Moody's Investors Service Inc., a New York credit ratin agency, has downgraded the credit ratings of troubled USF&G Corp. and the financial strength ratings of the insurer's property and casualty and life insurance subsidiaries.
The recent actions affect $600 million in securities and $400 million in commercial paper held by the Baltimore insurer, Moody's said. All of the ratings for USF&G's bonds and notes are still of investment grade.
"USF&G's near-term performance will continue to remain under pressure from greater than expected risks associated with the company's asset quality and restructuring programs," Moody's said in a press release.
However, Moody's said the company's restructuring efforts "should yield significant benefits over the longer term."
USF&G spokeswoman Kerrie Burch-DeLuca said the insurer was not surprised by Moody's actions in light of recent losses. But she said USF&G was pleased by Moody's recognition of the long-term benefits of its restructuring.
Early this month, USF&G announced that it was eliminating 1,925 jobs by the end of the year as part of its restructuring.
The company had losses last year of $569 million, or $6.99 a share, compared with a profit of $119 million, or $1.24 a share, in 1989.
Completing a review begun on Feb. 27, Moody's downgraded USF&G's ratings on senior notes and bonds to BAA3 from single-A3; convertible exchangeable preferred stock to BAA3 from single-A3; shelf registration to prospective BAA3 from prospective single-A3; commercial paper to Prime-3 from Prime-2.
For both the United States Fidelity and Guaranty Co. and Fidelity and Guaranty Life Insurance Co., Moody's downgraded the ratings for insurance financial strength from single-A1 to BAA1.
The insurance financial strength ratings reflect an insurer's ability to meet its policyholder obligations and claims. The ratings are based on an analysis of the insurance company and its relationships to its parent, subsidiaries and affiliates, Moody's said.