The stock of USF&G Corp. was severely battered yesterday in heavy trading after a column in the Wall Street Journal said the Baltimore insurance company is facing dismal prospects.
The price of USF&G shares dropped $2.37 1/2 a share to close at $7.75, its lowest closing price in 52 weeks. The stock was the most active on the New York Stock Exchange, with more than 2.5 million shares traded. The stock has traded as high as $30.62 1/2 in the last year.
Company officials were not available for comment.
In the Journal's "Heard on the Street" column yesterday, analysts criticized USF&G for the large amount of junk bonds and real estate in its investment portfolio. Because the company has large paper losses in those investments, it would be hurt if it had to sell them before prices recover, analysts said.
Analysts also faulted the company for its previous dividend policy that mandated ever-increasing payouts despite falling income.
Earlier this month the company announced that it was cutting its annual dividend by 66 percent, to $1 a share from $2.92. But even at the new rate, the yield would be a high 12.9 percent based on yesterday's stock price.
Along with the dividend announcement, USF&G said Jack Moseley, the company's president and chairman since 1981, will retire as soon as his successor is appointed. USF&G has not disclosed who will take over from Moseley, other than to say it will be somebody of "national stature."
To improve its financial health, the company is embarking on a $75 million cost-cutting program, which will include staff reductions at all levels of the company.
At the end of last year, the company had 12,600 employees nationwide, with 2,500 in Maryland.
The company had a third-quarter loss of $15 million, or 22 cents a share, compared with a loss of $17 million, or 25 cents a share, in the 1989 third quarter.
USF&G, whose principal subsidiary is United States Fidelity and Guaranty Co., is a major writer of casualty and life insurance and also provides financial services. The company has assets of $13.9 billion.