FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to ____________
Commission file number: 1-13754
THE ALLMERICA FINANCIAL
AGENTS' RETIREMENT PLAN
(Full title of the plan)
ALLMERICA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3263626
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
440 Lincoln Street, Worcester, Massachusetts 01653
(Address of principal executive offices)
(Zip Code)
(508) 855-1000
(Registrant's telephone number, including area code)
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
The Allmerica Financial
Agents' Retirement Plan
Financial Statements
and Additional Information
December 31, 2001 and 2000
The Allmerica Financial Agents' Retirement Plan
December 31, 2001 and 2000
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TABLE OF CONTENTS
Report of Independent Accountants........................................ 1
Statements of Net Assets Available for Benefits.......................... 2
Statements of Changes in Net Assets Available for Benefits............... 3
Notes to Financial Statements............................................ 4
Additional Information*
Schedule of Assets Held for Investment Purposes At End of Year........... 10
* Other schedules required by the Department of Labor Rules and Regulations on
reporting and disclosure under the Employee Retirement Income Security Act of
1974, as amended, have been omitted because they are not applicable.
Report of Independent Accountants
To the Participants and Administrator of
The Allmerica Financial Agents' Retirement Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of The Allmerica Financial Agents' Retirement Plan (the "Plan") at December 31,
2001 and 2000, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at end of year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 24, 2002
The Allmerica Financial Agents' Retirement Plan
Statements of Net Assets Available for Benefits
At December 31,
------------------------------------------------------------------------------
2001 2000
Assets
Investments, at fair value:
Non-Affiliated Mutual Funds:
Fidelity Advisor Income Fund $ 19,376,191 * $ -
SSGA S&P 500 Index Fund 13,452,705 * -
Putnam Vista Fund 8,779,815 * -
Berger International Fund 7,012,399 * -
Alliance Premier Growth Fund 7,341,007 * -
Dreyfus Premier Core Bond Fund 5,604,057 * -
CRM Small Cap Value Fund 5,056,647 * -
Dreyfus Cash Management Plus Fund 3,417,585 -
TCW Galileo Small Cap Fund 1,301,274 -
MFS High Yield Income Fund 210,472 -
Investments with First Allmerica Financial
Life Insurance Company
Separate Investment Accounts:
Growth Stock Fund - 22,458,614
Indexed Stock Fund - 15,641,349
Select Aggressive Growth Fund - 13,037,915
Select International Equity Fund - 9,684,478
Select Growth Fund - 8,949,581
Balanced Fund - 4,575,795
Select Capital Appreciation Fund - 4,273,109
Money Market Fund - 2,475,865
Diversified Bond Fund - 762,169
Government Securities Fund - 137,201
---------------- ----------------
71,552,152 81,996,076
Allmerica Financial Corporation
Stock Fund, at fair value 9,671,994 * 13,971,974
Investment with First Allmerica Financial Life
Insurance Company, at contract value:
Fixed Interest Fund 7,508,611 * 6,840,130
Participant loans 3,338,356 3,588,501
Other assets 243,996 278,855
---------------- --------------
92,315,109 106,675,536
---------------- --------------
Employer's contribution receivable 3,206,675 3,387,089
Participants' contribution receivable 167,827 -
---------------- ---------------
3,374,502 3,387,089
---------------- ---------------
Net assets available for benefits $ 95,689,611 $ 110,062,625
================ ===============
* Amount represents five percent or more of net assets available for benefits
at December 31, 2001
The accompanying notes are an integral part of these financial statements.
2
The Allmerica Financial Agents' Retirement Plan
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31,
-------------------------------------------------------------------------------
2001 2000
---------------- ---------------
Investment (loss) income:
Net (depreciation) appreciation of:
Non-Affiliated Mutual Funds $ (7,881,571) $ -
Separate Investment Accounts (4,840,116) (9,487,133)
Allmerica Financial Corporation
Stock Fund (5,277,344) 3,954,761
Interest and dividend income 1,611,364 776,235
---------------- ---------------
(16,387,667) (4,756,137)
---------------- ---------------
Contributions:
Employer contributions 3,259,614 3,387,089
Participant contributions 3,305,432 3,049,801
Reallocated forfeitures (52,940) (78,845)
---------------- ---------------
6,512,106 6,358,045
---------------- ---------------
Total (deductions) additions (9,875,561) 1,601,908
---------------- ---------------
Benefit payments (4,503,053) (8,405,557)
Purchase of life insurance and
annuity contracts 5,600 7,463
---------------- ---------------
Total deductions (4,497,453) (8,398,094)
---------------- ---------------
Net decrease during year (14,373,014) (6,796,186)
Net assets available for benefits,
beginning of year 110,062,625 116,858,811
---------------- ---------------
Net assets available for benefits,
end of year $ 95,689,611 $ 110,062,625
================ ===============
The accompanying notes are an integral part of these financial statements.
3
The Allmerica Financial Agents' Retirement Plan
Notes to Financial Statements
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NOTE 1 - Description of plan
The following description of The Allmerica Financial Agents' Retirement Plan
("the Plan") is provided for general informational purposes only. More complete
information is provided in the Summary Plan Description, which is available from
the Plan Administrator.
General
The Plan is a defined contribution plan for certain employees and insurance
agents of First Allmerica Financial Life Insurance Company ("FAFLIC", "the
Sponsor" or "Company") and Allmerica Financial Life Insurance and Annuity
Company ("AFLIAC"). FAFLIC and AFLIAC are wholly-owned subsidiaries of Allmerica
Financial Corporation ("AFC").
The Plan is administered by the Sponsor ("the Plan Administrator") and is
subject to the provisions of the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The Trustee of the Plan is State Street Bank and
Trust. The Plan's recordkeeper is Hewitt Associates LLC.
In June 2001, the Board of Directors of the Company appointed State Street Bank
and Trust Company the Trustee of the Plan and of the AFC Stock Fund, replacing
Investors Bank & Trust Company. The Sponsor continues to hold those assets
invested in its Fixed Interest Fund.
Eligibility
Any eligible insurance agent is permitted to participate in the Plan on the
first day of employment with the Company, as defined by the Plan document.
Employer contributions
For each Plan year, the employer will contribute a minimum contribution of 7% of
the total eligible compensation paid all eligible participants during the year
comprised of up to 2% as a 401(k) employer contribution, with the remainder
comprised of an employer profit sharing contribution. Participants are eligible
to receive this contribution once they have completed one year of service from
the first of the quarter following their date of hire, and provided they are
employed on December 31st. Based on the Sponsor's before-tax profits and the
discretion of the Sponsor's Board of Directors, the Sponsor may contribute more
than the 7% contribution, subject to the established limitations under ERISA.
Employer contributions are allocated to the same investment vehicles as the
participant contributions.
4
The Allmerica Financial Agents' Retirement Plan
Notes to Financial Statements
------------------------------------------------------------------------------
NOTE 1 - Description of plan (continued)
Reallocated forfeitures
Forfeitures of employer contributions related to nonvested terminated
participants have been transferred to the Dreyfus Cash Management Plus Fund in
2001, and to either the Money Market Fund or the Fixed Interest Fund in 2000,
where they remain until the Plan Administrator reallocates them to the remaining
eligible participants of the Plan. Forfeited amounts supplement the employer
contributions and are allocated to the Plan's investment vehicles based upon the
investment elections of each eligible participant. The Board of Directors has
authorized the Plan to use forfeitures to reduce employer contributions in the
current year beginning in 2001. Forfeitures in the amount of $64,754 were used
to reduce employer contributions in 2001.
Participant accounts
Active participants in the Plan are eligible to make 401(k) contributions
through the use of a salary reduction plan up to a maximum of $10,500 for 2001
and 2000.
Beginning June 12, 2001, participants were no longer able to direct their
contributions to or maintain balances in the Separate Investment Accounts of the
Sponsor. These investment options have been replaced with non-affiliated mutual
funds.
As directed by participant election, contributions after June 12, 2001 may be
invested in the Fixed Interest Fund, the non-affiliated mutual funds or the
Allmerica Financial Corporation Stock Fund. All investment income is reinvested
in the same investment vehicle and is credited to the respective participant
account.
Participant loans
Loans made to participants are secured by the vested portion of the
participant's account up to the limit as defined in the Plan document. Loans
vary in duration, depending upon purpose, and are at an interest rate determined
by the Plan Administrator. A participant is limited to a maximum of two loans
outstanding at any one time from all plans of the Company combined. Loan fees
are not charged to participants. Interest income on participant loans totaled
$270,557 and $286,065 in 2001 and 2000, respectively.
Distributions and vesting provisions
Vested account balances become payable upon retirement, death, or separation
from service (including disability) as defined in the Plan document.
A participant's profit sharing account balance becomes 100% vested upon his or
her death or becoming totally and permanently disabled or upon attaining normal
retirement age (age 65). In addition, a participant's 401(k) account balance,
including the employer 401(k) contribution allocated to this account, rollover
account, after-tax
5
NOTE 1 - Description of plan (continued)
voluntary contribution account and tax deductible voluntary contribution account
are 100% vested.
The employer contributions other than the employer 401(k) amount shall be 100%
vested after completion of 5 years of service.
The amounts vested at December 31, 2001 and 2000 were $89,501,468 and
$104,236,862, respectively.
Payments from the fund are subject to limitations and requirements specified in
the Plan document.
NOTE 2 - Significant accounting policies
Significant accounting and reporting policies followed by the Plan are
summarized as follows:
Basis of presentation
The accompanying financial statements have been presented on the accrual basis
of accounting, in accordance with generally accepted accounting principles.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Valuation of investments
The Fixed Interest Fund is held in the Sponsor's general account and provides
for guaranteed rates of interest reset annually. The credited interest rates
were 5.84% and 5.75% for monies invested during 2001 and 2000, respectively.
The investment contracts held by the Fixed Interest Fund of the Plan are fully
benefit-responsive and are therefore exempt from fair value accounting for
certain contracts under the provisions of Statement of Position 94-4, "Reporting
Investment Contracts Held by Health and Welfare Benefit Plans and Defined
Contribution Plans". As such, these investments are recorded at contract value,
which approximates fair value at December 31, 2001 and 2000.
6
The Allmerica Financial Agents' Retirement Plan
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTE 2 - Significant accounting policies (continued)
Investments in non-affiliated mutual funds are priced using the end of day fair
market value of the underlying funds as recorded by State Street Bank and Trust
Company. The Separate Investment Accounts are pooled investment accounts
established as funding vehicles for qualified corporate retirement programs
administered by the Sponsor. Separate Investment Account funds are segregated
into accounts with specific investment objectives. Investments in Separate
Investment Accounts are stated at current value based on the market value of the
underlying securities as determined by the Sponsor, primarily through the use of
quoted prices. The investment returns of the non-affiliated mutual funds and the
Separate Investment Accounts of the Sponsor were as follows:
Period from
July 1, 2001 to Year Ended
Non-Affiliated Mutual Funds December 31, 2001 December 31, 2000
--------------------------- ----------------- -----------------
Fidelity Advisor Income Fund (3.45)% n/a
SSGA S&P 500 Index Fund (6.60)% n/a
Putnam Vista Fund (13.86)% n/a
Berger International Fund (9.31)% n/a
Alliance Premier Growth Fund (10.94)% n/a
Dreyfus Premier Core Bond Fund 0.52 % n/a
CRM Small Cap Value Fund 3.44 % n/a
Dreyfus Cash Management Plus Fund 1.44 % n/a
TCW Galileo Small Cap Fund (21.32)% n/a
MFS High Yield Income Fund 0.31 % n/a
Period from
January 1, 2001 Year Ended
Separate Investment Accounts to June 30, 2001 December 31, 2000
---------------------------- ---------------- -----------------
Growth Stock Fund (8.97)% (9.46)%
Indexed Stock Fund (7.21)% (8.75)%
Select Aggressive Growth Fund (12.36)% (23.89)%
Select International Equity Fund (14.23)% (8.08)%
Select Growth Fund (14.84)% (17.14)%
Balanced Fund (0.88)% 12.53 %
Select Capital Appreciation Fund (0.35)% 7.85 %
Money Market Fund 3.29 % 6.70 %
Diversified Bond Fund 3.41 % 11.11 %
Government Securities Fund 3.32 % 10.87 %
Due to participant-directed investment activity, actual investment returns
experienced by the participants in the Plan may differ from those displayed in
the above Fund returns.
7
NOTE 2 - Significant accounting policies (continued)
The AFC Stock Fund is a collective trust established by Allmerica Trust Company,
N.A. (a wholly-owned subsidiary of AFC). The AFC Stock Fund is stated at fair
value as determined by quoted market prices of both AFC common stock and cash
equivalents held in the Fund. Beginning June 12, 2001, State Street Bank and
Trust Company became the Trustee of the Fund. The average investment return for
2001 and 2000 was (37.46)% and 30.47%, respectively.
Purchases and sales of securities are accounted for as of the trade date.
Other assets
Other assets represent the value of individual annuities purchased from the
Sponsor and the annual interest earned plus the cash surrender value of life
insurance contracts held within the Plan.
In addition, the Plan is a policyholder of a non-participating group annuity
contract issued by FAFLIC, formerly State Mutual Life Assurance Company of
America ("State Mutual"). As such, in 1995 the Plan received the de minimis
amount of consideration in State Mutual's demutalization in the form of stock in
AFC, the new publicly-traded holding company of FAFLIC. The Plan received 28
shares of AFC stock with a per share value of $21 and a total value of $588.
This award is not allocated to individual participants of the Plan. These shares
have been included in "Other assets" in the Statement of Net Assets Available
for Benefits at December 31, 2001 and 2000.
Administrative expenses
Hewitt Associates LLC maintains agreements with certain of the non-affiliated
retail investment fund companies and for such agreements receives a portion of
12b-1 fees. The reimbursement is calculated based on the value of each
respective options' average daily net assets. These reimbursements are used to
reduce fees charged by Hewitt Associates LLC to the Sponsor for certain
administrative and professional services.
Beginning June 12, 2001, State Street Bank and Trust Company provides certain
trustee services for the plan. These fees are voluntarily assumed and paid
directly by the Sponsor. The Sponsor pays all other expenses incurred in the
administration of the plan.
NOTE 3 - Federal income taxes
The Internal Revenue Service determined and informed the Sponsor by a letter
dated June 3, 1996 that the Plan is qualified and the trust established under
the Plan is tax-exempt under the appropriate sections of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter and a
new plan document has been drafted and new determination letter has been
requested as of November 15, 2001. The Plan Administrator believes that the Plan
is designed and is currently being
8
operated in compliance with the applicable provisions of the Internal Revenue
Code. Therefore, no provision for income tax is required.
NOTE 4 - Plan termination
Although the Sponsor has not expressed any intent to terminate the Plan or
discontinue contributions, it may do so at any time. Should the Plan terminate
or discontinue contributions, the Plan provides that each participant's interest
in the Plan's assets as of the termination date shall become 100% vested and
nonforfeitable and either payable to the participant or applied to purchase a
nonforfeitable retirement annuity at the participant's option.
9
The Allmerica Financial Agents' Retirement Plan
Schedule of Assets Held for Investment Purposes at End of Year
Form 5500, Schedule H, Part IV, Line 4i
At December 31, 2001
-------------------------------------------------------------------------------
Identity of Description of Shares or
Issue Investments Units Current Value
Investment with First
Allmerica Financial
Life Insurance Company:**
Fixed Interest Fund Interest rates from 4.65% to $ 7,508,611 *
5.90%
Investments with Non-Affiliated
Mutual Funds:
Fidelity Advisor Income Diversified portfolio of mid- to 790,220 19,376,191 *
Fund large-cap value companies.
SSGA S&P 500 Common stocks which comprise S&P 711,031 13,452,705 *
Index Fund 500 Composite Stock Index.
Putnam Vista Fund Growth oriented, mid-cap fund 1,016,182 8,779,815 *
with domestic focus.
Berger International Portfolio of value oriented, 670,401 7,012,399 *
Fund foreign mid- and large-cap
multinational companies
(sub-advised by Bank of Ireland
Asset Management)
Alliance Premier Large-cap growth fund investing 693,857 7,341,007 *
Growth Fund companies with above average
earnings growth.
Dreyfus Premier Core Bond Broad-based, intermediate-term 560,911 5,604,057 *
Fund bond fund designed to offer
diversified exposure to the
domestic fixed-income market.
CRM Small Cap Value Fund Small-cap fund focused on long 243,577 5,056,647 *
term capital appreciation by
investing in value oriented
securities.
10
The Allmerica Financial Agents' Retirement Plan
Schedule of Assets Held for Investment Purposes at End of Year (continued)
Form 5500, Schedule H, Part IV, Line 4i
At December 31, 2001
------------------------------------------------------------------------------
Identity of Description of Share or
Issue Investments Units Current Value
Investments with Non-Affiliated
Mutual Funds (continued):
Dreyfus Cash Management Plus Short-term money market fund 335,716 3,417,585
Fund that invests primarily in
high-quality domestic and
foreign U.S. Dollar denominated
money market instruments.
TCW Galileo Small Small- to mid-Cap aggressive 69,290 1,301,274
Cap Fund growth fund
MFS High Yield Income Fund Portfolio that seeks high 21,611 210,472
current income by investing in
higher yielding, lower rated
debt of financially weaker
companies
Allmerica Financial Corporation Common stock traded on the New 212,334 9,671,994*
Stock Fund York Stock Exchange and cash
equivalents
Participant Loans Interest rates from 6.0% to 10.5% 3,338,356
Other Assets Individual annuities and life 243,996
insurance purchased from the
First Allmerica Financial Life
Insurance Company and 28 shares
of non-participant directed AFC
common stock**
Total Investments $92,315,109
===========
* Amount represents five percent or more of net assets available for benefits.
** Represents party-in-interest
11
SIGNATURES
"The Plan". Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
THE ALLMERICA FINANCIAL
AGENTS'RETIREMENT PLAN
(Name of Plan)
Plan Administrator: First Allmerica Financial
Life Insurance Company by Barbara Z. Rieck
Manager of Retirement Services
June 25, 2002
12
Exhibit Index
Exhibit 23.1 Consent of Independent Accountants
13
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-578) of Allmerica Financial Corporation of our
report dated June 24, 2002 relating to the financial statements of The Allmerica
Financial Agents' Retirement Plan, which appears in this Form 11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 24, 2002
14