More cuts are likely for former USF&G staff

St. Paul Cos. completing merger

layoffs expected

May 01, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

In its heyday, USF&G Corp. was one of Baltimore's highest-profile companies - an insurer with an Inner Harbor high-rise to hold its thousands of local employees.

Reorganized after tough times, its city staff had dropped to 2,800 by the time The St. Paul Cos. bought it six years ago. Now, just 700 work here - and further cuts loom.

Newly merged, The St. Paul Travelers Cos. said this week it is planning to save $300 million by eliminating jobs, consolidating offices and trimming other expenses.

Officials wouldn't say yesterday how that will affect branches in Maryland, but chief executive Jay S. Fishman has said that some of the remaining Baltimore jobs will be moved to Hartford, Conn.

Including the few small Travelers offices in the Baltimore area, the combined corporation employs about 840 in the state.

"There's no question but that that's an area that is likely to be impacted," Fishman said before the April 1 merger of The St. Paul Cos. and Travelers Property Casualty Corp.

Under the merger agreement, much of The St. Paul's small commercial business in Maryland will be consolidated under the Travelers brand and handled in Hartford.

St. Paul Travelers announced its projected savings during a first-quarter earnings conference call Thursday but offered few details.

About $200 million of the savings are expected to come from lower employee-related expenses, but the company would not say how many jobs would be cut - or where.

That amount of salaries and benefits would easily work out to hundreds of jobs, if not several thousand, said J. Paul Newsome, an A.G. Edwards & Sons analyst who follows the property casualty insurance industry.

The remaining $100 million in savings unrelated to jobs are to come from volume discounts, consolidating offices and combining separate information systems.

Joan Palm, a spokeswoman for St. Paul Travelers, said yesterday that duplication is a key factor as the company decides where to cut jobs.

That's a problem for Baltimore because it was St. Paul's base for midsize commercial business, Newsome said. Connecticut regulators announced that there would be "fairly minimal" layoffs in Hartford, Travelers' base for that business, he said.

"St. Paul and Travelers [competed] with each other, and many of their businesses do exactly the same thing," Newsome said. "It's completely up in the air how many people they will ultimately lay off. From the sounds [coming] from management, they don't know yet."

For Baltimore, the prospective cuts would be a continued chipping away at a symbol of the city - a reminder of its loss of corporate headquarters and financial services might. USF&G's story is much the same as that of Alex. Brown Inc., the oldest investment banking firm in America, a driving force in the development of Baltimore and a shadow of its former self after two mergers.

"Baltimore, as home to sizable companies but not massive companies, has tended to be home to the acquisition targets and not the acquirer," said Anirban Basu, chairman and chief executive of Sage Policy Group Inc., an economic and policy consulting firm in the city.

USF&G - an aggressive contributor to local cultural institutions and a sponsor of the Sugar Bowl football game - had a 102-year run before being bought out.

"It was a source of prestige and thousands of insurance jobs ... and it was one of a number of corporate entities that made Baltimore the Wall Street - or the financial center - of the South," Basu said.

USF&G came within six weeks of bankruptcy in 1990, and at the end of the year Norman P. Blake Jr. was brought in to turn it around. A few years later it consolidated in Mount Washington, leaving its 35-story Light Street tower - now occupied by Legg Mason.

The 700 employees remaining in Mount Washington are expected to relocate later in the year to a Hunt Valley warehouse being converted to offices, Baltimore County economic development officials said.

St. Paul Travelers, which employs 30,000 companywide, also has three small offices in the Baltimore area with staffs of 140 that were run by Travelers.

Palm said that more specific information about cuts should come with the second-quarter earnings report.

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