USF&G operating earnings rise 20% Net income up 46% for second quarter

July 25, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Despite intense competition, USF&G Corp. saw its earnings from operations grow 20 percent in the second quarter, and its net income jumped 46 percent, the insurer said yesterday.

The company earned $54 million from operations in the second quarter ended June 30, or 41 cents a share, compared with operating earnings of $45 million, or 34 cents a share, for the same period last year.

"Our business trends are very encouraging," said Norman P. Blake Jr., chairman and chief executive of the $14.6 billion-assets company, which is based in Baltimore.

For the first six months of the year, operating profit reached $98 million, or 74 cents a share, up from $84 million in 1995, or 64 cents a share.

In the second quarter, net income jumped to $67 million compared with $46 million in the same period in 1995.

USF&G's stock closed unchanged yesterday at $15.50 a share.

Profits were sparked by a $12 million gain on investments in the quarter, up from $5 million, and net income of $12 million from life insurance operations, up from $6 million in the second quarter a year ago.

But income from USF&G's property and casualty operations was $59 million in the quarter, unchanged from the year-ago quarter. And income from property and casualty insurance for the first six months of the year was $111 million, down from $115 million.

Dan Hale, USF&G's chief financial officer, said property and casualty earnings in 1995 were boosted by a $6 million foreign currency gain. The company lost $1.4 million in foreign currency transactions this year, he said.

Hale said the company showed continued improvement in controlling expenses and winning business.

"Our strategy is working," he said

The strategy has been to turn the once-troubled company around by driving down overhead and refocusing on a handful of insurance businesses, which include life insurance products tailored to meet the needs of school teachers; insuring middle-market companies such as high-technology firms; and insuring risky drivers at commensurate rates.

"They've come back from the dead," said Ira L. Zuckerman, an analyst with Nutmeg Securities Ltd., a Westport, Conn.-based institutional brokerage firm.

But Zuckerman isn't sure USF&G will ever fully recover.

"They are not big enough to be efficient, and they are not small enough to specialize," he said.

Zuckerman said competitive conditions are "horrendous."

"People are going out there cutting prices just to keep what business they've got," he said. "It is still going to be a tough road."

Pub Date: 7/25/96

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