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, 2004
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
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(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, 2004 and 2003
The Allmerica Financial Agents' Retirement Plan
December 31, 2004 and 2003
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TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm................... 1
Statements of Net Assets Available for Benefits........................... 2
Statements of Changes in Net Assets Available for Benefits................ 3
Notes to Financial Statements............................................. 4-9
Additional Information*
Schedule H, line 4i - Schedule of Assets (Held at End of Year)............ 10-11
* 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 Registered Public Accounting Firm
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,
2004 and 2003, 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 the standards of the Public Company Accounting
Oversight Board (United States). Those standards 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
at End of Year) as of December 31, 2004 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. The 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.
Boston, Massachusetts
June 22, 2005
The Allmerica Financial Agents' Retirement Plan
Statements of Net Assets Available for Benefits
At December 31,
--------------------------------------------------------------------------------
2004 2003
------------------ -----------------
Assets
Investments, at fair value:
Non-affiliated mutual funds:
Fidelity Equity - Income Fund $ 4,215,339* $ -
Spartan U.S. Equity Index Fund 2,032,724* -
PIMCO Total Return Fund - Administrative Class 1,270,302* -
Fidelity Retirement Money Market Portfolio 1,148,764* -
Artisan Mid Cap Fund 1,148,745* -
American Funds Growth Fund of America - Class R4 1,018,404* -
Fidelity Low - Priced Stock Fund 904,532* -
Fidelity Diversified International Fund 516,923 -
Fidelity Small Cap Stock Fund 500,123 -
Fidelity Freedom 2000 Fund 16,460 -
Fidelity Freedom Income Fund 6,185 -
Fidelity Freedom 2010 Fund 1,585 -
Fidelity Freedom 2040 Fund 989 -
Fidelity Advisor Equity Income Fund - 7,490,730
Dreyfus Cash Management Plus Fund - 5,905,727
SSgA S&P 500 Index Fund - 4,311,296
Putnam Vista Fund - 2,124,769
Dreyfus Premier Core Bond Fund - 2,101,767
CRM Small Cap Value Fund - 1,775,030
Alliance Bernstein Premier Growth Institutional Fund - 1,770,177
TCW Galileo Small Cap Growth Fund - 765,737
MFS High-Income Fund - 261,488
----------------- -----------------
12,781,075 26,506,721
Commingled Pools:
Fidelity Managed Income Portfolio II - Class 2 2,703,276* -
Allmerica Financial Corporation Stock Fund:
Allmerica Financial Corporation Stock 751,241 1,857,274
Cash and equivalents 24,261 82,439
----------------- -----------------
775,502 1,939,713
Investment with First Allmerica Financial Life
Insurance Company, at contract value:
Fixed Fund - 3,607,260
Participant loans 36,136 182,815
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16,295,989 32,236,509
----------------- -----------------
Other receivables - 127,996
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Net assets available for benefits $ 16,295,989 $ 32,364,505
================= =================
* Amount represents 5% or more of net assets available for benefits at
December 31, 2004.
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,
--------------------------------------------------------------------------------
2004 2003
------------------ -----------------
Net investment gains:
Net appreciation of:
Non-affiliated mutual funds $ 1,057,741 $ 5,135,030
Allmerica Financial Corporation Stock Fund 116,635 3,106,412
Interest and dividend income 669,875 471,004
Other gains - 148,771
------------------ -----------------
Total net investment gains 1,844,251 8,861,217
------------------ -----------------
Benefit payments (17,912,767) (48,615,449)
------------------ -----------------
Net decrease during year (16,068,516) (39,754,232)
Net assets available for benefits, beginning of year 32,364,505 72,118,737
------------------ -----------------
Net assets available for benefits, end of year $ 16,295,989 $ 32,364,505
================== =================
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 common-law employees
and insurance agents previously employed by First Allmerica Financial Life
Insurance Company ("FAFLIC", "the Sponsor" or "the Company") and Allmerica
Financial Life Insurance and Annuity Company ("AFLIAC"). FAFLIC and AFLIAC
are wholly-owned subsidiaries of Allmerica Financial Corporation ("AFC").
During 2002, the Sponsor adopted a restructuring plan related to its life
insurance and annuity business. As a result of this initiative, all agent
contracts were terminated as of December 31, 2002, which resulted in a
partial termination of the Plan (see Note 4 - Plan partial termination).
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").
On October 13, 2003, the Board of Directors of First Allmerica Financial
Life Insurance Company voted to change its recordkeeper from Hewitt
Associates LLC to Fidelity Management Trust Company, effective January 1,
2004. Additionally, the Board of Directors voted to appoint Fidelity
Management Trust Company as Trustee of the Plan and the AFC Stock Fund,
effective January 1, 2004. The Fixed Fund, which had been held by the
Sponsor, was liquidated at fair value effective January 1, 2004 upon the
appointment of Fidelity Management Trust Company as the recordkeeper and
Trustee. These funds were reinvested in other investment vehicles offered
by the Plan. Prior to January 1, 2004, the Plan's recordkeeper was Hewitt
Associates, LLC and the Trustee of the Plan and the AFC Stock Fund was
State Street Bank and Trust Company.
Eligibility
The Company no longer employs any eligible insurance agents (see Note 4 -
Plan partial termination).
Employer contributions
No contributions were made for the 2004 or 2003 Plan years pursuant to the
aforementioned provisions of the Plan's partial termination (see Note 4 -
Plan partial termination).
4
NOTE 1 - Description of plan (continued)
Reallocated forfeitures
Forfeitures of employer contributions related to nonvested participants who
terminated prior to 2002 were transferred to the Fidelity Retirement Money
Market Fund on January 1, 2004. Prior to that, the balances were invested
in the Dreyfus Cash Management Plus Fund. In accordance with rules and
procedures that were approved by the Internal Revenue Service ("IRS"),
these balances, which were forfeited prior to 2002, were reallocated in
2004. Forfeitures in the amount of $1,333,435 were reallocated to the
Plan's investment vehicles based upon the investment elections of each
eligible participant.
Participant accounts
Due to the partial termination of the Plan (see Note 4 - Plan partial
termination), participants in the Plan were not eligible to make 401(k)
contributions during 2004 and 2003.
For existing accounts that remain in the Plan, each participant has the
ability to continue to monitor and re-direct their funds in accordance with
the provisions of the Plan. All investment income is reinvested in the same
investment vehicle and is credited to the respective participant account.
Upon termination of the Plan, account balances will be distributed to each
participant in accordance with IRS regulations (see Note 5 - Other
matters).
Participant loans
Effective January 1, 2003, no new loans could be initiated by participants.
Participants with outstanding loan balances were allowed to repay
outstanding balances through December 31, 2004. The outstanding loan
balance at December 31, 2004 was $36,136. In accordance with IRS
regulations, such delinquent loans will be considered participant
distributions in 2005. Loans made to participants prior to January 1, 2003,
were secured by the vested portion of the participant's account up to the
limit as defined in the Plan document. Loans varied in duration, depending
upon purpose, and were at an interest rate determined by the Plan
Administrator. A participant was limited to a maximum of two loans
outstanding at any one time from all plans of the Company combined. Loan
fees were not charged to participants. Interest income on participant loans
totaled $2,101 and $50,141 in 2004 and 2003, respectively.
Distributions and vesting provisions
At December 31, 2002, all employer contributions for participants became
100% vested, pursuant to the Plan's partial termination (see Note 4 - Plan
partial termination). Prior to the Plan's partial termination, vested
account balances were payable in the event of retirement, death, or
separation from service (including disability) as defined in the Plan
document. After the Plan's partial termination,
5
NOTE 1 - Description of plan (continued)
account balances are payable at the request of the participant.
Distributions to participants are payable either through a lump sum payment
or through periodic payments. If a lump sum distribution is elected, the
participant has the option of taking their balance in the AFC Stock Fund
in-kind.
All account balances were fully vested at December 31, 2004 and 2003.
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
liquidation basis of accounting, in accordance with generally accepted
accounting principles. There currently is no difference between the
liquidation and accrual bases of accounting for this Plan.
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 Fund, which was liquidated effective January 1, 2004, was held in
the Sponsor's general account and provided for guaranteed rates of
interest, reset annually. The credited interest rate was 1.85% for monies
invested during 2003. The average rate of return for the Fixed Fund for the
year ended December 31, 2003 was 4.22%.
The insurance contracts that were underlying the Fixed Fund were fully
benefit-responsive and were 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 were recorded
at contract value, which approximated fair value at December 31, 2003.
6
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 Fidelity
Management Trust Company in 2004 and as recorded by State Street Bank and
Trust Company in 2003, which are based on the published net asset values of
the funds.
Investments in Fidelity Managed Income Portfolio II - Class 2, a commingled
pool of the Fidelity Group Trust for Employee Benefit Plans, are priced
daily. This pool primarily invests in short or long-term contracts issued
by insurance companies ("GICs"), investment contracts issued by commercial
banks ("BICs"), synthetic investment contracts, fixed income securities,
and money market mutual funds. The portfolio seeks to maintain a stable $1
unit price. Investments in GICs, BICs and synthetic investment contracts
are carried at contract value as they provide for fully benefit-responsive
withdrawals. Fixed income securities for which quotations are readily
available are valued at their most recent bid price. For those securities
for which quotations are not readily available, the security is valued
based upon a method that the Trustee of the portfolio deems to be
reflective of fair value. Investments in money market funds are valued at
the net asset value each day.
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. The
average investment return for 2004 and 2003 was 6.42% and 190.75%,
respectively.
Participant loans are valued at their outstanding values, which approximate
fair value.
Purchases and sales of securities are accounted for as of the trade date.
Dividends are recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Net appreciation (depreciation) on the fair value of investments include
realized gains and (losses) and unrealized appreciation (depreciation) of
the investments.
Administrative expenses and other fees
Expenses related to the management of investments are reflected in the
value of each investment vehicle in 2004. All other fees incurred in 2004
in the administration of the Plan were paid by the Sponsor.
During 2003, Hewitt Associates LLC maintained agreements with certain
non-affiliated mutual funds and for such agreements received a portion of
certain asset-based fees (12b-1 fees) charged by the fund. These fees were
calculated based on the average daily net asset value of Plan assets in
each respective fund. These fees were used to reduce charges by Hewitt
Associates LLC to the Sponsor for certain administrative and professional
services. In addition, the
7
NOTE 2 - Significant accounting policies (continued)
Sponsor paid all other expenses incurred in 2003 in the administration of
the Plan.
Payment of benefits
Benefits are recorded when paid.
NOTE 3 - Federal income taxes
The IRS has determined and informed the Sponsor by a letter dated July 10,
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.
The Plan Administrator believes that the Plan continues to be designed and
is currently being operated in compliance with the applicable provisions of
the Internal Revenue Code. Therefore, no provision for income tax is
required.
NOTE 4 - Plan partial termination
The Plan provides that in the event the Plan is wholly or partially
terminated, or upon the complete discontinuance of contributions under the
Plan by the Sponsor, each affected participant's interest in the Plan's
assets as of the termination date shall become 100% vested and
nonforfeitable. As such, in accordance with Plan provisions, the Sponsor
vested all agents 100% as of December 31, 2002, including previously
terminated agents whose non-vested account balances had not been forfeited
by December 31, 2002. In addition, upon termination of the Plan, the assets
become either payable to the participant or applied to purchase a
nonforfeitable retirement annuity at the participant's option.
As a result of the termination of all agent contracts, there will be no
future agent or Sponsor contributions to the Plan. For the agents' current
balances, each agent has the option to roll over their funds to another
qualified plan or individual retirement account, receive a distribution, or
remain in the Plan until such time that the Plan is fully terminated. For
those accounts that remain in the Plan, each agent has the ability to
continue to monitor and direct their funds, in accordance with Plan
provisions.
NOTE 5 - Other matters
On June 22, 2004, the Board of Directors of FAFLIC voted to terminate the
Plan as a result of the aforementioned termination of agent contracts. On
July 1, 2004, the Sponsor filed with the IRS a request to terminate the
Plan. Pending approval from the IRS, the Sponsor will develop a plan
regarding the timing and the distribution of Plan assets.
Effective January 1, 2003, certain agents became employees of the Company.
The AFC Board of Directors approved eligibility for immediate participation
in The
8
NOTE 5 - Other matters (continued)
Allmerica Financial Employees' 401(k) Matched Savings Plan for these former
agents.
NOTE 6 - Subsequent events
During the first five months of 2005, there have been participant initiated
withdrawals of approximately $1.8 million, primarily resulting from the
aforementioned termination of agent contracts.
9
The Allmerica Financial Agents' Retirement Plan
Form 5500, Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
At December 31, 2004
--------------------------------------------------------------------------------
Identity of Description of Shares or
Issue Investments Units Current Value
Investments with non-affiliated
mutual funds:
*Fidelity Equity - Income Fund Diversified portfolio of large-cap 79,866 $ 4,215,339
value companies.
*Spartan U.S. Equity Index Common stocks primarily those included 47,427 2,032,724
Fund in the S&P Composite Stock Index.
PIMCO Total Return Fund - Invests primarily in debt securities, 119,054 1,270,302
Administrative Class such as: U.S. government securities,
corporate bonds, and mortgage-related
securities.
*Fidelity Retirement Money Invests in U.S. dollar-denominated 1,148,764 1,148,764
Market Portfolio money market securities of domestic
and foreign issuers as well as
repurchase agreements.
Artisan Mid Cap Fund Long-term capital growth fund of 38,861 1,148,745
mid-size companies.
American Funds Growth Fund Large-cap growth fund invested 37,400 1,018,404
of America - Class R4 primarily in common stocks.
*Fidelity Low - Priced Stock Small-cap blend fund seeking capital 22,472 904,532
Fund appreciation.
*Fidelity Diversified Large-cap growth fund invested 18,049 516,923
International Fund primarily in non-U.S.
dollar-denominated common stocks.
*Fidelity Small Cap Stock Fund Small-cap fund focused on long-term 27,540 500,123
growth of capital by investing in both
growth and value oriented
securities.
*Fidelity Freedom 2000 Fund Conservative allocation fund invested 1,363 16,460
in Fidelity equity, fixed-income, and
money market funds.
Target to investors already in
retirement.
10
The Allmerica Financial Agents' Retirement Plan
Form 5500, Schedule H, Line 4i (continued)
Schedule of Assets (Held at End of Year)
At December 31, 2004
--------------------------------------------------------------------------------
Identity of Description of Shares or
Issue Investments Units Current Value
*Fidelity Freedom Income Fund Invests in a combination of Fidelity 549 $ 6,185
equity, fixed-income, and money market
funds. Designed for investors already
in retirement.
*Fidelity Freedom 2010 Fund Invests in a combination of Fidelity 116 1,585
equity, fixed-income, and money market
funds. Targeted to investors expected
to retire around the year 2010.
*Fidelity Freedom 2040 Fund Large-cap blend fund that invests in a 120 989
combination of Fidelity equity, fixed
income, and money market funds.
Targeted to investors expected to
retire around the year 2040.
Commingled Pool:
*Fidelity Managed Stable value fund invested in 2,703,277 2,703,276
Income Portfolio II - Class 2 investment contracts issued by
insurance companies and other
financial institutions, and in fixed
income securities.
*Allmerica Financial
Corporation Stock Fund:
*Allmerica Financial Common stock traded on the New York 751,241
Corporation Stock Stock Exchange.
Cash and equivalents 24,261
*Participant loans Interest rates from 5.75% to 7.75%. 36,136
---------------
Total investments $ 16,295,989
===============
* 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)
/s/ John Taylor
----------------
Plan Administrator: First Allmerica Financial
Life Insurance Company by John Taylor
Vice President, Compensation and Benefits
June 24, 2005
12
Exhibit Index
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
13