earnings surged on cost-cutting and increased profit in its consulting business.

The world's second-largest insurance broker said net income rose to $17.5 million, or 25 cents a share, from a loss of $25.6 million, or 58 cents a share for the year-earlier quarter which included a $20.9 million loss from discontinued operations.

Revenue fell to $299.7 million from $332.6 million a year earlier as the company sold off businesses during the past year.

The 25 cents a share net was below Wall Street expectations of 29 cents, based on a survey of 11 analysts by Zacks Investment Research. Shares of New York-based Alexander & Alexander fell 1/4 in late morning trading to 23 1/2.

The earnings come amid a major restructuring for Alexander & Alexander, one of a handful of insurance consultants large enough to put together global insurance packages for international corporations.

"Although expense savings were instrumental in the year-to- year improvement, future earnings growth will increasingly depend on building revenues through aggressive business development and selective acquisitions,'' said Frank Zarb, Alexander & Alexander's chairman and chief executive.

The company acquired most of the US insurance brokerage and consulting business of Jardine Insurance Brokers Inc.

The results also reflect improved results from the company's insurance services and risk management consulting businesses.

Since early last year, the company cut its quarterly dividend by 90 percent to 2.5 cents, replaced its chairman with Zarb, a former Smith Barney Inc.

executive, and sold $200 million of preferred stock to the insurer American International Group Inc.

Marsh & McLennan reported yesterday that net income for the third quarter rose nine perent to to $91 million.

Income rose 11 percent to to $922 million in the three months ended September 30, 1995 compared to $827 million in 1994, the insurance broker said.

Earnings per share rose 11 percent to $1.26 for the quarter.

The company, which has also provided capital for Bermuda-based XL Insurance, Mid-Ocean Re and ACE Insurance, said income for the quarter from insurance services was $459.1 million, $269 million was earned from consulting and $193.1 million came from investment management.