Weather is kind to USF&G as insurer's profit rises 35% Chairman credits lack of storms in Southeast

October 23, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

USF&G Corp. escaped winds, storms, hurricanes and other natural disasters, and as a result, operating income soared 68 percent and net income rose 35 percent in the third quarter.

The Baltimore insurance company said yesterday that it's after-tax operating income jumped to $51 million in the third quarter ended Sept. 30, compared with $31 million for the same time a year earlier.

After-tax operating income per fully diluted common share rose 81.8 percent to 40 cents in the quarter, compared with 22 cents for the same period in 1996.

"USF&G's third-quarter results got a boost from mother nature for a change," said Norman P. Blake Jr., the company's chairman. "The late summer storms usually seen in the Southeast simply did not materialize this year."

Net income after taxes was $48 million in the quarter, compared with $35 million for the same period a year earlier. After-tax net income per fully diluted share rose 54 percent to 40 cents compared with 26 cents for the same time a year earlier.

In the quarter, losses due to catastrophes fell nearly 90 percent to $5 million, compared with $45 million for the same period a year earlier when the company was socked with $31 million in losses related to Hurricane Fran.

Fran raked the East Coast in September 1996, and caused extensive damage and flooding in Western Maryland.

"The positive impact of lower catastrophes notwithstanding, we are encouraged by our underlying performance in what is widely held to be a dismal marketing environment," Blake said.

He sees "strength" in the company's property and casualty RTC business as well as in its life insurance business despite competition.

USF&G's stock declined 56.25 cents to close at $21.

Ira Zuckerman, an insurance analyst with Nutmeg Securities Ltd., said the company is continuing to "struggle."

"They are doing all the right things, but I don't know that it is enough," he said. "They are not at the point where they are making a lot of money."

Zuckerman said competition is cutthroat.

For the first nine months of the year, the company's after-tax operating income was up 14 percent to $147 million, or $1.14 per fully diluted common share, compared with $129 million, or 93 cents, the same time a year earlier.

After-tax net income was $140 million, or $1.16 per fully diluted common share for the first nine months of the year, compared with $159 million, or $1.16 per share.

Revenue slipped 4.5 percent to $828 million in the quarter, compared with $867 million for the same period in 1996. For the first nine months of the year, revenue was $2.5 billion, down from $2.6 billion.

Dan L. Hale, USF&G's chief financial officer, said revenue fell in part because the company sold nearly $1 billion in single premium deferred annuities.

Pub Date: 10/23/97

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