USF&G pleases analysts with break-evenn results

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

A story in the business section of yesterday's edition of The Sun incorrectly said that USF&G Corp. did not pay a dividend on its common stock. Currently it pays a quarterly dividend of 5 cents a share.

The Sun regrets the error.

USF&G Corp. said yesterday that it eked out its second narrowly profitable quarter in a row in the three months that ended in June, but, just as in early 1992, the Baltimore insurance conglomerate posted a small loss after it paid the dividend on its preferred stock.

The second straight quarter of essentially break-even performance pleased analysts, most of whom had expected a slightly bigger loss. And two analysts predicted that USF&G will return to yearly profits next year after breaking even or losing a small amount in 1992. That would mark the company's comeback from its nearly overwhelming problems in 1990 and last year.

"USF&G's second-quarter performance represents the expected continuation of positive earnings improvement," Chief Executive Norman P. Blake Jr. said in a statement. "We are particularly encouraged by the performance of our core property/casualty [insurance] business as it drives the earnings recovery."

The numbers worked out to a profit of $6 million in the quarter before the dividend was paid. But after the dividend was paid, the company lost 7 cents a share, or about $5.9 million.

Holders of USF&G common stock do not receive a dividend.

The quarter was the second one in a row in which USF&G has been profitable before the dividend and not profitable after.

But Wall Street welcomed even a whiff of profitability from a company whose last unambiguously money-making quarter was the second quarter of 1990.

Analysts had predicted, on average, that USF&G would lose 12 cents a share. And they seemed to be generally pleased yesterday: The company's stock closed unchanged at $14.50 a share in New York Stock Exchange trading.

"If you put aside the write-down in oil and gas partnerships, they lost 2 cents a share on continuing operations," said Denis Callaghan, an analyst with Alex. Brown & Sons Inc. in Baltimore.

"We were looking for 4 cents, so they did a little less badly than we were expecting."

Mr. Callaghan said the write-down in oil and gas investments cost USF&G 12 cents a share. He said the company should break even this year and earn 50 cents a share, or about $42 million, in 1993.

Company spokeswoman Kerrie Burch-DeLuca said unfavorable weather in Kansas and Oklahoma cost the company $25 million to $30 million more as hail and tornadoes helped drive up claims.

Nonetheless, the property/casualty business segment earned $52 million in the quarter, reversing a $44 million loss in 1991's second quarter.

"The big difference clearly came in the property-casualty operation," said Lehman Bos. analyst Gloria Vogel.

Ms. Vogel said USF&G significantly improved its ratio of claim losses and administrative expenses to premiums collected.

USF&G still pays out more in claims and expenses than it takes in in premiums, as does the entire insurance industry, she said. But the gap is now narrow enough that USF&G can break even or make a small profit with the help of income from its investments.

Ms. Vogel predicts USF&G will make 50 cents a share in operating earnings next year after paying the preferred dividend. It lost 50 cents on operations this year.

-

Three months ended 6/30/92

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

'92... ... 900,000,000... ... ... ... 6,000,000... ... ... (0.07)

'91... . 1,053,000,000... ... ... . (56,000,000)... ... ... (0.77)

% change... ... ..-14.5... ... ... ... ... ... .--... ... ... ... --

+

Six months ended 6/30/92

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

'92... . 1,841,000,000... ... ... .. 10,000,000... ... ... (0.17)

'91... . 2,137,000,000... ... ... (111,000,000)... ... ... (1.47)

% change... ... ..-13.9... ... ... ... ... ... .--... ... ... ... --

Earnings per share are adjusted for the payment of dividend to preferred stockholders.

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