A&A to record $20 million gain on business sale

November 15, 1994|By David Conn | David Conn,Sun Staff Writer

Alexander & Alexander Services Inc. yesterday added a bright financial note to its restructuring by announcing it will record a $20 million pre-tax gain from the sale of its personal lines business to a subsidiary of the Chubb Corp.

The $30 million sale, to Chubb's Personal Lines Insurance Brokerage Inc., was first announced without the financial details on Aug. 4. Yesterday's news follows a series of events aimed at restoring the nation's second-largest insurance broker to profitability.

Although based in New York, Alexander & Alexander employs more than 500 people at its administrative headquarters in Owings Mills and another 290 at its Baltimore sales office.

In June the company hired a new chairman, Frank G. Zarb, formerly head of the Smith Barney investment firm. At the same time, Alexander secured a $200 million equity investment from insurer AIG Group and cut its dividend by 90 percent, to 2.5 cents a share.

Last month, Alexander announced it would take 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 Baltimore sales office, located in the Brokerage downtown. The 526 employees in Owings Mills will not be affected.

"We fully anticipate before the fourth quarter is over adding to that $12 million," said spokesman Gary Sullivan. "And even in light of the personal lines transaction we expect to have a loss for the fourth quarter and a loss for the year."

Plans to restructure the company's domestic operations are finished; still to come are reorganizations of the operations in Canada and overseas. The extent of the special charges may not be known until after the first of the year, Mr. Sullivan said.

In the third quarter, which ended Sept. 30, Alexander lost $20.8 million, or 58 cents a share, because of a special charge related to a business sold years ago. Operating income for the third quarter was $4.2 million, up from $200,000 in the 1993 third quarter.

Alexander's stock gained 25 cents yesterday to close at $20.

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