USF&G reports 3rd-quarter loss of $25 million Notes improvement in core operations

October 31, 1991|By Peter H. Frank

USF&G Corp. said yesterday that it lost $25 million in the third quarter as the company's restructuring had yet to take full effect.

The Baltimore-based insurer, parent of the United States Fidelity and Guaranty Co., said it had arrested some of the decline in its core operations but that bottom-line improvements would take more time.

For the three months ended Sept. 30, USF&G's loss amounted to 44 cents a share compared with a loss of $15 million, or 22 cents a share, in the same year-ago period. Total revenue of which premiums account for three-quarters fell nearly 13 percent during the quarter to $980 million from $1.1 billion last year.

Although the third-quarter loss was slightly larger than analysts had expected, USF&G's continued sagging fortunes caught no one by surprise.

Analysts said that USF&G's 9-month-old restructuring remained too fresh to overcome the weak prices, high payouts and stagnant investment income that is hurting much of the property and casualty insurance industry.

Further, the company said that costs stemming from insurance claims had not fallen as fast as premium revenue, which has been reduced through the year as the company moved to cut back on "unprofitable" products and in "undesirable" areas.

Traded on the New York Stock Exchange, USF&G closed yesterday up 12.5 cents to $7.50 a share.

"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," Norman P. Blake Jr., the chairman and chief executive of the $13.9 billion company, said in a statement.

"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."

Since joining USF&G nearly a year ago, Mr. Blake has overseen a massive restructuring of the giant insurer that has cut nearly 25 percent, or 2,700 workers, from the company's payroll, saving about $30 million in employee costs this quarter. He has ordered the merger of 16 branch offices and said the company would exit such money-losing states as Texas and Louisiana.

While USF&G's overall operating loss increased to $31 million from $16 million a year ago, the company's core property and casualty unit began showing significant improvement in the third quarter.

Accounting for about two-thirds of the parent company's business, the insurance subsidiary said it recorded profits of $10 million in the quarter, compared with $18 million in the same quarter a year ago. That was a marked improvement over a loss of $59 million in the first half of this year.

The company's life insurance unit, the Fidelity and Guaranty Life Insurance Co., with about $4 billion in assets, said its earnings fell to $3 million from $15 million last year. The company blamed a decline in premium revenue and an increased rate of policy surrenders for the lower income.

Three months ended 9/30/91

Revenue ... ... ... ... ... ... Net ... ... ... ... ... ... Share*

'91 980,000,000 .. ... ... ... (25,000,000) .. .. ... ... (0.44)

'90 1,124,000,000 ... ... .. .. (15,000,000) ... ... ... .. (0.22)

% change ... -12.8 .. ... .. .. NA ... ... ... ... .. .. .. NA

Nine months ended 9/30/91

Revenue ... ... ... ... ... ... Net ... ... ... ... ... ... Share

'91 3,134,000,000 .. ... .. .. (136,000,000) .. ... .. .. (1.91)

'90 3,366,000,000 .. ... .. .. 41,000,000 ... ... .. .. .. 0.35

% change ... -6.9 ... ... .. .. NA ... ... ... ... .. .. .. NA

* Per share figures reflect income after the payment of preferred dividends, which increased threefold in the past year.

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