USF&G reports $610 million loss, cuts dividend Baltimore-based insurance company writes off junk bonds, real estate investments.

February 27, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

USF&G Corp. reported a $610 million loss in the fourth quarter today and chopped a nickel a share from its quarterly common stock dividend. The company pared its investment portfolio of junk bonds and poor real estate investments.

The news delayed trading of USF&G stock on the New York Stock Exchange this morning. At 1 p.m. the stock had dropped to 9 1/8 , down 1 3/8 .

Insurance analysts had been expecting a write-off in the fourth quarter. "The actual size of the loss was a little surprising," said Denise Pitus, a bank analyst for Argus Research Corp. in New York.

Along with clearing the company's investment portfolio of the problem investments, Norman P. Blake, Jr., chairman and chief executive officer of USF&G, said the company will get out of the leasing, travel services and other "non-core" businesses.

"Going forward, USF&G will concentrate its resources on its insurance and investment management businesses where it has a strong competitive position, expertise and prospects for an attractive return on investment," he said.

USF&G said the $610 million loss amounted to $7.32 a share compared to a profit of $104 million, or $1.20 a share, in the 1989 fourth quarter period. More than half -- $357 million, or $4.25 a share -- came from losses from selling and restructuring investments.

Total revenues for the fourth quarter were $1.17 billion compared FTC to $1.22 billion in the 1989 fourth quarter.

For all of 1990, USF&G reported a loss of $569 million, or $6.99 a share, compared with a profit of $119 million, or $1.24 per share, in 1989. Investment losses amounted to $354 million.

Revenues for the year were $4.5 billion compared to $4.7 billion in 1989.

The company cut its dividend to 5 cents per share, payable on April 30. The company had already cut its Jan. 31 dividend to 25 cents from the previous quarterly dividend of 73 cents per share.

The investment restructuring and other losses have have reduced the company's stockholders equity to $1.2 billion, or $11.97 per share, a 40 percent drop from the end of 1989 when stockholder equity was $2 billion, or $21.60 a share.

In January the company announced a massive cost-cutting effort that included the elimination of 900 workers, cutting $28 million in unnecessary advertising and promotion costs and the selling of the corporate jet.

In a prepared statement, Blake said there will be further "significant reductions" in the company's work force, which now stands at about 10,900 nationwide with 1,940 of those workers in the Baltimore area.

Even though jobs have not yet been eliminated, the company took a one-time charge of $34 million in the fourth quarter for the anticipated staff reduction.

USF&G spokeswoman Kerrie Burch-DeLuca said jobs will not be eliminated until the company finishes a strategic review, which is scheduled to be completed in late March.

Even without the massive revamping of its investment portfolio, the company lost $130 million, or $1.55 a share, during the fourth quarter from its operations. In comparison, the company had an operating income of $56 million, or 67 cents per share, for the 1989 fourth quarter.

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