Property-casualty earnings were lower in the second quarter, the insurer explained, mainly because of a pre-tax charge of $23 million from a recent adverse arbitration decision regarding an insurance pool it exited in 1996.

The company said catastrophe losses were higher in the 2003 second quarter compared to one year ago, when CAT losses were unusually low.

"Our core earnings in the second quarter were solid and reflect our efforts to improve underwriting results. However, our reported earnings for the quarter were negatively impacted by the arbitration ruling we announced earlier in the quarter relating to business we exited in 1996," commented Robert Restrepo, president of Allmerica's property and casualty companies.

On the positive side, Allmerica Financial's financial services and life insurance unit performed well, posting $18.4 million in profit, compared to a $113.8 million loss during the year-ago period.

"We are pleased with our second-quarter results and the further improvements in the capital position of our life insurance companies," said Edward Parry, chief financial officer at Allmerica Financial.

Based in Worcester, Mass., Allmerica Financial is an insurance and financial services holding company providing personal auto, homeowners, workers' compensation, commercial automobile and commercial multiple-peril insurance coverage through its Citizens Insurance and Hanover Insurance subsidiaries.