USF&G turning 100, a gleam in its eye Birthday mission: Battling its way back from another flirtation with failure, USF&G Corp. is determined to show that it can make money consistently and beat the competition.

March 24, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

The axiom in swimming goes like this: If a person goes under for a third time, he's dead.

USF&G Corp. has tested the theory and it has survived barely.

Four times the Baltimore-based insurance company has been to the brink of failure, only to fight its way back.

It survived the fire of 1904, which wiped out the company's headquarters. It nearly collapsed in 1934 during the Great Depression. It lost $1 million a day in its financial cushion in 1973 as its stock investments soured, and in 1990, when the company was badly over-extended, it was six weeks away from bankruptcy.

Today, the $14.6 billion-asset company is a survivor again, and it's looking to turn consistent profits, expand through acquisitions and beat the competition on price and service.

But as USF&G celebrates its centennial this year, it's still unclear whether the company will thrive.

"The jury is still out," said Gloria Vogel, managing director of Ladenburg, Thalmann & Co., a New York-based brokerage firm.

"There is a lot of leverage on the upside for this company if they can grow the premium base," added Daniel M. Theriault, an analyst with T. Rowe Price Associates Inc. Growing premiums is "always the big if."

Even Norman P. Blake Jr., USF&G's high-energy chairman and chief executive, acknowledges that the going could be more challenging than during his initial years at the company when he slashed 6,000 employees and jettisoned about a dozen businesses to stem losses.

"I was blessed with the situation where anything you did had to be better," said the 54-year-old executive.

Analysts are impressed with the job Mr. Blake has done because they see signs that USF&G may be a bigger success than they envisioned just a short time ago: Premium revenues in 1995 jumped 8 percent to $2.7 billion; total revenues rose more than 6 percent to $3.5 billion; and Mr. Blake has continued to grind down expenses, shedding $89 million last year alone.

The company's rating was raised in January to "A" from "A minus" by A. M. Best Co., the Oldwick, N.J.-based insurance rating firm.

But analysts still see hurdles for USF&G:

Competitors are gouging each other in a price war. Though that's good for consumers, Pressure from shareholders, who are eager for USF&G's stock to appreciate, and want increases in dividends.

But Mr. Blake says his biggest concern is keeping employees motivated so the company can reach its goal of becoming one of the best performing insurance companies in the business.

That means boosting the return on shareholders' equity to 15 percent from 10.8 percent over the next three to five years.

The mission, he said, "is not one of survival, it is one of being the best at what we do."

"You can never become complacent. You can't become self-confident you have to have that healthy sense of paranoia," he said. "We have been playing catch-up ball since I have been here. We haven't won, we are just in the ballgame."

Mr. Blake tries to keep employees inspired by writing monthly letters some of which are eight pages long about the company's progress and challenges. He also holds monthly "NB with NB" sessions, which stands for "no bull with Norm Blake," where employees can fire at him any questions that come to their minds.

"Now they trust me," Mr. Blake said. "In terms of nasty questions there's no retribution."

This summer Mr. Blake will take his message on the road. His goal is to meet every one of the company's 6,100 employees during the centennial year. From June to November, he will travel two days a week to the company's 35 branch offices.

Since Mr. Blake was hired in November 1990 to replace the ousted chairman, Jack Moseley, USF&G has traveled a long way. Mr. Blake joined the company after turning around Fuji Bank's Heller International, a commercial financial company based in Chicago.

What Blake found in 1990

When Mr. Blake joined USF&G, the company was bloated with 12,500 employees, and its businesses strayed far from insurance a strategy designed to protect the company from cyclical downturns. The company invested heavily in junk bonds, ran liquor distributorships and windmill farms and even managed citrus groves.

Mr. Blake immediately slashed jobs, cut perks and dumped hundreds of independent agents. He sold most of the company's junk-bond and real estate portfolios. And he axed about a dozen businesses, which represented 38 percent of stockholders' equity.

"None of them were making money," Mr. Blake said. "I arrived here and was faced with the stark reality of the fact that we were in technical default on our loan covenants."

The company was rocked by a $569 million loss in 1990, and a $176 million loss the following year. USF&G's stock took a pounding, too, falling to a low of $5.625 in early 1991 from the mid-$30s in 1989.

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