USF&G profits on operations Gain is 1st since '90

Limited dividend led to per-share loss.

April 30, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

USF&G Corp. reported yesterday its first quarterly operating profit since 1990, as only a dividend payment to preferred stockholders pushed the Baltimore-based insurer's per-share results into the red.

The company, which has gone through a painful restructuring involving thousands of layoffs and more than $700 million in losses during 1990 and 1991, said it earned $4 million before paying the preferred dividend. Including the dividend, the company's net loss was 9 cents a share in the quarter that ended March 31.

USF&G lost $55 million, or 70 cents a share, a year ago.

"All of the restructuring stuff is gone," company spokeswoman Kerrie Burch-DeLuca said. "We have money. The earnings are coming from where they should -- the insurance company."

Analysts agreed with USF&G Chairman Norman P. Blake Jr.'s view that the results showed "a measurable positive trend is emerging."

But the analysts don't expect USF&G to become a star performer soon, given the continuing downturn in prices in the property-casualty insurance business that provides about 85 percent of its revenue.

"It is a turnaround for them," said Ellen S. Barzilai, an analyst for Alex. Brown & Sons Inc. in New York. "We think it's sustainable, not for this year, but compared to last year it's a dramatic improvement."

She predicted USF&G will just about break even this year, then earn 50 cents a share in 1993.

"We have them down for a small profit after preferred dividends in 1993," said Michael A. Lewis, an analyst for Dean Witter Reynolds Inc. in New York, who said USF&G will likely lose 25 cents a share in 1992.

Wall Street wasn't surprised by the results because USF&G had given analysts a preview on April 8. Earlier, the consensus among analysts had been that USF&G would lose 30 cents a share.

Ms. Burch-DeLuca and Mr. Lewis said USF&G's revenue has been shrinking because it has dropped lines where it wasn't making money. Revenue fell to $941 million in the quarter from $1.1 billion a year ago.

But, they said, USF&G has retained customers it wants to keep.

"That they can keep the [repeat] business high is very, very good," Mr. Lewis said.

Ms. Burch-DeLuca said USF&G's core property-casualty insurance company earned $40 million, after losing $15 million a year earlier. This year's earnings were helped by less-than-usual customer claims related to the weather, Mr. Lewis said.

The subsidiary's profit was offset at the parent company level, however, because of $40 million in interest payments, non-insurance operations and certain real estate-related expenses, the company said.

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