Transcript Slide 1

Allmerica Financial Corporation
Smith Barney Citigroup
Small & Mid-Cap Conference
May 6, 2004
Ed Parry
Executive Vice President
Chief Financial Officer
Allmerica Financial Corporation
Forward Looking Statement
Certain statements in this presentation may contain, “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. In particular, this presentation may include
forward looking statements with respect to earnings growth, return on equity, anticipated price increases in
our P&C business, growth, expense management and improved underwriting.
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, changes from assumed surrender activities and assumed stock market returns, adverse selection in
underwriting activities and surrender patterns, investment impairments, heightened competition, adverse
state and federal legislation or regulation, financial ratings actions, and various other factors, which include
the effect of the Company’s decision to close its retail broker-dealer operations as well as the anticipated
impact and cost of the GMDB hedging program. The performance of the hedging program is dependent
on, among other things, the future performance and volatility of the equity market, the extent to which the
performance of the various hedging instruments correlate with the investment performance of the
underlying annuity sub-accounts, the continued availability of equity index futures and redemption and
mortality patterns in the Company’s annuity contracts.
The discussion in this presentation includes financial measures that are not derived from generally accepted
accounting principles, or GAAP. Information regarding these non-GAAP financial measures is available in
the Investor Relations section of the Allmerica website at www.allmerica.com
Who We Are
Fortune 500: Market Capitalization of $1.9B
Regional Property and Casualty Company
• 30th Largest Property and Casualty Insurer
• Over $2 billion in Written Premium
• Partnerships with 1,850 Local Agencies
in 25 States – Northeast and Michigan Focus
• Hanover & Citizens Brand Names
• Over 150 Years in the Business
• A.M. Best Rating of A- [Excellent]
Life Companies
• Closed Block of Business Consisting Primarily of
Variable Annuities
• $14B in Assets
• $120 Million in Annual Operating Cash Flow
• A.M. Best “Secure” Rating of B+ [Very Good]
Who We Are in Numbers
2003 Revenue
2003 Pre-tax Segment Income*
24%
7%
Li
fe
Life $0.8B
$9
M
P&C
$2.5B
P&C
$118M
76%
93%
* Excludes Corporate Debt
Total Revenue: $3.3B
2003 Net Income: $87m
EPS: $1.63
Who We Are in Numbers
Statutory Surplus
$1,555
$1,218
GAAP Equity
$1,619
$1,312
43%
$1,029
$1,002
$892
$830
Life $1.2B
P&C
$1.6B
57%
$326
Q3 '02
$482
Q4 '02
Life Surplus
$553
Q4 '03
$590
Q1 '04
P&C Surplus
3/31/04 Life Company RBC = 420%
Life and P&C Equity $2.8B
Debt
(0.5B)
Total GAAP Equity
$2.3B
Allmerica Financial Corporation
2003 Property and Casualty Business Mix
$2.2B Total Net Written Premium
Other Personal
2%
Workers' Comp
6%
Homeow ners
17%
Commercial Auto
8%
Commercial Lines by Size
47%
22%
22%
13%
8%$10k < $25k
10%
13%
9%
> $100k
Commercial Multi
Peril
15%
Personal Auto
49%
< $10k
Other
Commercial
3%
46%
81% in Policies < $50K
2/3 of Accounts < $75K
• 68% Personal Lines - Short-tail Liabilities
• 32% Commercial Lines - Predominately “Main Street” Small Commercial
10%
Personal Lines
2004 Priorities
Margin Improvement Drive Earnings Growth
Agency
Partnerships



Achieve Adequate Pricing Levels
Continue Implementation of Rate
Tiering
Shift Geographic Mix of Business
Improve MA Auto Results

Accelerate Deployment of POS

Introduce Pre-Fill

Product &
Underwriting


Responsive Service
Delivery
Identify and Grow with Key Agents
Aggressively Manage Underperforming
Agents
Commercial Lines
2004 Priorities
Build the Foundation for Earnings Growth in 2005
Agency
Partnerships
Product &
Underwriting
Responsive Service
Delivery

Lock in Strategic Partnerships with
Winning Commercial Lines Agencies

Improve Renewal Retention
Enhance New Business Mix
Tiered Pricing Strategies



Refine small commercial
operating model
Life Companies
2004 Priorities
Maximize Long
Term Cash Flow
• Maintain Expense Margins
• Retain Profitable Customers
Manage Volatility
• Manage GMDB Risk Through
Maximize Long
Term Value
Hedging
• Create Strategies to Utilize
Excess Capital
Allmerica Financial Corporation
Financial Performance
($ in millions)
After Tax Segment Earnings
First Quarter Highlights
• Segment Income up
40%
$33
• Life Earnings Better
than Expected
$24
Q1 2003
• Solid P&C Earnings
Q1 2004
Property & Casualty
Financial Performance
($ in millions)
Pre-tax Segment Earnings
First Quarter Highlights
$38 $39
$39
Personal Lines:
• Rate Increases
$27
• Lower Frequency of Losses
Commercial Lines:
$11
• Lower Favorable Development
• Premium Growth
$2 $1
-$3
Commercial
Lines
Personal
Lines
• Increased Retention
Other P&C
Q1 2003 Q1 2004
Total P&C
Life Companies
Financial Performance
($ in millions)
Pre-tax Segment Earnings
$10
• Lower Operating Expenses
• Favorable Equity Market
-$2
$5
$2
Q1
2003
Q1
2004
($ in millions)
Net Operating Cash Flow
$42
$40
$39
$32
$29
Q4
2003
$32
Q1
2004
$40
• Strong Positive Cash Flow
AFC Performance Metrics
P&C
• GAAP Earnings
• GAAP
Book Value
• Return on
Equity
Life
• Cash Flow
• Statutory
Surplus
2004 Financial Summary
Focus on the Basics
Personal Lines
Margin Improvement
Drives Earnings Growth
Commercial Lines
Building the Foundation
for Growth
Life Companies
Maximize Cash Flow &
Maintain Strong Surplus
Improve
ROE
Great
Start
Towards
Becoming
a World
Class
P&C
Company
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