USF&G Corp. suffered another down day on Wall Street yesterday, closing at $10.875 a share, off 75 cents, as a major credit-rating agency said it might move to lower the rating of the insurance giant's debt.
Yesterday's slide took the insurance giant's stock down a total of 20 percent, or $2.75 a share, since Monday, when the stock closed at $13.625.
Standard & Poor's action on the credit rating came a day after Baltimore-based USF&G said its longtime chairman and chief executive, Jack Moseley, would resign and that the company would slash its dividend and cut its work force. The cost reductions were aimed at saving a total of $235 million a year, the company said.
Standard & Poor's, citing "concerns about USF&G's near-term operating plans and capital structure," said it had placed the company's single-A senior debt, single-A-minus preferred stock and A-1 commercial paper on its credit watch with negative implications.
Also put up for review were the ratings on the claims-paying ability, currently rated double-A, of the property and casualty subsidiary, United States Fidelity & Guaranty Co., and its life insurance unit, Fidel
ity & Guaranty Life Insurance Co.
S&P said its concerns were "highlighted by the deterioration of earnings beyond S&P's expectations."
USF&G said Wednesday that it had lost $15 million, or 22 cents a share, during the third quarter, compared with a loss of $17 million, or 25 cents a share, in the same period last year.
"The announced cost-reduction program and lowering of the dividend, which will reduce costs by nearly $75 million and conserve about $160 million of retained earnings annually, are expected to have a positive effect in the long term," S&P said.
"However, these actions represent a significant policy change and, along with new leadership, present the potential for significant restructuring of operations during the next few years."