NU Online News Service, Sept. 27, 2:37 p.m. – Allmerica Financial Corp., Worcester, Mass., says it will be revamping its Allmerica Financial Services business unit to cope with the effects of the stock market slump.

The unit includes Allmerica’s life insurance and annuity operations.

Allmerica will cut Allmerica Financial operating expenses, reduce sales of proprietary variable annuities and life insurance products, and consider selling some lines of life insurance business, the company says.

The company is also looking into the possibility of raising external capital and reinsuring some lines of business.

The changes should not have a direct effect on the company’s third-party asset management business or its property-casualty operations, Allmerica says.

Allmerica notes in the press release announcing the changes that the S&P 500 stock index is down 25% since Jan. 1 and down 44% from its peak in March 2000. The company describes the downturn as one of the worst bear markets since the Depression.

“The decline in the equity markets results in, among other things, increased Guaranteed Minimum Death Benefit expenses, lower fee income, higher deferred acquisition cost amortization and higher statutory capital reserve requirements,” Allmerica says. “The reduction in statutory profits associated with these items also exacerbates the strain on statutory capital associated with continued sales of variable annuities.”

The company says it will give more details about the changes in October, when it releases its third-quarter earnings.