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 EMPLOYEES'
401(K) MATCHED SAVINGS 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 o (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
Employees' 401(k) Matched
Savings Plan
Financial Statements
and Additional Information
December 31, 2001 and 2000
The Allmerica Financial Employees' 401(k) Matched Savings Plan
-------------------------------------------------------------------------------
December 31, 2001 and 2000
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 Employees'
401(k) Matched Savings 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 Employees' 401(k) Matched Savings 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.
/s/PRICEWATERHOUSECOOPERS LLP
June 24, 2002
The Allmerica Financial Employees' 401(k) Matched Savings 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 $ 67,271,076 * $ -
SSGA S&P 500 Index Fund 50,277,278 * -
Dreyfus Premier Core Bond Fund 34,526,769 * -
Putnam Vista Fund 14,733,399 -
Dreyfus Cash Management Plus Fund 12,580,734 -
CRM Small Cap Value Fund 11,041,801 -
Alliance Premier Growth Fund 10,254,493 -
Berger International Fund 9,991,660 -
TCW Galileo Small Cap Fund 1,165,968 -
MFS High Yield Income Fund 289,620 -
Investments with First Allmerica Financial
Life Insurance Company:
Separate Investment Accounts:
Growth Stock Fund - 84,427,505
Indexed Stock Fund - 61,161,170
Balanced Fund - 25,873,125
Select Aggressive G - 20,277,578
Select Growth Fund - 13,378,929
Select Internationaund - 12,412,865
Diversified Bond Fu - 11,505,660
Money Market Fund - 8,939,526
Select Capital Apprund - 5,695,424
Government Securities Fund - 2,984,907
---------------------- -----------------------
212,132,798 246,656,689
Allmerica Financial Corporation
Stock Fund, at fair value 33,581,727 * 56,533,224
Investment with First Allmerica Financial Life
Insurance Company, at contract value:
Fixed Interest Fund 134,192,821 * 120,704,810
Participant loans 9,406,238 10,456,611
Other assets 252,697 454,559
---------------------- -----------------------
Net assets available for $ 389,566,281 $ 434,805,893
====================== =======================
*Amount represents five percent or more of net assets avaiable for benefits at
December 31, 2001.
The accompanying notes are an integral part of these financial statements.
2
The Allmerica Financial Employees' 401(k) Matched Savings Plan
Statements of Changes in Net Assets Available for Benefits
For the years ended December 31,
-------------------------------------------------------------------------------
2001 2000
------------------- ------------------
Investment income:
Net (depreciation) appreciation of:
Non-Affiliated Mutual Funds $ (16,909,736) $ -
Separate Investment Accounts (10,280,626) (20,200,328)
Allmerica Financial Corporation
Stock Fund (20,795,007) 14,912,315
Interest and dividend income 10,801,931 8,012,551
------------------- ------------------
(37,183,438) 2,724,538
------------------- ------------------
Contributions:
Employer contributions 5,381,833 6,425,551
Employee contributions 19,741,144 19,777,780
------------------- ------------------
25,122,977 26,203,331
------------------- ------------------
Total (deductions) additions (12,060,461) 28,927,869
------------------- ------------------
Benefit payments (33,190,631) (51,308,801)
Purchase of life insurance and
annuity contracts 11,480 13,428
------------------- ------------------
Total deductions (33,179,151) (51,295,373)
------------------- ------------------
Net decrease during year (45,239,612) (22,367,504)
Transfers out of Plan - (4,167,536)
Net assets available for benefits,
beginning of year 434,805,893 461,340,933
------------------- ------------------
Net assets available for benefits,
end of year $ 389,566,281 $ 434,805,893
=================== ==================
The accompanying notes are an integral part of these financial statements.
3
The Allmerica Financial Employees' 401(k) Matched Savings Plan
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTE 1 - Description of plan
The following description of The Allmerica Financial Employees' 401(k) Matched
Savings 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 eligible employees of First
Allmerica Financial Life Insurance Company ("FAFLIC," "the Sponsor," or
"Company"), a wholly-owned subsidiary 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"). 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. The Sponsor continues to hold those assets invested in its Fixed
Interest Fund. The Plan's recordkeeper is Hewitt Associates LLC.
Eligibility
Active employees are eligible for participation in the Plan on the first day of
employment with the Company, as defined by the Plan document.
Employer contributions
The Plan has a 401(k) match provision. Employees are eligible to receive
matching contributions in the Plan on the first day of the calendar month
following completion of one year of service, as defined by the Plan document.
Under this provision, the amount of the match is determined by Company
performance at the discretion of the Sponsor's Board of Directors and is
announced at the beginning of each year. Employer contributions are 100% vested
to the participant immediately upon receipt. In addition, the Board of Directors
may require that all matching contributions be made to the AFC Stock Fund.
However, this restriction was not imposed during the 2001 or 2000 plan year.
In 2001 and 2000, the matching contribution rate was 50 cents on every dollar up
to the first 6% of compensation contributed to the Plan by a participant. These
contributions were allocated to the same investment vehicles as the employee
contributions.
4
NOTE 1 - Description of plan (continued)
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.
Forfeited amounts are used to offset the employer contributions and are
allocated to the Plan's investment vehicles based upon the investment elections
of each eligible participant. Forfeitures in the amount of $375,303 during 2000
and 2001 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 active 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 employees. Interest income on participant loans totaled
$842,106 and $903,444 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 account balance is immediately vested and includes the employer
matching contribution, the employer profit sharing contribution equal to 2% of
participant earnings(contributed for plan years 1994 and prior), the rollover
account, the after-tax voluntary contribution account and the tax deductible
voluntary contribution account.
5
NOTE 1 - Description of plan (continued)
The employer profit sharing contributions (contributed for the plan years 1994
and prior), other than the 2% allocated to the 401(k) account become vested as
follows:
Vested Percentage of
Completed Years of Service Regular Account Balance
-------------------------- -----------------------
1 0%
2 25%
3 50%
4 75%
5 100%
The amounts vested at December 31, 2001 and 2000 were $378,763,927 and
$433,381,063, 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 prepared 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 disclosures 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 rate was
6.00% for monies invested in 2001 and 2000.
6
NOTE 2 - Significant accounting policies (continued)
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". Assuch, these investments are recorded at contract value,
which approximates fair value at December 31, 2001 and 2000.
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 %
7
NOTE 2 - Significant accounting policies (continued)
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.
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 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.
Administrative expenses
Hewitt Associates LLC maintains agreements with certain of the non-affiliated
mutual fund options 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 began providing
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 has determined and informed the Sponsor by a letter
dated February 21, 2002, that the Plan is qualified and the trust established
under the Plan is tax exempt under the appropriate sections 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
non-forfeitable and be either payable to the participant or applied to purchase
a non-forfeitable retirement annuity at the participant's option.
8
NOTE 5 - Significant transactions and other matters
During the second quarter of 2000, the Sponsor adopted a formal company-wide
restructuring plan. This plan consisted of various initiatives resulting in the
elimination of approximately 360 positions, of which 240 employees were
terminated as of December 31, 2001 and 120 vacant positions have been
eliminated. Plan assets declined during 2001 and 2000 as a result of increased
withdrawals related to these terminated employees.
On October 6, 1999, Allmerica Financial Corporation entered into an agreement
with Great-West Life and Annuity Insurance Company of Denver (Great-West), which
provided for the sale of the Company's group life and health business effective
March 1, 2000. As a result of this sale, a certain number of Plan participants
became employees of Great-West. The Plan assets of the affected participants
totaled $4,167,536 and were transferred to a Great-West 401(k) plan during 2000.
9
The Allmerica Financial Employees' 401(k) Matched Savings 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 Shares or Contract or
Issue of Investments Units Current Value
Investment with First
Allmerica Financial Life
Insurance Company:**
Fixed Interest Fund Interest rates at 6.00% 134,192,821 *
Investments with
Non-Affiliated Mutual Funds:
Fidelity Advisor Income Diversified portfolio of mid- to 2,743,519 67,271,076 *
Fund large-cap value companies
SSGA S&P 500 Index Fund Common stocks which comprise S&P 500 2,657,361 50,277,278 *
Composite Stock Index
Dreyfus Premier Core Bond Broad-based, intermediate-term bond 3,455,786 34,526,769 *
Fund fund designed to offer diversified
exposure to the domestic fixed-income
market
Putnam Vista Fund Growth oriented, mid-cap fund with 1,705,255 14,733,399
domestic focus
Alliance Premier Growth Large-cap growth fund investing in 969,234 10,254,493
Fund companies with above average earnings
growth
Berger International Portfolio of value oriented, foreign 955,226 9,991,660
Fund mid- and large-cap multinational
companies (sub-advised by Bank of
Ireland Asset Management)
TCW Galileo Small Small- to mid-cap aggressive growth 62,086 1,165,968
Cap Fund fund
10
The Allmerica Financial Employees' 401(k) Matched Savings 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 Shares or Contract or
Issue of Investments Units Current Value
Investments with
Non-Affiliated Mutual Funds
(continued):
Dreyfus Cash Management Short-term money market fund that 1,236,177 12,580,734
Plus Fund invests primarily in high-quality
domestic and foreign U.S. Dollar
denominated money market instruments
CRM Small Cap Small-cap fund focused on long-term 531,879 11,041,801
Value Fund capital appreciation by investing in
value-oriented securities
MFS High Yield Income Fund Portfolio that seeks high current 29,738 289,620
income by investing in higher
yielding, lower rated debt of
financially weaker companies
Allmerica Financial Common stock traded on the New York 737,236 33,581,727 *
Corporation Stock Fund Stock Exchange and cash equivalents
Participant loans Interest rates from 6.0% to 10.5% 9,406,238
Other assets Individual annuities and life 252,697
insurance contracts purchased from
First Allmerica Financial Life
Insurance Company **
Total Investments $389,566,281
================
* 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 EMPLOYEES'
401(K) MATCHED SAVINGS PLAN
(Name of Plan)
/s/ Barbara Z. Rieck
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. 333-576) of Allmerica Financial Corporation of our
report dated June 24, 2002 relating to the financial statements of The Allmerica
Financial Employees' 401(k) Matched Savings Plan, which appears in this Form
11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 24, 2002
14