NU Online News Service, Feb. 5, 7:29 p.m. – Allmerica Financial Corp., Worcester, Mass., is reporting a $71 million net loss for the fourth quarter of 2001 on $818 million in revenue, compared with $60 million in net income on $794 million in revenue for the fourth quarter of 2000.
Allmerica sells property-casualty insurance as well as life insurance and asset management services. The net results for the latest quarter include $66 million in charges for shutting down p-c operations and meeting obligations to an environmental risk pool. The net results also include $13 million in losses on investments and $24 million in losses on derivatives contracts.
Allmerica bought the derivatives contracts, which can act as the financial equivalent of insurance policies, to protect itself against market swings, but it ended up taking the $24 million charge to reflect the fact that some derivatives turned out to be ineffective, according to a footnote in Allmerica’s earnings release.
Operating income, which excludes the p-c charges, investment losses and derivatives losses, fell to $34 million in the fourth quarter, from $80 million.
The life insurance and asset management units generated $26 million in operating income on $230 million in revenue, down from $63 million in operating income on $251 million in revenue, Allmerica says.