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ALEXANDER & ALEXANDER 'F-1' COMMERCIAL PAPER RATING ON FITCHALERT - NEGATIVE -- FITCH FINANCIAL WIRE --

 NEW YORK, Dec. 31 /PRNewswire/ -- Alexander & Alexander Services Inc.'s 'F-1' commercial paper rating is placed on FitchAlert with negative implications, as a result of the company's announcement that it will take a significant fourth quarter charge relating to discontinued operations that were sold in 1987. The alert is prompted by the company's inability at this time to quantify the amount of the charge. The company has no commercial paper outstanding.
 A&A's announcement was made pursuant to a court decision in London which essentially invalidated certain commutation contracts in existence when Sphere Drake Insurance Company was purchased by Alexander & Alexander in 1982. Alexander & Alexander, which sold Sphere Drake in 1987 with an indemnification on certain of its loss reserves, is now liable for losses incurred on particular business written by Sphere Drake during 1953-1967. A&A had believed these policy years were covered by a third party through commutation agreements.
 Currently, A&A is in the process of gathering actuarial and loss information to determine the magnitude of this liability, and the level of reserves needed. Preliminary information has indicated that the reserve of $20 million established in 1991 will not be sufficient, consequently the company announced that it will be taking a charge. As the charge will not immediately affect cash, the impact will be primarily on the balance sheet, with cash impacted over the long term as losses are paid. Fitch will determine the appropriate rating action once the results of the actuarial evaluation are quantified. If the charge amounts to less than $100 million the F-1 rating will likely be affirmed, due to the otherwise positive operating and financial trends of the company.
 Operating results have improved despite a difficult environment, with earnings from continuing operations through Sept. 30, 1992 up 16 percent over 1991's results. The improvement is largely the result of a concerted effort by management to rationalize the company's core brokerage businesses through organizational changes, cost cutting measures to improve efficiency, and divestitures of non-core businesses. These actions have begun to pay-off, and are expected to better position the company for the eventual turn of the property and casualty cycle.
 Additionally, financial leverage is the most conservative its been in several years, with debt to total capitalization of 26 percent at Sept. 30, 1992. On a pro-forma basis, a $100 million charge would raise leverage to 32 percent which is still within historical levels. The company's liquidity position continues to be good, with committed bank lines providing additional financial flexibility.
 -0- 12/31/92
 /CONTACT: Lygia X. Campbell of Fitch, 212-908-0695/
 (AAL)


CO: Alexander & Alexander Services Inc. ST: New York IN: INS SU: RTG

SH -- NY017 -- 0897 12/31/92 12:01 EST
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Publication:PR Newswire
Date:Dec 31, 1992
Words:450
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