Earnings plummet at Alexander & Alexander Insurance broker blames new acquisitions

April 20, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

Alexander & Alexander Inc. reported a big first-quarter earnings drop yesterday, explaining to Wall Street that some businesses it acquired last year are seasonal and do poorly in the first few months of the year.

The large insurance brokerage firm said it earned $13.1 million, or 15 cents a share, on sales of $314.3 million during the three months that ended in March. The company earned $41.7 million during the same months of 1995.

"Operating margins for 1996 are expected to improve modestly over 1995 despite difficult market conditions," Alexander & Alexander chief executive Frank G. Zarb said.

The firm did not say which of the businesses -- added in a restructuring effort that began in 1994 -- caused the fluctuation.

Alexander & Alexander's stock rose 25 cents to $19.375. The company is based in New York, but has major sales and administrative operations in Baltimore and Owings Mills.

Merrill Lynch analyst Jay A. Cohen said the earnings were well below the 25 cents a share he had expected, but said Wall Street did not pound the stock because the company offered a reasonable argument for why profits should rebound later in the year, when its acquisitions businesses begin to perform better.

"Even though it looked on the surface to be disappointing, the quarter was not that bad," said Mr. Cohen, who has a "neutral" near-term investment rating on the stock. "They're certainly headed in the right direction."

The company also pleased stockholders by saying its board authorized the repurchase of up to 2 million of A&A's 44.8 million outstanding shares.

That move builds the value of remaining stock by giving the owners of each remaining shares a larger stake in the same future earnings stream.

Pub Date: 4/20/96

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