Alexander to sell Alexsis claims-processing subsidiary

January 17, 1995|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Alexander & Alexander Services Inc., continuing its restructuring, announced a deal yesterday to sell its Alexsis claims processing unit to CNA Financial Corp. of Chicago for $45 million in cash.

The deal was the second asset sale in two months for the New York-based insurance brokerage, which employs about 800 people at an administrative headquarters in Owings Mills and a sales office in downtown Baltimore. It sold another unit to Chubb Corp. in November.

The Alexsis sale will give Alexander & Alexander a first-quarter pre-tax gain of about $30 million, company spokesman Gary Sullivan said. The deal is expected to close in March.

"It [Alexsis] is not a part of our core business strategy, and it does provide some cash that we can reinvest," Mr. Sullivan said. "We've been sort of getting back to our knitting for a several-year period. Under Frank Zarb it's accelerating."

Frank G. Zarb was named chief executive officer in June. Mr. Sullivan said the restructured company will focus on risk management consulting, insurance and reinsurance brokerage and human resource consulting.

Mr. Sullivan said Alexsis' top managers are based in suburban Detroit and will be kept on by CNA, which is buying the unit through its Continental Casualty subsidiary.

The unit has about 30 employees in Owings Mills, who adjust claims under workers' compensation insurance policies. "They're going to remain in place and will continue to do business in Maryland as we always have," Alexsis Chief Executive Kevin Smith said.

Alexsis processes insurance claims for organizations, such as companies and government agencies, that insure themselves against losses but still want an outside company to review spending and handle insurance-related paperwork. The unit also works directly for some insurance companies.

Alexsis accounted for about $100 million of Alexander & Alexander's $1.3 billion in annual sales, the company said. Mr. Sullivan said Alexsis is profitable, but its profits are not reported separately.

More asset sales could be on the way. Jay Cohen, an analyst who follows insurance stocks for Salomon Bros. Inc. in New York, said that although the company's balance sheet was bolstered by last year's $200 million investment by American International Group Inc., money for restructuring and operating improvements will come from asset sales.

"This is all going on to fund a major cleanup at the company," Mr. Cohen said. There will be "major hits to earnings so that the new management can start out with a clean slate."

The company has already told Wall Street to expect a $12 million restructuring charge for the fourth quarter to pay for eliminating 400 jobs.

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