A&A to take charge as part of settlement

January 31, 1995|By David Conn | David Conn,Sun Staff Writer

Alexander & Alexander Services Inc. said yesterday it would take an after-tax charge of $21.9 million, or 50 cents a share, for the 1994 fourth quarter as part of a legal settlement with a former subsidiary.

The settlement is with Shand/Evanston Group Inc., whose predecessor bought Alexander's Shand Morahan & Co. subsidiary in 1987. Shand Morahan was the subject of claims that it mishandled some of its reinsurance contracts. Alexander, based in New York, is the nation's second largest insurance brokerage firm.

The settlement requires Alexander to pay Shand/Evanston $14 million in cash and issue a five-year $14 million note plus an obligation of $5.75 million payable if certain events occur.

The company, which employs about 500 people at its administrative headquarters in Owings Mills and another 280 or so at its Baltimore sales office, has been maneuvering through a restructuring since the second half of last year.

Under new leadership, it has raised capital and announced up to 400 job cuts in its U.S. operations. In September, Alexander said it would take a $12 million charge in the fourth quarter to pay for those layoffs. The company has told analysts to expect a loss for the quarter and the year.

The Shand/Evanston settlement releases Alexander from certain indemnity obligations and ends pending arbitration proceedings "that created significant potential exposure for A&A," the company said.

Specifically, Alexander was exposed to more than $33 million in arbitration claims that alleged its Shand Morahan subsidiary committed errors and omissions in placing reinsurance for various clients. The agreement releases Alexander from any payments that may result from the arbitration, the company said.

Alexander's stock closed unchanged yesterday at $20 a share.

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