USF&G to Raise $300 Million for Principal Subsidiary
BALTIMORE (AP) _ Troubled insurance conglomerate USF&G Corp. said Monday it will raise $300 million through two public stock offerings to help strengthen its primary subsidiary, United States Fidelity and Guaranty Co.
The corporation’s move follows a decision by A.M. Best Co., an insurance rating company, to assign a rating of A- to the subsidiary, down slightly from an A contingent rating assigned previously.
The rating was given in part because of USF&G’s plan to add more equity to the company by the third quarter of 1991, and its promise to continue to preserve capital and control costs, company officials said.
In April, USF&G announced it was cutting 2,000 jobs and merging 14 branch offices to save $200 million each year. The insurance giant intends to cut its work force by 25 percent by the end of the year.
In the first quarter of this year, USF&G reported a $55 million loss because of two large, unanticipated charges, said company spokeswoman Kerrie Burch-Deluca. The corporation paid $21 million in restructuring costs and $20 million into the National Workers’ Compensation re-insurance pool. The charges are one-time events, she said.
USF&G decided to restructure after suffering heavy losses in its core property and casualty operations, and a loss of value in its real estate and junk bond holdings. The company was forced to cut its dividend by two-thirds in November and a further reduction came in February.
Terms of the convertible preferred stock offering, to be presented in a prospectus, will be determined by market conditions, company officials said.
The Baltimore-based corporation, with assets of $14 billion, writes property, casualty and life insurance policies, and provides investment management services.