | 29.5 | % | 4.3 | pts | 30.3 | % | 28.7 | % | 1.6 | pts | ||||||||||
POLICYHOLDERS’ DIVIDENDS | (0.6 | )% | 0.5 | % | (1.1 | )pts | — | 0.2 | % | (0.2 | )pts | |||||||||||
COMBINED | 104.3 | % | 106.8 | % | (2.5 | )pts | 104.0 | % | 103.1 | % | 0.9 | pts | ||||||||||
| (1) | Policy benefits, claims, and losses for the twelve months ended December 31, 2003 include a $21.9 million charge resulting from an adverse arbitration decision related to an insurance pool in which one of Allmerica Financial Corporation’s subsidiaries, The Hanover Insurance Company, was formerly a participant. |
8
ALLMERICA FINANCIAL CORPORATION
ALLMERICA FINANCIAL SERVICES
CONDENSED INCOME STATEMENTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||
(In millions) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||
REVENUES | ||||||||||||||||||||
Premiums | $ | 7.3 | $ | 8.9 | (18.0 | ) | $ | 41.9 | $ | 48.1 | (12.9 | ) | ||||||||
Fees: | ||||||||||||||||||||
Fees from surrenders | 12.6 | 34.5 | (63.5 | ) | 66.9 | 61.9 | 8.1 | |||||||||||||
Other proprietary product fees | 64.0 | 83.4 | (23.3 | ) | 252.4 | 347.9 | (27.5 | ) | ||||||||||||
Net investment income | 45.0 | 63.9 | (29.6 | ) | 199.0 | 283.9 | (29.9 | ) | ||||||||||||
Brokerage and investment management income(1) | 20.4 | 28.8 | (29.2 | ) | 107.0 | 82.5 | 29.7 | |||||||||||||
Other income | 10.0 | 11.2 | (10.7 | ) | 36.5 | 30.4 | 20.1 | |||||||||||||
Total segment revenue | 159.3 | 230.7 | (30.9 | ) | 703.7 | 854.7 | (17.7 | ) | ||||||||||||
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES | ||||||||||||||||||||
Policy benefits, claims and losses | 61.8 | 87.5 | (29.4 | ) | 259.0 | 501.6 | (48.4 | ) | ||||||||||||
Policy acquisition expenses | 25.6 | 64.9 | (60.6 | ) | 140.8 | 674.1 | (79.1 | ) | ||||||||||||
Brokerage and investment management variable expenses(1) | 12.5 | 21.0 | (40.5 | ) | 68.7 | 55.9 | 22.9 | |||||||||||||
Other operating expenses | 47.5 | 58.0 | (18.1 | ) | 208.3 | 248.1 | (16.0 | ) | ||||||||||||
Total policy benefits, claims and operating expenses | 147.4 | 231.4 | (36.3 | ) | 676.8 | 1,479.7 | (54.3 | ) | ||||||||||||
Segment income (loss) before federal income taxes | $ | 11.9 | $ | (0.7 | ) | N/M | $ | 26.9 | $ | (625.0 | ) | N/M | ||||||||
| (1) | Brokerage and investment management income primarily reflects fees earned from the distribution of non-proprietary insurance and investment products as well as the management of assets for proprietary products. Variable expenses related to this business primarily consist of commissions and subadvisory fees. |
9
ALLMERICA FINANCIAL CORPORATION
ALLMERICA FINANCIAL SERVICES
SEGMENT INCOME BY PRODUCT LINE
| Quarter ended December 31, 2003 | ||||||||||||||||||||
(In millions) | Individual Annuities | Variable Universal Life (2) | Other Insurance (3) | Total Insurance | VeraVest Distribution | Total | ||||||||||||||
REVENUES | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 7.3 | $ | 7.3 | $ | — | $ | 7.3 | ||||||||
Fees: | ||||||||||||||||||||
Fees from surrenders | 9.8 | 2.8 | — | 12.6 | — | 12.6 | ||||||||||||||
Other proprietary product fees | 40.2 | 22.8 | 1.0 | 64.0 | — | 64.0 | ||||||||||||||
Net investment income | 13.2 | 3.3 | 28.4 | 44.9 | 0.1 | 45.0 | ||||||||||||||
Brokerage and investment management income(1) | 4.8 | 0.9 | 0.1 | 5.8 | 14.6 | 20.4 | ||||||||||||||
Other income | 3.7 | 0.6 | 3.6 | 7.9 | 2.1 | 10.0 | ||||||||||||||
Total segment revenue | 71.7 | 30.4 | 40.4 | 142.5 | 16.8 | 159.3 | ||||||||||||||
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES | ||||||||||||||||||||
Policy benefits, claims and losses | 25.3 | 13.8 | 22.7 | 61.8 | — | 61.8 | ||||||||||||||
Policy acquisition expenses | 21.0 | 3.7 | 0.9 | 25.6 | — | 25.6 | ||||||||||||||
Variable operating expenses | 8.1 | 1.0 | (0.7 | ) | 8.4 | 9.7 | 18.1 | |||||||||||||
| 54.4 | 18.5 | 22.9 | 95.8 | 9.7 | 105.5 | |||||||||||||||
Segment income before other operating expenses | $ | 17.3 | $ | 11.9 | $ | 17.5 | $ | 46.7 | $ | 7.1 | 53.8 | |||||||||
Other operating expenses(4) | 41.9 | |||||||||||||||||||
Segment income before federal income taxes | $ | 11.9 | ||||||||||||||||||
| Quarter ended December 31, 2002 | ||||||||||||||||||||
| Individual Annuities | Variable Universal Life (2) | Other Insurance (3) | Total Insurance | VeraVest Distribution | Total | |||||||||||||||
REVENUES | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 8.9 | $ | 8.9 | $ | — | $ | 8.9 | ||||||||
Fees: | ||||||||||||||||||||
Fees from surrenders | 30.7 | 3.7 | 0.1 | 34.5 | — | 34.5 | ||||||||||||||
Other proprietary product fees | 42.8 | 25.3 | 15.3 | 83.4 | — | 83.4 | ||||||||||||||
Net investment income | 18.4 | 3.0 | 42.4 | 63.8 | 0.1 | 63.9 | ||||||||||||||
Brokerage and investment management income(1) | 6.0 | 1.1 | 0.2 | 7.3 | 21.5 | 28.8 | ||||||||||||||
Other income | 1.9 | 0.4 | 6.1 | 8.4 | 2.8 | 11.2 | ||||||||||||||
Total segment revenue | 99.8 | 33.5 | 73.0 | 206.3 | 24.4 | 230.7 | ||||||||||||||
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES | ||||||||||||||||||||
Policy benefits, claims and losses | 30.2 | 12.4 | 44.9 | 87.5 | — | 87.5 | ||||||||||||||
Policy acquisition expenses | 54.1 | 7.4 | 3.4 | 64.9 | — | 64.9 | ||||||||||||||
Variable operating expenses | 8.1 | 2.9 | 0.9 | 11.9 | 17.6 | 29.5 | ||||||||||||||
| 92.4 | 22.7 | 49.2 | 164.3 | 17.6 | 181.9 | |||||||||||||||
Segment income before other operating expenses | $ | 7.4 | $ | 10.8 | $ | 23.8 | $ | 42.0 | $ | 6.8 | 48.8 | |||||||||
Other operating expenses(4) | 49.5 | |||||||||||||||||||
Segment loss before federal income taxes | $ | (0.7 | ) | |||||||||||||||||
| (1) | Brokerage and investment management income primarily reflects fees earned from the distribution of non-proprietary insurance and investment products as well as the management of assets for proprietary products. Variable expenses related to this business primarily consist of commissions and subadvisory fees. |
| (2) | Variable universal life includes group variable universal life business. |
| (3) | Other insurance includes results from the closed block, universal life, traditional life, yearly renewable term life, individual health and other insurance and group retirement products. |
| (4) | Includes insurance and VeraVest distribution operating expenses. |
10
ALLMERICA FINANCIAL CORPORATION
ALLMERICA FINANCIAL SERVICES
SEGMENT INCOME BY PRODUCT LINE
| Year ended December 31, 2003 | |||||||||||||||||||||
(In millions) | Individual Annuities | Variable Universal Life(2) | Other Insurance (3) | Total Insurance | VeraVest Distribution | Total | |||||||||||||||
REVENUES | |||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 41.9 | $ | 41.9 | $ | — | $ | 41.9 | |||||||||
Fees: | |||||||||||||||||||||
Fees from surrenders | 53.7 | 13.2 | — | 66.9 | — | 66.9 | |||||||||||||||
Other proprietary product fees | 156.9 | 92.5 | 3.0 | 252.4 | — | 252.4 | |||||||||||||||
Net investment income | 59.1 | 14.6 | 124.9 | 198.6 | 0.4 | 199.0 | |||||||||||||||
Brokerage and investment management income(1) | 18.2 | 3.9 | 0.3 | 22.4 | 84.6 | 107.0 | |||||||||||||||
Other income | 10.5 | 4.1 | 17.6 | 32.2 | 4.3 | 36.5 | |||||||||||||||
Total segment revenue | 298.4 | 128.3 | 187.7 | 614.4 | 89.3 | 703.7 | |||||||||||||||
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES | |||||||||||||||||||||
Policy benefits, claims and losses | 103.2 | 44.4 | 111.4 | 259.0 | — | 259.0 | |||||||||||||||
Policy acquisition expenses | 120.0 | 18.5 | 2.3 | 140.8 | — | 140.8 | |||||||||||||||
Variable operating expenses | 31.5 | 5.4 | 1.9 | 38.8 | 57.4 | 96.2 | |||||||||||||||
| 254.7 | 68.3 | 115.6 | 438.6 | 57.4 | 496.0 | ||||||||||||||||
Segment income before other operating expenses | $ | 43.7 | $ | 60.0 | $ | 72.1 | $ | 175.8 | $ | 31.9 | 207.7 | ||||||||||
Other operating expenses(4) | 180.8 | ||||||||||||||||||||
Segment income before federal income taxes | $ | 26.9 | |||||||||||||||||||
| Year ended December 31, 2002 | |||||||||||||||||||||
Individual Annuities | Variable Universal Life(2) | Other Insurance (3) | Total Insurance | VeraVest Distribution | Total | ||||||||||||||||
REVENUES | |||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 48.1 | $ | 48.1 | $ | — | $ | 48.1 | |||||||||
Fees: | |||||||||||||||||||||
Fees from surrenders | 50.3 | 10.8 | 0.8 | 61.9 | — | 61.9 | |||||||||||||||
Other proprietary product fees | 180.5 | 104.7 | 62.7 | 347.9 | — | 347.9 | |||||||||||||||
Net investment income | 81.3 | 11.5 | 190.9 | 283.7 | 0.2 | 283.9 | |||||||||||||||
Brokerage and investment management income(1) | 26.9 | 5.0 | 1.3 | 33.2 | 49.3 | 82.5 | |||||||||||||||
Other income | 8.9 | 0.9 | 15.3 | 25.1 | 5.3 | 30.4 | |||||||||||||||
Total segment revenue | 347.9 | 132.9 | 319.1 | 799.9 | 54.8 | 854.7 | |||||||||||||||
POLICY BENEFITS, CLAIMS AND OPERATING EXPENSES | |||||||||||||||||||||
Policy benefits, claims and losses | 265.3 | 45.2 | 191.1 | 501.6 | — | 501.6 | |||||||||||||||
Policy acquisition expenses | 592.9 | 67.0 | 14.2 | 674.1 | — | 674.1 | |||||||||||||||
Variable operating expenses | 35.6 | 12.9 | 3.9 | 52.4 | 40.8 | 93.2 | |||||||||||||||
| 893.8 | 125.1 | 209.2 | 1,228.1 | 40.8 | 1,268.9 | ||||||||||||||||
Segment (loss) income before other operating expenses | $ | (545.9 | ) | $ | 7.8 | $ | 109.9 | $ | (428.2 | ) | $ | 14.0 | (414.2 | ) | |||||||
Other operating expenses(4) | 210.8 | ||||||||||||||||||||
Segment loss before federal income taxes | $ | (625.0 | ) | ||||||||||||||||||
| (1) | Brokerage and investment management income primarily reflects fees earned from the distribution of non-proprietary insurance and investment products as well as the management of assets for proprietary products. Variable expenses related to this business primarily consist of commissions and subadvisory fees. |
| (2) | Variable universal life includes group variable universal life business. |
| (3) | Other insurance includes results from the closed block, universal life, traditional life, yearly renewable term life, individual health and other insurance and group retirement products. |
| (4) | Includes insurance and VeraVest distribution operating expenses. |
11
ALLMERICA FINANCIAL CORPORATION
ALLMERICA FINANCIAL SERVICES
SELECTED FINANCIAL INFORMATION - VARIABLE ANNUITIES
| Quarter ended | ||||||||||||||
(In millions) | December 31 2003 | September 30 2003 | June 30 2003 | March 31 2003 | December 31 2002 | |||||||||
VARIABLE INDIVIDUAL ANNUITIES - REDEMPTIONS BY DISTRIBUTION CHANNEL(1) | ||||||||||||||
Agency | $ | 233.7 | $ | 218.5 | $ | 259.4 | $ | 430.4 | 415.3 | |||||
Select | 114.6 | 111.6 | 130.7 | 267.8 | 441.3 | |||||||||
Partner | 157.6 | 163.5 | 162.4 | 292.2 | 426.8 | |||||||||
| $ | 505.9 | $ | 493.6 | $ | 552.5 | $ | 990.4 | 1,283.4 | ||||||
December 31 2003 | December 31 2002 | % Change | |||||||
VARIABLE INDIVIDUAL ANNUITIES - ACCOUNT VALUES BY DISTRIBUTION CHANNEL | |||||||||
Agency | $ | 4,364.3 | $ | 4,623.6 | (5.6 | ) | |||
Select | 2,852.3 | 2,995.3 | (4.8 | ) | |||||
Partner | 4,526.0 | 4,507.2 | 0.4 | ||||||
| $ | 11,742.6 | $ | 12,126.1 | (3.2 | ) | ||||
NET AMOUNT AT RISK BY DISTRIBUTION CHANNEL | |||||||||
Agency | $ | 956.5 | $ | 1,854.8 | (48.4 | ) | |||
Select | 565.7 | 1,037.3 | (45.5 | ) | |||||
Partner | 1,029.0 | 1,720.3 | (40.2 | ) | |||||
| $ | 2,551.2 | $ | 4,612.4 | (44.7 | ) | ||||
VARIABLE ANNUITY DEFERRED ACQUISITION COST ASSET BY DISTRIBUTION CHANNEL | |||||||||
Agency | $ | 259.2 | $ | 290.7 | (10.8 | ) | |||
Select | 197.1 | 270.1 | (27.0 | ) | |||||
Partner | 203.9 | 217.4 | (6.2 | ) | |||||
| $ | 660.2 | $ | 778.2 | (15.2 | ) | ||||
| (1) | Includes both full policy and partial policy surrenders, withdrawals and death benefits (to the extent equal to account value). |
12
ALLMERICA FINANCIAL CORPORATION
ALLMERICA FINANCIAL SERVICES
FUTURE POLICY BENEFITS AND ACCOUNT BALANCES
(In millions) | December 31 2003 | December 31 2002 | % Change | ||||||
GENERAL ACCOUNT RESERVES | |||||||||
Insurance | |||||||||
Traditional life | $ | 845.8 | $ | 854.2 | (1.0 | ) | |||
Universal life (1) | 661.6 | 703.0 | (5.9 | ) | |||||
Variable universal life (2) | 221.2 | 222.9 | (0.8 | ) | |||||
Individual health(3) | 260.3 | 265.4 | (1.9 | ) | |||||
Total insurance | 1,988.9 | 2,045.5 | (2.8 | ) | |||||
Annuities | |||||||||
Individual annuities | 1,363.1 | 1,716.0 | (20.6 | ) | |||||
Group annuities | 572.5 | 615.0 | (6.9 | ) | |||||
Total annuities | 1,935.6 | 2,331.0 | (17.0 | ) | |||||
Total general account reserves | $ | 3,924.5 | $ | 4,376.5 | (10.3 | ) | |||
SEPARATE ACCOUNT LIABILITIES | |||||||||
Variable individual life | $ | 1,053.2 | $ | 977.9 | 7.7 | ||||
Variable individual annuities | 10,545.8 | 10,611.9 | (0.6 | ) | |||||
Total individual | 11,599.0 | 11,589.8 | 0.1 | ||||||
Group variable universal life | 127.0 | 349.7 | (63.7 | ) | |||||
Group annuities | 109.4 | 403.9 | (72.9 | ) | |||||
Total group | 236.4 | 753.6 | (68.6 | ) | |||||
Total separate account liabilities | $ | 11,835.4 | $ | 12,343.4 | (4.1 | ) | |||
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
| 2003 | 2002 | % Change | 2003 | 2002 | % Change | |||||||||||||||||
SEPARATE ACCOUNT INDIVIDUAL ANNUITIES | ||||||||||||||||||||||
Balance at beginning of period | $ | 10,034.9 | $ | 10,445.8 | (3.9 | ) | $ | 10,611.9 | $ | 12,834.5 | (17.3 | ) | ||||||||||
Direct premiums and deposits | 21.0 | 73.2 | (71.3 | ) | 103.9 | 1,892.4 | (94.5 | ) | ||||||||||||||
Redemptions | (440.3 | ) | (922.0 | ) | (52.2 | ) | (2,135.8 | ) | (2,087.0 | ) | 2.3 | |||||||||||
Market appreciation (depreciation) | 904.2 | 518.3 | 74.5 | 1,946.3 | (2,284.5 | ) | N/M | |||||||||||||||
Transfers and other | 26.0 | 496.6 | (94.8 | ) | 19.5 | 256.5 | (92.4 | ) | ||||||||||||||
Balance at end of period | $ | 10,545.8 | $ | 10,611.9 | (0.6 | ) | $ | 10,545.8 | $ | 10,611.9 | (0.6 | ) | ||||||||||
| (1) | Universal life reserves include reinsured balances of $633.8 million and $681.7 million at December 31, 2003 and December 31, 2002, respectively. |
| (2) | Variable universal life reserves include group variable universal life reserves of $23.6 million and $11.8 million at December 31, 2003 and December 31, 2002, respectively. |
| (3) | Individual health reserves include reinsured balances of $258.9 million and $264.0 million at December 31, 2003 and December 31, 2002, respectively. |
13
ALLMERICA FINANCIAL CORPORATION
ASSET MANAGEMENT
CONDENSED INCOME STATEMENTS AND SUPPLEMENTAL INFORMATION
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
INTEREST MARGINS ON GICS | ||||||||||||||||||||||
Net investment income | $ | 16.7 | $ | 24.4 | (31.6 | ) | $ | 71.8 | $ | 100.2 | (28.3 | ) | ||||||||||
Interest credited | (17.0 | ) | (17.6 | ) | (3.4 | ) | (66.9 | ) | (85.7 | ) | (21.9 | ) | ||||||||||
Net interest margin | (0.3 | ) | 6.8 | N/M | 4.9 | 14.5 | (66.2 | ) | ||||||||||||||
PREMIUM FINANCING BUSINESS | ||||||||||||||||||||||
Fees | 3.8 | 3.5 | 8.6 | 14.4 | 13.5 | 6.7 | ||||||||||||||||
Operating expenses | (3.1 | ) | (3.1 | ) | — | (12.0 | ) | (9.8 | ) | 22.4 | ||||||||||||
Net premium financing business | 0.7 | 0.4 | 75.0 | 2.4 | 3.7 | (35.1 | ) | |||||||||||||||
FEES AND OTHER INCOME | ||||||||||||||||||||||
External fees | 1.1 | 2.0 | (45.0 | ) | 6.5 | 8.1 | (19.8 | ) | ||||||||||||||
Internal fees | 1.3 | 1.3 | — | 5.2 | 5.9 | (11.9 | ) | |||||||||||||||
Other operating expenses | (1.7 | ) | (2.0 | ) | (15.0 | ) | (7.7 | ) | (7.8 | ) | (1.3 | ) | ||||||||||
Segment income before federal income taxes | $ | 1.1 | $ | 8.5 | (87.1 | ) | $ | 11.3 | $ | 24.4 | (53.7 | ) | ||||||||||
| Year ended December 31 | |||||||||||
| 2003 | 2002 | % Change | |||||||||
GIC DEPOSITS | |||||||||||
Outstanding GIC deposits, beginning of period | $ | 1,410.0 | $ | 2,689.7 | (47.6 | ) | |||||
Withdrawals during the period | (69.1 | ) | (1,577.3 | ) | (95.6 | ) | |||||
Deposits during the period | — | 211.9 | N/M | ||||||||
Interest credited during the period | 66.9 | 85.7 | (21.9 | ) | |||||||
Outstanding GIC deposits, end of period | $ | 1,407.8 | $ | 1,410.0 | (0.2 | ) | |||||
| December 31 | ||||||||
| 2003 | 2002 | |||||||
GIC SCHEDULED MATURITIES | ||||||||
2003 | $ | — | $ | 83.3 | ||||
2004 | 221.4 | 137.2 | ||||||
2005 | 732.7 | 672.2 | ||||||
2006 | 311.4 | 358.5 | ||||||
2007+ | 142.3 | 158.8 | ||||||
| 1,407.8 | (1) | 1,410.0 | (1) | |||||
| (1) | Includes $4.1 million and $3.8 million of traditional GIC balances for the years ended December 31, 2003 and 2002, respectively |
14
ALLMERICA FINANCIAL CORPORATION
CORPORATE
CONDENSED INCOME STATEMENTS
| Quarter ended December 31 | Year ended December 31 | |||||||||||||||||||||
(In millions) | 2003 | 2002 | % Change | 2003 | 2002 | % Change | ||||||||||||||||
REVENUES | ||||||||||||||||||||||
Net investment income | $ | 0.5 | $ | 0.7 | (28.6 | ) | $ | 1.9 | $ | 5.0 | (62.0 | ) | ||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||
Interest expense(1) | 10.0 | 10.0 | — | 39.9 | 39.9 | — | ||||||||||||||||
Other operating expenses | 14.2 | 11.2 | 26.8 | 57.5 | 53.2 | 8.1 | ||||||||||||||||
Total operating expenses | 24.2 | 21.2 | 14.2 | 97.4 | 93.1 | 4.6 | ||||||||||||||||
Net segment loss before federal income taxes | $ | (23.7 | ) | $ | (20.5 | ) | 15.6 | $ | (95.5 | ) | $ | (88.1 | ) | 8.4 | ||||||||
| (1) | Reflects the reclassification, in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information”, of costs that were classified as Minority Interest prior to the adoption of Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. |
15
ALLMERICA FINANCIAL CORPORATION
NET INVESTMENT INCOME
| Year ended December 31, 2003 | |||||||||||||||||||||||||||||||||||
(In millions, except yields) | Property and Casualty(1) | Yield | Allmerica Financial Services | Yield | Asset Management | Yield | Corporate(2) | Yield | Total | Yield | |||||||||||||||||||||||||
Fixed maturities | $ | 188.5 | 6.00 | % | $ | 161.7 | 5.85 | % | $ | 73.4 | 6.33 | % | $ | 1.3 | 4.58 | % | $ | 424.9 | 5.99 | % | |||||||||||||||
Equity securities | 0.5 | 4.62 | % | 0.5 | 2.99 | % | — | — | — | — | 1.0 | 3.65 | % | ||||||||||||||||||||||
Mortgages | 6.3 | 8.50 | % | 7.2 | 7.99 | % | 5.3 | 8.47 | % | 0.5 | — | 19.3 | 8.58 | % | |||||||||||||||||||||
All other | (8.0 | ) | — | 33.5 | — | (5.3 | ) | — | (0.5 | ) | — | 19.7 | — | ||||||||||||||||||||||
Investment expenses | (3.8 | ) | — | (3.9 | ) | — | (1.5 | ) | — | — | — | (9.2 | ) | — | |||||||||||||||||||||
Total | $ | 183.5 | 5.57 | % | $ | 199.0 | 5.88 | % | $ | 71.9 | 5.85 | % | $ | 1.3 | 3.86 | % | $ | 455.7 | 5.74 | % | |||||||||||||||
| Year ended December 31, 2002 | |||||||||||||||||||||||||||||||||||
| Property and Casualty(1) | Yield | Allmerica Financial Services | Yield | Asset Management | Yield | Corporate(2) | Yield | Total | Yield | ||||||||||||||||||||||||||
Fixed maturities | $ | 200.0 | 6.43 | % | $ | 230.6 | 6.98 | % | $ | 133.5 | 6.78 | % | $ | 3.8 | 4.88 | % | $ | 567.9 | 6.71 | % | |||||||||||||||
Equity securities | 0.7 | 3.84 | % | 0.9 | 2.36 | % | — | — | — | — | 1.6 | 2.88 | % | ||||||||||||||||||||||
Mortgages | 6.8 | 7.32 | % | 10.2 | 8.72 | % | 6.3 | 6.90 | % | 0.6 | — | 23.9 | 8.00 | % | |||||||||||||||||||||
All other | (1.8 | ) | — | 50.1 | — | (37.3 | ) | — | (0.4 | ) | — | 10.6 | — | ||||||||||||||||||||||
Investment expenses | (3.7 | ) | — | (7.9 | ) | — | (2.2 | ) | — | — | — | (13.8 | ) | — | |||||||||||||||||||||
Total | $ | 202.0 | 6.03 | % | $ | 283.9 | 6.66 | % | $ | 100.3 | 4.82 | % | $ | 4.0 | 3.93 | % | $ | 590.2 | 6.02 | % | |||||||||||||||
| (1) | Includes purchase accounting adjustments of $3.3 million and $3.5 million for the years ended December 31, 2003 and 2002, respectively. |
| (2) | Includes corporate eliminations of $0.6 million and $1.0 million for the years ended December 31, 2003 and 2002, respectively. |
16
ALLMERICA FINANCIAL CORPORATION
AGING OF GROSS UNREALIZED LOSSES ON SECURITIES AVAILABLE FOR SALE
| December 31, 2003 | ||||||||||||||||||
| Unrealized Losses | Fair Value | |||||||||||||||||
(In millions) | Property and Casualty (1) | Life & Other (2) | Total | Property and Casualty (1) | Life & Other (2) | Total | ||||||||||||
INVESTMENT GRADE FIXED MATURITIES: | ||||||||||||||||||
0 - 6 months | $ | 10.8 | $ | 7.0 | $ | 17.8 | $ | 555.1 | $ | 468.4 | $ | 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 | 16.9 | 21.5 | 38.4 | 669.6 | 781.9 | 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 | $ | 17.9 | $ | 30.0 | $ | 47.9 | $ | 696.3 | $ | 840.8 | $ | 1,537.1 | ||||||
| December 31, 2002 | ||||||||||||||||||
| Unrealized Losses | Fair Value | |||||||||||||||||
Property and Casualty (1) | Life & Other (2) | Total | Property and Casualty (1) | Life & Other (2) | Total | |||||||||||||
INVESTMENT GRADE FIXED MATURITIES: | ||||||||||||||||||
0 - 6 months | $ | 3.6 | $ | 9.8 | $ | 13.4 | $ | 147.7 | $ | 139.5 | $ | 287.2 | ||||||
7 - 12 months | 0.5 | 0.6 | 1.1 | 21.3 | 7.2 | 28.5 | ||||||||||||
Greater than 12 months | 2.9 | 14.5 | 17.4 | 38.0 | 122.9 | 160.9 | ||||||||||||
Total investment grade fixed maturities | 7.0 | 24.9 | 31.9 | 207.0 | 269.6 | 476.6 | ||||||||||||
BELOW INVESTMENT GRADE FIXED MATURITIES: | ||||||||||||||||||
0 - 6 months | 6.3 | 9.6 | 15.9 | 49.8 | 70.6 | 120.4 | ||||||||||||
7 - 12 months | 4.8 | 12.6 | 17.4 | 40.3 | 98.8 | 139.1 | ||||||||||||
Greater than 12 months | 9.7 | 31.4 | 41.1 | 42.1 | 114.0 | 156.1 | ||||||||||||
Total below investment grade fixed maturities | 20.8 | 53.6 | 74.4 | 132.2 | 283.4 | 415.6 | ||||||||||||
Equity securities | 0.1 | 0.3 | 0.4 | — | 1.1 | 1.1 | ||||||||||||
Total fixed maturities and equity securities | $ | 27.9 | $ | 78.8 | $ | 106.7 | $ | 339.2 | $ | 554.1 | $ | 893.3 | ||||||
| (1) | Property and Casualty includes The Hanover Insurance Company, Citizens Insurance Company of America, and their subsidiaries and excludes discontinued Group Life & Health. |
| (2) | Life & Other includes Allmerica Financial Life Insurance and Annuity Company, First Allmerica Financial Life Insurance Company, Allmerica Financial Corporation (the holding company) and other non-Property and Casualty subsidiaries. |
17
ALLMERICA FINANCIAL CORPORATION
CREDIT QUALITY OF FIXED MATURITIES
(In millions) | December 31, 2003 | |||||||||||||||||||
| Amortized Cost | Fair Value | |||||||||||||||||||
NAIC Designation | Rating Agency Equivalent Designation | Property and Casualty (1) | Life & Other(2) | Total | Property and Casualty (1) | Life & Other(2) | Total | |||||||||||||
1 | Aaa/Aa/A | $ | 2,316.9 | $ | 2,385.7 | $ | 4,702.6 | $ | 2,392.7 | $ | 2,467.2 | $ | 4,859.9 | |||||||
2 | Baa | 870.0 | 1,351.7 | 2,221.7 | 894.3 | 1,435.5 | 2,329.8 | |||||||||||||
3 | Ba | 91.5 | 133.9 | 225.4 | 97.0 | 138.8 | 235.8 | |||||||||||||
4 | B | 76.1 | 64.3 | 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 | $ | 3,385.8 | $ | 3,960.5 | $ | 7,346.3 | $ | 3,508.4 | $ | 4,138.1 | $ | 7,646.5 | ||||||||
| December 31, 2002 | ||||||||||||||||||||
| Amortized Cost | Fair Value | |||||||||||||||||||
NAIC Designation | Rating Agency Equivalent | Property and Casualty (1) | Life & Other(2) | Total | Property and Casualty (1) | Life & Other(2) | Total | |||||||||||||
1 | Aaa/Aa/A | $ | 2,304.6 | $ | 2,513.7 | $ | 4,818.3 | $ | 2,398.5 | $ | 2,662.9 | $ | 5,061.4 | |||||||
2 | Baa | 562.2 | 1,514.6 | 2,076.8 | 581.4 | 1,599.1 | 2,180.5 | |||||||||||||
3 | Ba | 133.1 | 310.3 | 443.4 | 129.2 | 281.4 | 410.6 | |||||||||||||
4 | B | 110.2 | 115.6 | 225.8 | 106.6 | 106.0 | 212.6 | |||||||||||||
5 | Caa and lower | 50.6 | 68.6 | 119.2 | 45.0 | 65.5 | 110.5 | |||||||||||||
6 | In or near default | 9.1 | 23.3 | 32.4 | 8.0 | 19.5 | 27.5 | |||||||||||||
Total fixed maturities | $ | 3,169.8 | $ | 4,546.1 | $ | 7,715.9 | $ | 3,268.7 | $ | 4,734.4 | $ | 8,003.1 | ||||||||
| (1) | Property and Casualty includes The Hanover Insurance Company, Citizens Insurance Company of America, and their subsidiaries and excludes discontinued Group Life & Health. |
| (2) | Life & Other includes Allmerica Financial Life Insurance and Annuity Company, First Allmerica Financial Life Insurance Company, Allmerica Financial Corporation (the holding company) and other non-Property and Casualty subsidiaries. |
18
ALLMERICA FINANCIAL CORPORATION
HISTORICAL FINANCIAL HIGHLIGHTS
(In millions, except per share data) | 2003 | Q4 03 | Q3 03 | Q2 03 | Q1 03 | 2002 | Q4 02 | Q3 02 | Q2 02 | Q1 02 | ||||||||||||||||||||||||||||||
SEGMENT INCOME (LOSS)(1) | ||||||||||||||||||||||||||||||||||||||||
Property and Casualty | $ | 143.6 | $ | 40.2 | $ | 38.6 | $ | 20.6 | $ | 44.2 | $ | 184.3 | $ | 35.2 | $ | 58.5 | $ | 51.6 | $ | 39.0 | ||||||||||||||||||||
Allmerica Financial Services | 26.9 | 11.9 | (5.8 | ) | 18.4 | 2.4 | (625.0 | ) | (0.7 | ) | (540.2 | ) | (113.8 | ) | 29.7 | |||||||||||||||||||||||||
Asset Management | 11.3 | 1.1 | 5.2 | 2.5 | 2.5 | 24.4 | 8.5 | 5.7 | 5.1 | 5.1 | ||||||||||||||||||||||||||||||
Corporate(2) | (95.5 | ) | (23.7 | ) | (23.9 | ) | (24.6 | ) | (23.3 | ) | (88.1 | ) | (20.5 | ) | (23.7 | ) | (21.3 | ) | (22.6 | ) | ||||||||||||||||||||
Total segment income (loss) before federal income taxes | $ | 86.3 | $ | 29.5 | $ | 14.1 | $ | 16.9 | $ | 25.8 | $ | (504.4 | ) | $ | 22.5 | $ | (499.7 | ) | $ | (78.4 | ) | $ | 51.2 | |||||||||||||||||
Federal income tax benefit (expense) on segment income (loss) | 6.1 | 0.8 | 5.6 | 1.8 | (2.1 | ) | 229.0 | (0.6 | ) | 184.7 | 50.7 | (5.8 | ) | |||||||||||||||||||||||||||
Total segment income (loss) after federal income taxes | 92.4 | 30.3 | 19.7 | 18.7 | 23.7 | (275.4 | ) | 21.9 | (315.0 | ) | (27.7 | ) | 45.4 | |||||||||||||||||||||||||||
Net realized investment gains (losses), net of amortization and taxes | 10.4 | 4.0 | (8.2 | ) | 6.6 | 8.0 | (89.4 | ) | (45.8 | ) | (0.7 | ) | (38.5 | ) | (4.4 | ) | ||||||||||||||||||||||||
Gain from retirement of trust instruments supported by funding obligations, net of taxes | 3.7 | — | 0.4 | 0.3 | 3.0 | 66.7 | 66.7 | — | — | — | ||||||||||||||||||||||||||||||
Income (loss) from sale of universal life business, net of taxes | 3.6 | — | — | — | 3.6 | (20.3 | ) | (20.3 | ) | — | — | — | ||||||||||||||||||||||||||||
(Losses) gains on derivative instruments, net of taxes | (4.5 | ) | (5.4 | ) | 0.3 | (0.4 | ) | 1.0 | 26.2 | 6.5 | — | 9.1 | 10.6 | |||||||||||||||||||||||||||
Restructuring costs, net of taxes | (18.7 | ) | (14.9 | ) | (0.8 | ) | (0.8 | ) | (2.2 | ) | (9.6 | ) | (9.6 | ) | — | — | — | |||||||||||||||||||||||
Other items, net of taxes | — | — | — | — | — | (0.6 | ) | (4.5 | ) | 2.3 | 1.6 | — | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of accounting change | 86.9 | 14.0 | 11.4 | 24.4 | 37.1 | (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 INCOME (LOSS) | $ | 86.9 | $ | 14.0 | $ | 11.4 | $ | 24.4 | $ | 37.1 | $ | (306.1 | ) | $ | 14.9 | $ | (313.4 | ) | $ | (55.5 | ) | $ | 47.9 | |||||||||||||||||
PER SHARE DATA (DILUTED) | ||||||||||||||||||||||||||||||||||||||||
NET INCOME (LOSS) | $ | 1.63 | $ | 0.26 | $ | 0.21 | $ | 0.46 | $ | 0.70 | $ | (5.79 | ) | $ | 0.28 | $ | (5.93 | ) | $ | (1.05 | ) | $ | 0.90 | |||||||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED)(3) | 53.2 | 53.5 | 53.3 | 53.0 | 53.0 | 52.9 | 52.9 | 52.9 | 52.9 | 53.1 | ||||||||||||||||||||||||||||||
BALANCE SHEET | ||||||||||||||||||||||||||||||||||||||||
Total investments | $ | 8,185.6 | $ | 8,279.5 | $ | 8,219.0 | $ | 8,172.2 | $ | 8,806.8 | $ | 9,816.0 | $ | 9,844.9 | $ | 9,977.2 | ||||||||||||||||||||||||
Separate account assets | $ | 11,835.4 | $ | 11,546.0 | $ | 11,719.0 | $ | 11,016.2 | $ | 12,343.4 | $ | 12,152.9 | $ | 14,054.3 | $ | 15,085.9 | ||||||||||||||||||||||||
Total assets | $ | 25,112.5 | $ | 25,008.0 | $ | 25,173.2 | $ | 24,372.8 | $ | 26,578.9 | $ | 27,528.6 | $ | 29,157.3 | $ | 30,292.2 | ||||||||||||||||||||||||
Total shareholders’ equity | $ | 2,220.2 | $ | 2,196.6 | $ | 2,225.6 | $ | 2,115.9 | $ | 2,072.2 | $ | 2,105.4 | $ | 2,391.7 | $ | 2,384.8 | ||||||||||||||||||||||||
Book value per share | $ | 41.89 | $ | 41.42 | $ | 41.96 | $ | 39.86 | $ | 39.12 | $ | 39.69 | $ | 45.07 | $ | 44.98 | ||||||||||||||||||||||||
Book value per share, excluding accumulated other comprehensive income | $ | 41.59 | $ | 41.30 | $ | 41.07 | $ | 40.59 | $ | 39.83 | $ | 39.47 | $ | 45.32 | $ | 46.32 | ||||||||||||||||||||||||
| (1) | Represents income or loss of the Company’s three operating segments: Property and Casualty, Allmerica Financial Services and Asset Management. 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. In addition, segment income or loss reflects those results related to the Corporate segment, which consists of income and expenses related to invested assets, corporate debt, preferred securities of a subsidiary trust and corporate overhead expenses. Corporate overhead expenses reflect costs not attributable to a particular segment, such as those related to certain officers and directors, technology, finance, human resources and legal. |
| (2) | Reflects the reclassification, in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures about Segment of an Enterprise and Related Information”, of costs that were classified as Minority Interest prior to the adoption of Statements of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. |
| (3) | 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. |
19
ALLMERICA FINANCIAL CORPORATION
HISTORICAL FINANCIAL HIGHLIGHTS
(In millions, except per share data) | 2001 | Q4 01 | Q3 01 | Q2 01 | Q1 01 | 2000 | Q4 00 | Q3 00 | Q2 00 | Q1 00 | ||||||||||||||||||||||||||||||
SEGMENT INCOME (LOSS)(1) | ||||||||||||||||||||||||||||||||||||||||
Property and Casualty | $ | 93.5 | $ | 29.0 | $ | 6.8 | $ | 41.5 | $ | 16.2 | $ | 190.0 | $ | 33.6 | $ | 59.4 | $ | 53.9 | $ | 43.1 | ||||||||||||||||||||
Allmerica Financial Services | 143.0 | 21.7 | 34.4 | 42.6 | 44.3 | 222.8 | 56.2 | 56.7 | 55.5 | 54.4 | ||||||||||||||||||||||||||||||
Asset Management | 20.7 | 4.2 | 6.1 | 4.4 | 6.0 | 22.5 | 7.0 | 5.8 | 4.6 | 5.1 | ||||||||||||||||||||||||||||||
Corporate (2) | (88.4 | ) | (22.4 | ) | (21.9 | ) | (21.7 | ) | (22.4 | ) | (85.4 | ) | (26.5 | ) | (19.9 | ) | (18.3 | ) | (20.7 | ) | ||||||||||||||||||||
Total segment income before federal income taxes | $ | 168.8 | $ | 32.5 | $ | 25.4 | $ | 66.8 | $ | 44.1 | $ | 349.9 | $ | 70.3 | $ | 102.0 | $ | 95.7 | $ | 81.9 | ||||||||||||||||||||
Federal income tax (expense) benefit on segment income | (4.3 | ) | 1.5 | 9.0 | (7.9 | ) | (6.9 | ) | (48.7 | ) | 10.1 | (22.1 | ) | (21.2 | ) | (15.5 | ) | |||||||||||||||||||||||
Total segment income after federal income taxes | 164.5 | 34.0 | 34.4 | 58.9 | 37.2 | 301.2 | 80.4 | 79.9 | 74.5 | 66.4 | ||||||||||||||||||||||||||||||
Net realized investment losses, net of amortization and taxes | (78.8 | ) | (12.6 | ) | (2.8 | ) | (51.0 | ) | (12.4 | ) | (87.8 | ) | (20.5 | ) | (17.4 | ) | (13.7 | ) | (36.2 | ) | ||||||||||||||||||||
(Losses) gains on derivative instruments, net of taxes | (22.9 | ) | (24.4 | ) | (0.4 | ) | 0.3 | 1.6 | — | — | — | — | — | |||||||||||||||||||||||||||
Loss from selected property and casualty exited agencies, policies, groups and programs, net of taxes | (44.4 | ) | (44.4 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Voluntary pool environmental losses, net of taxes | (21.5 | ) | (21.5 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Restructuring costs, net of taxes | (1.8 | ) | (1.8 | ) | — | — | — | (13.5 | ) | (0.3 | ) | — | (13.2 | ) | — | |||||||||||||||||||||||||
Other items, net of taxes | 5.0 | — | — | 5.0 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Income (loss) before cumulative effect of accounting change | 0.1 | (70.7 | ) | 31.2 | 13.2 | 26.4 | 199.9 | 59.6 | 62.5 | 47.6 | 30.2 | |||||||||||||||||||||||||||||
Cumulative effect of change in accounting principle, net of taxes | (3.2 | ) | — | — | — | (3.2 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
NET (LOSS) INCOME | $ | (3.1 | ) | $ | (70.7 | ) | $ | 31.2 | $ | 13.2 | $ | 23.2 | $ | 199.9 | $ | 59.6 | $ | 62.5 | $ | 47.6 | $ | 30.2 | ||||||||||||||||||
PER SHARE DATA (DILUTED) | ||||||||||||||||||||||||||||||||||||||||
NET (LOSS) INCOME | $ | (0.06 | ) | $ | (1.34 | ) | $ | 0.59 | $ | 0.25 | $ | 0.44 | $ | 3.70 | $ | 1.11 | $ | 1.16 | $ | 0.88 | $ | 0.56 | ||||||||||||||||||
DIVIDENDS | $ | 0.25 | $ | 0.25 | $ | — | $ | — | $ | — | $ | 0.25 | $ | — | $ | 0.25 | $ | — | $ | — | ||||||||||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) (3) | 53.1 | 52.7 | 53.1 | 53.1 | 53.1 | 54.0 | 53.8 | 53.9 | 54.1 | 54.3 | ||||||||||||||||||||||||||||||
BALANCE SHEET | ||||||||||||||||||||||||||||||||||||||||
Total investments | $ | 10,326.2 | $ | 10,367.2 | $ | 10,222.1 | $ | 9,676.8 | $ | 9,395.6 | $ | 9,312.5 | $ | 9,043.1 | $ | 8,871.5 | ||||||||||||||||||||||||
Separate account assets | $ | 14,838.4 | $ | 13,367.0 | $ | 16,095.1 | $ | 15,594.4 | $ | 17,437.4 | $ | 18,660.1 | $ | 18,477.5 | $ | 18,595.5 | ||||||||||||||||||||||||
Total assets | $ | 30,336.1 | $ | 28,913.8 | $ | 31,437.5 | $ | 30,556.4 | $ | 31,588.0 | $ | 32,634.8 | $ | 32,088.6 | $ | 31,854.1 | ||||||||||||||||||||||||
Total shareholders’ equity | $ | 2,391.1 | $ | 2,529.8 | $ | 2,502.7 | $ | 2,502.5 | $ | 2,409.1 | $ | 2,357.3 | $ | 2,288.6 | $ | 2,267.7 | ||||||||||||||||||||||||
Book value per share | $ | 45.19 | $ | 47.83 | $ | 47.39 | $ | 47.44 | $ | 45.74 | $ | 44.24 | $ | 42.98 | $ | 42.27 | ||||||||||||||||||||||||
Book value per share, excluding accumulated other comprehensive income | $ | 45.44 | $ | 46.98 | $ | 46.52 | $ | 46.23 | $ | 45.84 | $ | 44.92 | $ | 44.17 | $ | 43.13 | ||||||||||||||||||||||||
| (1) | Represents income or loss of the Company’s three operating segments: Property and Casualty, Allmerica Financial Services and Asset Management. 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. In addition, segment income or loss reflects those results related to the Corporate segment, which consists of income and expenses related to invested assets, corporate debt, preferred securities of a subsidiary trust and corporate overhead expenses. Corporate overhead expenses reflect costs not attributable to a particular segment, such as those related to certain officers and directors, technology, finance, human resources and legal. |
| (2) | Reflects the reclassification, in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures about Segment of an Enterprise and Related Information”, of costs that were classified as Minority Interest prior to the adoption of Statements of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. |
| (3) | Excludes 0.3 million shares for the quarter ended December 31, 2001 due to antidilution. |
20
ALLMERICA FINANCIAL CORPORATION
HISTORICAL FINANCIAL HIGHLIGHTS
(In millions, except per share data) | 1999 | Q4 99 | Q3 99 | Q2 99 | Q1 99 | 1998 | Q4 98 | Q3 98 | Q2 98 | Q1 98 | ||||||||||||||||||||||||||||||
SEGMENT INCOME (LOSS) (1) | ||||||||||||||||||||||||||||||||||||||||
Property and Casualty | $ | 199.6 | $ | 65.0 | $ | 49.5 | $ | 55.3 | $ | 29.8 | $ | 149.6 | $ | 52.4 | $ | 24.6 | $ | 34.9 | $ | 37.7 | ||||||||||||||||||||
Allmerica Financial Services | 205.5 | 54.2 | 54.7 | 47.7 | 48.9 | 169.0 | 43.5 | 39.1 | 44.2 | 42.2 | ||||||||||||||||||||||||||||||
Asset Management | 23.5 | 5.3 | 5.7 | 6.8 | 5.7 | 23.7 | 6.7 | 6.9 | 6.2 | 3.9 | ||||||||||||||||||||||||||||||
Corporate(2) | (83.9 | ) | (22.2 | ) | (19.9 | ) | (19.6 | ) | (22.2 | ) | (75.5 | ) | (21.4 | ) | (16.8 | ) | (18.8 | ) | (18.5 | ) | ||||||||||||||||||||
Total segment income before federal income taxes and minority interest | $ | 344.7 | $ | 102.3 | $ | 90.0 | $ | 90.2 | $ | 62.2 | $ | 266.8 | $ | 81.2 | $ | 53.8 | $ | 66.5 | $ | 65.3 | ||||||||||||||||||||
Federal income tax expense on segment income | (63.8 | ) | (21.5 | ) | (14.2 | ) | (17.2 | ) | (10.9 | ) | (44.5 | ) | (11.7 | ) | (8.5 | ) | (10.1 | ) | (14.2 | ) | ||||||||||||||||||||
Minority interest | ||||||||||||||||||||||||||||||||||||||||
Equity in earnings | — | — | — | — | — | (9.8 | ) | (2.4 | ) | (1.9 | ) | (1.7 | ) | (3.8 | ) | |||||||||||||||||||||||||
Total segment income after federal income taxes and minority interest | 280.9 | 80.8 | 75.8 | 73.0 | 51.3 | 212.5 | 67.1 | 43.4 | 54.7 | 47.3 | ||||||||||||||||||||||||||||||
Net realized investment gains (losses), net of amortization and taxes | 63.0 | (13.6 | ) | (16.7 | ) | (6.2 | ) | 99.5 | 28.8 | 6.4 | 1.1 | 4.5 | 16.8 | |||||||||||||||||||||||||||
Sales practice litigation, net of taxes | — | — | — | — | — | (20.2 | ) | — | (20.2 | ) | — | — | ||||||||||||||||||||||||||||
Restructuring costs, net of taxes | 1.2 | 1.2 | — | — | — | (5.8 | ) | (5.8 | ) | — | — | — | ||||||||||||||||||||||||||||
Other items, net of taxes | — | — | — | — | — | (0.6 | ) | — | — | — | (0.6 | ) | ||||||||||||||||||||||||||||
Income from continuing operations | 345.1 | 68.4 | 59.1 | 66.8 | 150.8 | 214.7 | 67.7 | 24.3 | 59.2 | 63.5 | ||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||
(Loss) income from operations of discontinued group life and health business, net of taxes | (18.8 | ) | — | (15.5 | ) | (6.6 | ) | 3.3 | (13.5 | ) | (1.8 | ) | (16.1 | ) | 1.1 | 3.3 | ||||||||||||||||||||||||
Loss on disposal of group life and health business, net of taxes | (30.5 | ) | — | (30.5 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
NET INCOME | $ | 295.8 | $ | 68.4 | $ | 13.1 | $ | 60.2 | $ | 154.1 | $ | 201.2 | $ | 65.9 | $ | 8.2 | $ | 60.3 | $ | 66.8 | ||||||||||||||||||||
PER SHARE DATA (DILUTED) | ||||||||||||||||||||||||||||||||||||||||
INCOME FROM CONTINUING OPERATIONS(3) | $ | 6.21 | $ | 1.25 | $ | 1.08 | $ | 1.21 | $ | 2.61 | $ | 3.56 | $ | 1.13 | $ | 0.40 | $ | 0.98 | $ | 1.05 | ||||||||||||||||||||
NET INCOME | $ | 5.33 | $ | 1.25 | $ | 0.24 | $ | 1.09 | $ | 2.67 | $ | 3.33 | $ | 1.10 | $ | 0.13 | $ | 1.00 | $ | 1.11 | ||||||||||||||||||||
DIVIDENDS | $ | 0.25 | $ | — | $ | 0.25 | $ | — | $ | — | $ | 0.15 | $ | — | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) | 55.5 | 54.6 | 54.7 | 55.1 | 57.7 | 60.3 | 59.9 | 60.6 | 60.5 | 60.3 | ||||||||||||||||||||||||||||||
BALANCE SHEET | ||||||||||||||||||||||||||||||||||||||||
Total investments | $ | 8,599.0 | $ | 9,004.6 | $ | 9,792.4 | $ | 9,922.1 | $ | 9,818.7 | $ | 9,936.0 | $ | 10,029.0 | $ | 9,684.2 | ||||||||||||||||||||||||
Separate account assets | $ | 17,629.6 | $ | 15,102.9 | $ | 15,635.9 | $ | 14,329.4 | $ | 13,697.7 | $ | 11,424.9 | $ | 12,260.5 | $ | 11,425.4 | ||||||||||||||||||||||||
Total assets | $ | 30,769.6 | $ | 29,080.0 | $ | 29,826.4 | $ | 28,461.2 | $ | 27,653.1 | $ | 25,233.5 | $ | 25,816.4 | $ | 24,511.8 | ||||||||||||||||||||||||
Total shareholders’ equity | $ | 2,240.2 | $ | 2,199.7 | $ | 2,248.7 | $ | 2,387.5 | $ | 2,458.6 | $ | 2,480.3 | $ | 2,539.4 | $ | 2,468.8 | ||||||||||||||||||||||||
Book value per share | $ | 41.32 | $ | 40.86 | $ | 41.49 | $ | 42.30 | $ | 41.95 | $ | 41.02 | $ | 42.04 | $ | 40.94 | ||||||||||||||||||||||||
Book value per share, excluding accumulated other comprehensive income | $ | 42.71 | $ | 41.76 | $ | 41.45 | $ | 40.97 | $ | 38.87 | $ | 38.08 | $ | 38.01 | $ | 37.07 | ||||||||||||||||||||||||
| (1) | Represents income or loss of the Company’s three operating segments: Property and Casualty, Allmerica Financial Services and Asset Management. 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. In addition, segment income or loss reflects those results related to the Corporate segment, which consists of income and expenses related to invested assets, corporate debt, preferred securities of a subsidiary trust and corporate overhead expenses. Corporate overhead expenses reflect costs not attributable to a particular segment, such as those related to certain officers and directors, technology, finance, human resources and legal. |
| (2) | Reflects the reclassification, in accordance with Statement of Financial Accounting Standards No. 131, “Disclosures about Segment of an Enterprise and Related Information”, of costs that were classified as Minority Interest prior to the adoption of Statements of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. |
| (3) | Income from continuing operations represents net income before adjustment for the results of the discontinued operations of the Company. |
21
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 | 2003 | |||||||||||||
| Price Range | Dividends Per Share | |||||||||||||
| High | Low | |||||||||||||
March 31 | $ | 16.43 | $ | 9.84 | — | |||||||||
June 30 | $ | 18.53 | $ | 13.75 | — | |||||||||
September 30 | $ | 24.90 | $ | 17.74 | — | |||||||||
December 31 | $ | 31.29 | $ | 24.65 | — | |||||||||
Quarter Ended | 2002 | |||||||||||||
| Price Range | Dividends Per Share | |||||||||||||
| High | Low | |||||||||||||
March 31 | $ | 45.17 | $ | 40.60 | — | |||||||||
June 30 | $ | 50.33 | $ | 44.20 | — | |||||||||
September 30 | $ | 45.85 | $ | 12.00 | — | |||||||||
December 31 | $ | 11.51 | $ | 7.16 | — | |||||||||
INDUSTRY RATINGS AS OF January 28, 2004
Financial Strength Ratings | A.M. Best | Standard & Poor’s | Moody’s | |||
The Hanover Insurance Company | A- | BBB+ | Baa2 | |||
Citizens Insurance Company of America | A- | BBB+ | — | |||
First Allmerica Financial Life Insurance Company | B+ | B+ | Ba1 | |||
Allmerica Financial Life Insurance and Annuity Company | B+ | B+ | Ba1 | |||
Debt Ratings | A.M. Best | Standard & Poor’s | Moody’s | |||
Allmerica Financial Corporation Senior Debt | bb+ | BB- | Ba3 | |||
Allmerica Financial Corporation Capital Securities | bb- | B- | B2 | |||
Allmerica Financial Corporation Short Term Debt | AMB-3 | — | NP | |||
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
