USF&G loses $25 million

October 30, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff sBB

USF&G Corp., the Baltimore-based insurance company, lost $25 million in the third quarter, about two-thirds more than the 1990 third-quarter loss of $15 million.

On a per share basis, the loss was double -- 44 cents compared to 22 cents, primarily because of payment of dividends on $300 million worth of preferred shares that were issued in June. Per share figures are based on income after deduction of preferred stock dividends.

Revenues for the third quarter were $980 million, down 14 percent from revenues of $1.12 billion in the previous third quarter.

The company said the third-quarter results were primarily due to a 15 per cent decline in premiums resulting from the company's pullout from states where it says its business is unprofitable. Earlier this year the company announced it was withdrawing from Texas and Louisiana and reducing the number of branches from 50 to 36.

For the first nine months, USF&G lost $136 million, or $1.91 per share, compared with net income of $41 million, or 35 cents per share, in the same period in 1990. Revenues for the nine months was $3.1 billion, compared to $3.4 billion a year ago.

The company has previously said it does not expect to make a profit during this year, and one analyst foresees problems for the company through the first six months of 1992.

Daniel Murray, an insurance analyst for Argus Research, a New York brokerage research firm, said bond yields, which property and casualty insurance companies rely on to supplement premium revenues, are expected to go down by about a half or 1 percent in the next six months. "That is bad news for property and casualty companies," he said.

Murray said USF&G's decision to withdraw from unprofitable markets and reduce its work force by 2,700 people in the last year will help, but not immediately. "It will get better, but its not something that happens overnight," he said.

"While it is disappointing to report further losses in the quarter, we are pleased to see stability returning to our core property/casualty insurance business after the substantial restructuring process of the past three quarters." said Norman P. Blake Jr., chairman, president and chief executive officer. "With the majority of the financial rebuilding phase of our strategy behind us, we are now focused on returning our insurance businesses to profitability -- a process that we knew would need time to take hold.

"Cost control efforts have resulted in a reduction in controllable expenses in the third quarter of 1991, as compared with the same period in 1990, Blake said. "Efforts to improve our primary property casualty underwriting results include a strategy of strong product mix management and strict pricing disciplines."

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