Alexander takes a $12 million charge

October 27, 1994|By David Conn | David Conn,Sun Staff Writer

Alexander & Alexander Services Inc., the nation's second-largest insurance broker, began its anticipated restructuring this week by announcing a $12 million charge in the fourth quarter to pay for up to 400 job cuts in its U.S. operations.

Layoffs will eliminate 220 of those jobs, including five in the company's Baltimore sales office. That office, in the Brokerage downtown, has about 290 people. The 526 employees at Alexander's administrative headquarters in Owings Mills will not be affected.

The rest of the reductions will come from a voluntary early retirement program being offered to more than 200 employees.

The layoffs and early retirements affect only Alexander's domestic operations, which account for slightly more than half of the 14,100-person work force, the company said.

"These initial actions will be part of significant restructuring and other charges anticipated in the fourth quarter as the result of a review of operations that is now under way throughout the company," Alexander said in a statement Tuesday.

The company predicted a loss for the fourth quarter and the year.

Alexander has suffered through years of substandard performance and losses. Many of the company's problems stemmed from underwriting and liability problems from acquisitions made in the 1980s. Almost 4,000 jobs have been eliminated since 1987, a reduction of more than 20 percent.

The company lost a total of $100 million in 1991 and 1992, largely due to $225 million in restructuring charges. It turned a $27 million profit last year, but losses returned in the first and second quarters of this year. Third-quarter results have not been reported.

This year Alexander secured a $200 million investment from insurer American International Group Inc., it moved to stem further liability losses in its British unit, and it hired a new chairman, Frank G. Zarb, former chairman of securities firm Smith Barney.

"For the balance of 1994, we will concentrate on improving profitability and strengthening the balance sheet," Mr. Zarb said. Company spokesman Gary Sullivan said the job reductions will affect three U.S. divisions:

* Alexander & Alexander Inc., the main insurance brokerage unit, will lose about 400 of 4,400 employees;

* Alexander Consulting Group in Lyndhurst, N.J., will lose 17 of 1,250 people; and

* Alexander Howden North America, the U.S. branch of the British subsidiary, will lose four of 210 employees.

As work continues at the company's Funding the Future team, an Owings Mills group examining expense-cutting options, more staff reductions can be expected outside the country, Mr. Sullivan said.

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