A&A lost $2.2 million in 2nd quarter

July 29, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Alexander & Alexander Services Inc. said it lost $2.2 million during the second quarter, as the insurance broker's U.S. operations continued to suffer from a strategic decision to pursue the business of global companies, a move the company said has let competitors horn in on its traditional franchise serving middle-market firms.

"What you're seeing is the effect of a strategic decision made two years ago," company spokesman Gary Alexander said. "We embarked on a strategy to grow our market share among global companies. Our historical base has been in the middle market. Competitors couldn't resist the opportunity we gave them to attack our historic base."

Middle-market companies usually manage risk by buying insurance, Mr. Alexander said. Bigger companies often use other risk management tools such as setting up their own insurance subsidiaries or strategies to spend money up front to reduce insurable losses.

The strategic move was one of the reasons the company chose a new chief executive, Frank Zarb, in June after former CEO Tinsley H. Irvin resigned under pressure last winter. Mr. Zarb is working on reforms that will help the company try to regain its lost share of the market for brokering insurance to middle-market companies, Mr. Alexander said.

The $2.2 million loss, which works out to 10 cents a share, compares with net income of $13.1 million in the second quarter of last year. It was largely in line with Wall Street estimates.

Much of this year's loss stems from a decision, applauded by analysts, to spend $6 million on reinsurance to protect the company against exposure to policies that a now-closed subsidiary underwrote during the 1980s. But even without spending the $6 million, profits would have been down sharply.

Alexander & Alexander is formally based in New York, but has its administrative headquarters for all but its top executives in Owings Mills. It also has a large sales office in Baltimore.

Alexander & Alexander Services Inc.

1!

Ticker .. .. .. Yesterday's .. . Symbol .. .. .. Cls. .. .. Chg.

. AAL .. .. .. .. 19 3/4 ..unch.

Period ended

6/30 .. ... .. 2nd qtr. .. .. Year ago .. .. Chg.

Revenue ... .. $335,100 .. .. $341,900 .. .. 2.0%

Net Income ... $(2,200) .. ... $13,100 .. .. --

Primary EPS ... $(0.10) .. .. .. $0.26 .. .. --

.. .. .. .. .. 6 mos. . .. .. Year ago .. .. Chg.

Revenue ... .. $658,100 .. .. $666,700 .. .. 1.3%

Net Income .. $(6,600)* .. . $26,300** .. .. --

Primary EPS .. $(0.25)* .. ... $0.56** .. .. --

* Includes charge of $2.6 million, or 6 cents per share, for accounting change

** Includes gain of $3.3 million, or 8 cents per share, for accounting change

Figures in thousands (except per share data.)

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