USF&G profits rose 113% for quarter, to $49 million

April 27, 1995|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

USF&G Corp. yesterday reported that first-quarter earnings more than doubled as the company continued to tighten its underwriting standards and catastrophe losses declined because of milder weather.

"It was a very solid quarter for USF&G," said Steven A. Gavios, an insurance analyst for Bear, Stearns & Co., a New York investment banking firm. "Premium growth was robust and came from all the right places," he said.

Mr. Gavios also attributed the good results to "excellent" underwriting, which is the selection of insurance risks.

The Baltimore-based insurance company's net income in the quarter climbed to $49 million, or 42 cents a share, up 113 percent from $23 million, or 13 cents a share, for the previous first quarter. Revenue grew by 3.8 percent, to $795 million from $766 million.

The company's net income got a boost of $6 million -- which represents the value of a new 14-year sublease with the Center Club for the 15th and 16th floors of the USF&G Building on Light Street. The Center Club, a club for executives that has occupied the two floors since 1986, renewed its sublease last month.

In January, USF&G announced it would leave the 35-story

signature downtown building and consolidate its local operations its Mount Washington campus by the end of 1996. There have been expressions of interest in subletting the company's 353,000-square-foot space in the building, according to spokeswoman Kerrie Burch-Deluca. "But there's nothing to announce at this point," she said.

Besides more premium money, the company's results were helped by lower claim payments in relation to revenues. This comparison, called the loss ratio, dropped to 73.3 in this quarter from 76.5 in the previous first quarter. Catastrophe losses dropped to $23 million from $40 million a year ago, when such claims were boosted by the frigid weather.

"What was most encouraging is that our results were achieved the right way -- strong underwriting," Norman P. Blake Jr., the company's chairman, chief executive officer and president, said in a statement.

Despite the strong results, the company's stock ended unchanged, at $14.375 a share.

"I'm surprised the market has not reacted more favorably to this very solid earnings report," Mr. Gavios said.

"We have a 'buy' rating on this stock, which is our highest rating, and it is our favorite stock," he said, adding that Bear Stearns expects the stock to reach $18 a share in the next 12 months.

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