USF&G to close more offices, lay off workers

April 04, 1991|By Peter H. Frank

USF&G Corp., which has already announced plans to shut its Texas and Louisiana branches, will be merging 14 additional offices this year and laying off hundreds more workers as part of a companywide reorganization aimed at curbing losses and reshaping the giant Baltimore-based insurer.

The company is expected to announce as early as this morning many, if not all, of the details in its latest restructuring efforts, which include this second round of layoffs.

Initial reductions came in January when USF&G let go 900 workers nationwide, including 360 employees in its headquarters.

Unlike the earlier announcement, which dealt primarily with the company's life insurance business, this latest action is expected to focus on the company's core property and casualty operations as USF&G moves to offset growing losses and soured investments.

Norman P. Blake Jr., chairman and chief executive of USF&G, declined to comment on the impending announcement yesterday. But analysts welcomed the steps taken by Mr. Blake since he took over for former USF&G Chairman Jack Moseley in late November.

"This is a company that needs to formulate a strategy, a rational strategy and implement it," said A. Michael Frinquelli, an insurance analyst with Salomon Brothers in New York. "What this company seems not to have had for a long time is a rational plan in regard to their core business, which, like it or not, is property and casualty insurance."

While full details of the planned restructuring could not be determined yesterday, USF&G outlined many of its proposed changes in a filing with the Securities and Exchange Commission earlier this week.

The company said it would be consolidating 14 of its 54 branch offices by the end of 1991 as part of a "fundamental shift in the approach to its business." These moves would come in addition to earlier announcements that USF&G was shutting its three offices in Texas and its single Louisiana office, affecting about 630 employees.

The company also said that it would separate its commercial and personal insurance businesses into discrete operating arenas.

Stung by a stubborn downswing in its core property and casualty operations and a painful loss of value in its real estate and "junk" bond holdings, USF&G began a series of evaluations late last year aimed at refocusing its business.

In November, the board of USF&G said it was cutting the company's dividend by two-thirds, to 25 cents a share, and warned that layoffs would come. Two months later, the company laid off 900 of its 11,800 workers nationwide in an effort to save $42 million this year. USF&G warned at the time that more staff cuts would come after the evaluation of its property and casualty business was completed near the end of March. A second reduction in the quarterly dividend, to a nickel a share, came in late February.

The company's property and casualty subsidiary, the United States Fidelity and Guaranty Corp., accounted for 86 percent of USF&G's overall revenues last year and suffered a net loss from operations of $192 million. Overall, USF&G posted a $610 million loss in the fourth quarter, leading to a $569 million loss for the year. According to the SEC filing, USF&G's real estate portfolio was particularly hard hit. More than 33 percent of its $1 billion in real estate holdings were troubled at the end of the year, up from about 20 percent at year-end 1989.

While it could not be learned what type of severance would be offered to those employees laid off in this latest round of reductions, lower-level employees received eight weeks of salary plus two weeks of pay for each year they worked at the company in the prior round.

However, some of the senior-level executives apparently have done much better. James A. Flick Jr., the former chief financial officer, left in early March and received a lump sum payment of $4.2 million, according to an SEC filing. Mr. Flick, the second-highest paid executive at the company in 1989, received a cash salary and bonus of $674,000 that year, according to the company's 1990 proxy statement.

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