ALLMERICA FINANCIAL AND CITIZENS CORPORATION ANNOUNCE THIRD QUARTER OPERATING EARNINGS ADVERSE ITEMS.

WORCESTER, Mass., October 15, 1998 - Allmerica Financial Corporation (NYSE:AFC) today said it expects third quarter operating earnings to be adversely impacted by $0.25 to $0.30 per share of unusual losses related to increased frequency of catastrophes and lower investment income. The two unusual items are expected to result in 1998 third quarter operating earnings falling below both analystsí estimates and the $0.90 per share Allmerica Financial reported in the third quarter of 1997.

John F. O'Brien, president and chief executive officer said, "While we continue to gain market share in the variable products business and we are making good progress on expense reductions in the Risk Management operation, we had unusual items in the quarter which impacted current earnings."

Pretax catastrophe losses in the property and casualty segment in the third quarter totaled $28.7 million. Catastrophe losses stemmed from six events totaling $10.1 million at Hanover Insurance and two events totaling nearly $18.6 million at Citizens Corporation (NYSE:CZC). For Allmerica Financial's property and casualty operation in total, year-to-date pretax catastrophe losses stand at $82.6 million, more than double the average catastrophe experience for Allmerica Financial's property and casualty operation over the past five years.

Pretax net investment income includes a $11.7 million loss related to three limited partnerships that primarily engaged in fixed income arbitrage. In addition to operating losses from these investments, Allmerica Financial has incurred realized losses of $18.5 million related to reducing the carrying value of these assets.

The Hanover Insurance Group, Inc. is the holding company for a group of insurance companies headquartered in Worcester, Massachusetts.

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