A.M. Best Comments on Allmerica Financial Corp.'s Recent Actions.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 14, 2003

This rating commentary follows Allmerica Financial Corp.'s (Allmerica) announcement outlining a series of strategic transactions, which were completed by management in the fourth-quarter 2002 and those anticipated in the first quarter 2003. A.M. Best Co. views the actions taken by Allmerica Financial Corporation (Worcester, MA) (NYSE: AFC) positively, as regards to improving the statutory capitalization of its life/annuity insurance companies. Among the transactions announced by Allmerica are:

-- an expected $106 million increase to statutory capital following the reinsurance of its traditional universal life insurance block to John Hancock;

-- an expected $90 million increase to statutory capital following the retirement of a portion of its long-term funding agreements at less than book value;

-- an expected $40 million increase to statutory capital (including a $20 million contribution from AFC) due to a new guaranteed minimum death benefit mortality reinsurance agreement. A.M. Best notes that the market risk in its variable annuity products is not removed in this agreement; and

-- the "flip" of its life/annuity insurance subsidiaries, while not bringing new capital into the group, does relieve some of the regulatory risk associated with the previous structure. In addition, both life companies will now operate under the same regulatory body, the Massachusetts Insurance Department.

A.M. Best plans to conduct a comprehensive review of AFC's financial strength and debt ratings following the release of its full year-end financial results.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.