UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to
Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 29, 1999
ALLMERICA FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-13754 04-3263626
(State or other (Commission File (I.R.S. Employer I.D.
jurisdiction of Number) Number)
Incorporation)
440 Lincoln Street, Worcester, Massachusetts 01653
(Address of Principal Executive Offices)
(Zip Code)
(508) 855-1000
(Registrant's Telephone Number including area code)
Page 1 of 8 pages
Exhibit Index on page 4
<PAGE>
Item 5. Other Events.
On April 29, 1999, Allmerica Financial Corporation announced its Financial
results for first quarter 1999. A copy of the press release is attached
as Exhibit 99 and is incorporated by reference herein.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE `SAFE HARBOR'PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Forward-Looking Statements
The Company wishes to caution readers that the following important factors,
among others, in some cases have affected and in the future could affect,
the Company's actual results and could cause the Company's actual results
for 1998 and beyond to differ materially from those expressed in any forward-
looking statements made by, or on behalf of, the Company. When used in the
attached press release, words such as "believes", "anticipated", "expects"
and similar expressions are intended to identify forward-looking statements.
See "Important Factors Regarding Forward-Looking Statements" filed as Exhibit
99-2 to the Company's Annual Report on Form 10-K for the period ended December
31, 1998.
Factors that may cause actual results to differ materially from those
contemplated or projected, forecast, estimated or budgeted in such forward-
looking statements include among others, the following possibilities:
(i)adverse catastrophe experience and severe weather; (ii) adverse loss
development for events the Company insured in prior years or adverse trends
in mortality and morbidity; (iii) heightened competition, including the
intensification of price competition, the entry of new competitors, and the
introduction of new products by new and existing competitors; (iv) adverse
state and federal legislation or regulation, including decreases in rates,
limitations on premium levels, increases in minimum capital and reserve
requirements, benefit mandates, limitations on the ability to manage care and
utilization, and tax treatment of insurance and annuity products; (v) changes
in interest rates causing a reduction of investment income or in the market
value of interest rate sensitive investments; (vi) failure to obtain new
customers, retain existing customers or reductions in policies in force by
existing customers; (vii) higher service, administrative, or general expense
due to the need for additional advertising, marketing, administrative or
management information systems expenditures; (viii) loss or retirement of
key executives; (ix) increases in medical costs, including increases in
utilization, costs of medical services, pharmaceuticals, durable medical
equipment and other covered items; (x) termination of provider contracts or
renegotiations at less cost-effective rates or terms of payment; (xi) changes
in the Company's liquidity due to changes in asset and liability matching;
(xii) restrictions on insurance underwriting, based on genetic testing and
other criteria; (xiii) adverse changes in the ratings obtained from
independent rating agencies, such as Moody's, Standard and Poor's, A.M. Best,
and Duff & Phelps; (xiv) lower appreciation on and decline in value of managed
investments, resulting in reduced variable products, assets and related fees;
(xv) possible claims relating to sales practices for insurance products;
(xvi) uncertainty related to the Year 2000 issue; (xvii) failure of a
reinsurer of the Company's policies to pay its liabilities under reinsurance
contracts; (xviii) earlier than expected withdrawals from the Company's
general account annuities, GICs, and other insurance products; and (xix)
changes in the mix of assets comprising the Company's investment portfolio and
the fluctuation of the market value of such assets.
Item 7. Financial Statements and Exhibits.
Exhibit 99 Press Release dated April 29, 1999, announcing Allmerica
Financial Corporation first quarter 1999 financial results.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALLMERICA FINANCIAL
CORPORATION
By: /s/ Edward J. Parry III
Edward J. Parry III
Vice President, Chief
Financial Officer, and
Treasurer
Date: April 30, 1999
3
<PAGE>
Exhibit Index
Exhibit 99 Press Release dated April 29, 1999, announcing Allmerica
Financial Corporation first quarter 1999 financial results.
4
<PAGE>
EXHIBIT 99
ALLMERICA FINANCIAL CORPORATION REPORTS FIRST QUARTER OPERATING EARNINGS
OF $0.95 PER SHARE
WORCESTER, Mass., April 29, 1999 - Allmerica Financial Corporation
(NYSE: AFC) today reported record first quarter operating earnings.
First quarter highlights:
Net operating income per share increased 13 percent to $0.95 per share, or
$54.8 million, from $0.84 per share or $50.4 million in 1998. 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 $54.6 million, up 18.4
percent from $46.1 million for the same period in 1998.
Risk Management pre-tax operating earnings were $35.2 million, down from the
$42.3 million reported in the first quarter of 1998. This decline is
principally due to extraordinarily high pre-tax catastrophe losses of $43.7
million, which were partially offset by a $20 million benefit from
reinsurance.
Net income was $154.1 million, or $2.67 per share, compared to $66.8 million,
or $1.11 per share in 1998. In the quarter net realized investment gains,
net of taxes, minority interest and amortization, were $99.3 million versus
$17 million in 1998.
"We are pleased with our record first quarter results." Said John F.
O'Brien, president and chief executive officer of Allmerica Financial
Corporation. "Continued growth in separate account assets enabled our Asset
Accumulation segment to produce record earnings. However, significant
weather-related catastrophe losses drove lower earnings in the Risk
Management segment."
5
<PAGE>
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. Risk
Management markets property and casualty insurance products on a regional
basis through The Hanover Insurance Company and Citizens Insurance Company of
America with additional distribution channels in Voluntary Benefits and
Specialty Products.
Asset Accumulation
First quarter pre-tax operating earnings for the Asset Accumulation business
increased 18.4 percent to $54.6 million from $46.1 million in 1998.
Allmerica Financial Services' pre-tax operating earnings increased to $48.9
million in the quarter, up from $42.2 million in the first quarter of 1998.
Allmerica Asset Management's pre-tax operating earnings were $5.7 million, a
46.2 percent increase, up from $3.9 million in the same period in the prior
year.
Asset Accumulation highlights:
Variable annuity sales were $714.8 million in 1999, up from $696.4 million in
1998.
Variable life insurance sales were up 19.8 percent, to $45.3 million in the
quarter.
Variable product fees of $82.9 million were up 19.3 percent over the 1998
first quarter. Increased fees are related to variable product asset growth
resulting from sales and stock market appreciation.
Allmerica Asset Management's operating earnings benefited from the sales of
funding agreements, which totaled $560 million for the quarter versus $300
million in the first quarter of 1998.
Risk Management
Risk Management pre-tax operating earnings were $35.2 million, compared to
$42.3 million for the first quarter of 1998.
Property and Casualty highlights:
Direct written premiums were $543.6 million and $516.3 million for the first
quarters of 1999 and 1998, respectively.
Pre-tax catastrophe losses were $43.7 million in the quarter, up from $10.1
million in 1998.
The statutory expense ratio improved to 28.4 percent in the quarter compared
to 29.4 percent for the first quarter of last year and 28.5 percent for the
full year in 1998.
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Corporate
Corporate segment net expenses were $16 million in the first quarter of 1999,
compared to $12.3 million in 1998.
Investment Results
Net investment income was $172.2 million for the first quarter of 1999,
compared to $168.3 million in the same period in 1998. This increase was
principally due to higher sales of funding agreements, partially offset by
lower portfolio yields.
First quarter net realized investment gains were $131.4 million, compared to
$29.2 million in 1998. During 1999, realized gains related principally to
the sale of appreciated equities in the property and casualty investment
portfolio.
Balance Sheet
Shareholders' equity was $2.4 billion, or $42.30 per share at March 31, 1999,
compared to $2.46 billion, or $41.95 per share at December 31, 1998.
Excluding the impact of SFAS No. 115, book value was $40.97 per share at the
close of the first quarter, compared to $38.87 per share at
December 31, 1998.
Total assets were $28.5 billion at March 31, 1999, up from $27.6 billion at
year-end 1998. Separate account assets increased to $14.3 billion at
March 31, 1999, up from $13.7 billion at December 31, 1998.
Additional Items
On March 30, 1999 Allmerica Financial completed the $200 million common stock
repurchase program announced in October, 1998 at an approximate average price
of $54 per share.
On March 23, 1999, Allmerica Financial announced another $200 million common
stock repurchase program. As of April 28, Allmerica Financial had
repurchased approximately 2.1 million shares of its common stock for an
aggregate cost of approximately $120 million.
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.
CONTACTS: Investors Media
Henry P. St. Cyr Michael F. Buckley
(508) 855-2959 (508) 855-3099
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<PAGE>
<TABLE>
<CAPTION
ALLMERICA FINANCIAL CORPORATION
(In millions, except per share data)
Quarter ended
March 31
1999 1998
<C> <C>
<S>
Net income $154.1 $66.8
Net income per share $2.67 $1.11
Weighted average shares 57.7 60.3
</TABLE>
The following is a reconciliation from net operating income to net income
per share:
<TABLE>
<CAPTION>
Quarter ended
PER SHARE DATA (DILUTED) <FN2> March 31
1999 1998
<C> <C>
<S>
Net operating income <FN1> $0.95 $0.84
Net realized gains on
investments, net of taxes,
minority interest and
amortization 1.72 0.28
Other, net of applicable
federal income taxes - (0.01)
------- -------
Net income $2.67 $1.11
======= =======
<FN>
<FN1>
Net operating income excludes net realized gains and losses and other items
which management believes are not indicative of overall operating trends,
all net of taxes and minority interest.
<FN2>
Basic net income per share was $2.69 for the quarter ended March 31, 1999.
For the quarter ended March 31, 1998 basic and diluted net income per share
are the same.
</FN>
</TABLE>
All figures reported are unaudited and are in accordance with generally
accepted accounting principles.
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