Allmerica Financial Corp. announced that its profit in the second quarter more than doubled due to strong growth in the company’s property and casualty segment.
Net income grew to $72 million, or $1.34 per share, from $32.4 million, or 60 cents per share, a year ago. The company noted that the latest figures include a reduction in federal income tax reserves for prior years of $12.9 million, or 23 cents per share, resulting from ongoing Internal Revenue Service audits.
Total segment income after taxes for the financial services and property/casualty firm, excluding certain non-operating items, rose to $57.6 million, or $1.07 per share, from $29.1 million, or 54 cents per share, a year ago.
Property and casualty segment income rose dramatically to $90.1 million from $49.1 million last year. The company’s personal and commercial lines segments recorded solid earnings growth, which the company said was driven by improved loss performance.
“I am very pleased with our strong second quarter results and the continued improvement in the performance of our core property and casualty operations over the past several quarters,” said Frederick H. Eppinger, president and chief executive officer of Allmerica Financial Corporation, which is based in Worcetser, Mass. “We continue to effectively execute to our key business strategies and both our personal lines and commercial lines segments recorded solid earnings growth, driven by improved loss performance.”
He said the company intends to declare an annual common stock dividend in the fourth quarter of this year of about 25 cents per share.
Commercial Lines segment income was $31.0 million in the quarter, compared to $12.6 million in the second quarter of 2004, an increase of $18.4 million. Excluding pre-tax catastrophe losses, which were $0.6 million lower in the current quarter compared to the second quarter of last year, Commercial Lines segment income was $33.6 million, compared to $15.8 million in the prior-year quarter. This $17.8 million increase in segment income was due primarily to favorable loss performance.
The current quarter loss ratio, excluding catastrophes, was 6.6 points better than the prior-year quarter, primarily due to improved development of prior-year loss and loss adjustment expense reserves. Favorable development of prior-year reserves was $6.8 million in the second quarter of 2005, compared to unfavorable development of $5.0 million in the same quarter last year. The unfavorable development in the second quarter of 2004 was primarily in the workers’ compensation line and certain other commercial lines, while the favorable development in the current quarter was primarily in the commercial multiple peril line.
In addition, segment income in the current quarter benefited from lower expenses compared to the second quarter of 2004, principally from lower contingent commissions and the timing of certain technology costs.
Personal Lines segment income was $57.4 million in the quarter compared to $35.8 million in the prior year, an increase of $21.6 million. Excluding pre-tax catastrophe losses, which were $7.5 million lower in the current quarter compared to the second quarter of last year, Personal Lines segment income for the current quarter was $61.8 million, compared to $47.7 million in the second quarter of last year. This $14.1 million improvement in segment income was primarily due to improved loss performance. The current quarter loss ratio, excluding catastrophes, was 4.4 points better than the prior-year quarter, primarily due to improvement in the current accident year results.
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