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Allmerica To Hedge VA Benefits With Futures

By Staff Writer

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NU Online News Service, Dec. 5, 2003, 1:33 p.m. EST – Allmerica Financial Corp., Worcester, Mass., says it will be using exchange-traded futures contracts to hedge the guaranteed minimum death benefits it has sold along with variable annuities.[@@]

The hedging program will protect the company against the possibility that falling stock prices could increase VA death benefit claims, but the program will let Allmerica share in the gains if stock prices rise, the company says.

In related news, Allmerica’s main life subsidiary, Allmerica Financial Life Insurance and Annuity Company, will be paying the parent company a dividend of $25 million.

Allmerica says the dividend should be enough to cover the cost of its 2004 interest payments and relieve it of the need to take dividends from its property-casualty companies in 2004.