Cuts 2,000 More Jobs, Merges 14 Offices
BALTIMORE (AP) _ USF&G Corp. on Thursday announced it was cutting nearly 2,000 jobs and merging 14 branch offices, austerity measures that the troubled insurance conglomerate said would save $100 million.
The job cuts expand on previously announced reductions that will decrease the company’s workforce 25 percent by year’s end, the company said.
USF&G also will focus more efforts on its core products, property and casualty insurance, which comprise 60 percent of the company’s business, spokeswoman Kerrie Burch-DeLuca said.
The Baltimore-based insurer ″is commencing a series of strategic initiatives to concentrate its resources on those areas where it has a strong competitive position and prospects for attractive return on investment,″ said Norman P. Blake Jr., who took over as chairman and chief executive in November.
The company gave pink slips to 225 employees Thursday in Baltimore, Ms. Burch-DeLuca said. Another 1,700 jobs will be slashed companywide by the end of the year, she said. Those job cuts were at all levels, including vice presidents, the spokeswoman said, but declined to further specify which jobs will be eliminated.
Industry analysts said it was too soon to say if the changes would turn around a company that is one of many struggling through a downturn in the insurance industry.
″My sense is that the new management...is moving quickly to sharpen the focus of the company, to cut out the fat, to be more profit oriented,″ said Dennis Callaghan, an analyst at Alex. Brown Inc.
″I’m optimistic that his (Blake’s) efforts will succeed. At the same time, the effort could use a little bit of luck and that would come from a better economy and a better pricing environment in their core business, property casualty,″ Callaghan said.
Gloria Vogel, analyst with Bear, Stearns & Co. in New York, also praised the company’s sharper focus. But she said, ″It’s really too soon to know if it will″ make a difference.
In January, USF&G slashed 900 jobs, cut advertising and sold the company jet, for an estimated savings of $75 million. Two months later, it announced plans to shut its Louisiana and Texas branches, cutting another 630 jobs.
The changes announced Thursday were recommended by a set of five internal task forces created to examine ways to improve company profitability, Ms. Burch-DeLuca said. The changes give more control to local offices, she said. There will be 36 branch offices, as 14 branch offices will be changed into what Ms. Burch-DeLuca termed sub-offices.
Those are in Alburquerque, N.M.; Birmingham, Ala.; Boston; Columbia, S.C.; Cincinnati; Little Rock, Ark.; Livingston, N.J.; Memphis, Tenn.; Meridian, Miss.; Minneapolis; Omaha, Neb.; Phoenix; Scranton, Pa.; and Toledo, Ohio.
USF&G has been stung by a stubborn downswing in its core property and casualty operations and a loss of value in its real estate and ″junk″ bond holdings.
In November, the board of USF&G said it was cutting the company’s dividend by two-thirds, to 25 cents a share, and warned of layoffs.
A second reduction in the quarterly dividend, to a nickel a share, came in late February.
The company’s property and casualty subsidiary, the United States Fidelity and Guaranty Corp., accounted for 86 percent of USF&G’s overall revenues last year and suffered a net loss from operations of $192 million.
Overall, USF&G posted a $610 million loss in the fourth quarter, leading to a $569 million loss for the year.
Since Blake joined the company as chairman and chief executive, more than a half-dozen executives have either been promoted or hired into senior positions while a number of veteran employees have stepped down.