Alexander & Alexander rebounds in 1st quarter

April 25, 1995|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Alexander & Alexander Services Inc. reported substantially improved first-quarter results yesterday, showing the effects of a cost-cutting campaign and sparking a rally in the company's stock, but tightening insurance markets could make it hard to sustain the momentum.

The New York-based commercial insurance brokerage firm, which has its administrative headquarters in Owings Mills, said it earned $41.7 million, or 80 cents a share. Half of that, however, was a gain on the company's sale of its Alexsis claims processing unit.

In the first quarter of last year, the company posted a loss of $4.4 million, or 15 cents per share. Those results included a charge of $1.6 million, or 6 cents per share, because of an accounting change.

The company since has cut 1,300 employees, a 10 percent reduction overall. The cuts saved the company $14.6 million during the quarter, when revenue was essentially flat.

The company also said improved retail results in Europe boosted profits, and the U.S. dollar's decline against major currencies increased revenue by $4.7 million by making its overseas earnings more valuable in dollars.

Ira Malis, who follows the company for Alex. Brown Inc. in Baltimore, said the earnings work out to 28 cents a share, after excluding Alexsis' profit before it was sold and the gain on the sale.

Wall Street had expected the company to earn about 16 cents a share, and pushed the stock up $2.25 a share, to close at $25.125.

But the company said it expects worldwide insurance markets to weaken late in the year. Mr. Malis said that sets up the real test for Alexander & Alexander Services, which is attempting to work its way back into Wall Street's favor after more than half a decade of strategic mistakes.

"We all knew the expense savings were coming," Mr. Malis said. "The real issue is, what are the earnings going to be next year."

Alexander & Alexander

Services Inc.

New York ..... Ticker ... Yesterday's

........ ..... Symbol ... Cls. .. Chg.

........ ..... AAL ...... 25 1/8 +2 1/4

Period ended

03/31 ........... 1st qtr. ... Year ago .... Chg.

Revenue ......... $324,200 ... $323,000 .... +0.4

Net Income ....... $41,700 ... $(4,400) ..... --

Primary EPS ........ $0.80 .... $(0.15) ..... --

Figures in thousands (except per share data)

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