USF&G Corp., the troubled Baltimore insurance company, yesterday said it was laying off 900 of its 11,800 employees to cut costs and said more job losses were likely. More than 350 of the terminated workers are in Baltimore, and the rest are scattered around the country.

The layoffs were effective immediately; a spokeswoman said employees were told upon arriving at work yesterday. Baltimore-based employees will receive eight weeks of severance pay plus two weeks' pay for every year worked, job-search services and health benefits for two months.

The layoffs will save the company $35 million, after accounting for $7 million in severance and other benefits. The company's stock rose 12 1/2 cents yesterday to close at $7.75 a share in New York Stock Exchange trading.

USF&G, which through its subsidiaries sells property, casualty and life insurance and such financial services as mutual funds, lost $15 million in the third quarter of 1990 and is expected to report a loss for the calendar year. Its situation is similar to that of other property-casualty insurers, which are suffering from intense competition. USF&G also is feeling the pain from losses on its investments in junk bonds and real estate.

"Their problems are symptomatic of those of the industry in terms of a difficult underwriting environment and investments that have proven to be marginal," said David Seifer, vice president of the brokerage firm Donaldson, Lufkin & Jenrette Securities Corp. in New York.

Seifer said he is estimating that USF&G will have an operating loss for 1990 of about $54.4 million.

The layoffs are spread evenly across the company's operations, spokeswoman Kellie Burch-DeLuca said, from the vice-presidential level down. She said that once a review of the company's operating strategy is completed this spring, some operations may be slimmed down or eliminated.

"Although painful, downsizing our work force as part of a broad-based expense reduction program is absolutely essential to USF&G's ability to compete successfully in the marketplace," Norman P. Blake Jr., chairman and president, said in a letter to employees released yesterday.

The company's other recent cost-cutting measures include reducing advertising and promotion by $28 million, freezing salaries, putting a corporate jet up for sale, eliminating the home-office executive dining room and cutting the common stock dividend to 25 cents per share from 73 cents.

The layoffs hit Baltimore at a difficult time. The cancellation last week of the U.S. Navy contract to build the A-12 fighter jet already is expected to result in the loss of 1,200 jobs at Westinghouse Electronic Systems Group near Baltimore-Washington International Airport.

Other area defense contractors also are laying off workers, as is MNC Financial Inc., parent of Maryland National Bank and American Security Bank.