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| 8-K - FORM 8-K - CRAWFORD & CO | d637358d8k.htm |
 Crawford &
Company New York City
December 4, 2013
Exhibit 99.1 |
 Crawford
& Company FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION
2
Forward-looking statements
Revenues Before Reimbursements (“Revenues”)
Segment and Consolidated Operating Earnings
Earnings Per Share
Non-GAAP Financial Information
–This presentation contains forward-looking statements, including
statements about the future financial condition, results of operations and earnings
outlook of Crawford & Company. Statements, both qualitative and
quantitative, that are not statements of historical fact may be
“forward-looking
statements”
as defined in the Private Securities Litigation Reform Act of 1995 and other
securities laws. Forward-looking statements involve a number of
risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company’s present
expectations. Accordingly, no one should place undue reliance on
forward-looking statements, which speak only as of the date on which they are
made. Crawford & Company does not undertake to update
forward-looking statements to reflect the impact of circumstances or events that may
arise or not arise after the date the forward-looking statements are made.
Results for any interim period presented herein are not necessarily
indicative of results to be expected for the full year or for any other future
period. For further information regarding Crawford & Company, and the
risks and uncertainties involved in forward-looking statements, please read
Crawford & Company’s reports filed with the United States Securities and
Exchange Commission and available at www.sec.gov or in the Investor Relations
section of Crawford & Company’s website at
www.crawfordandcompany.com.
–Crawford’s business is dependent, to a significant extent, on case
volumes. The Company cannot predict the future trend of case volumes for a
number of reasons, including the fact that the frequency and severity of
weather-related claims and the occurrence of natural and man-made
disasters, which are a significant source of claims and revenue for the Company,
are generally not subject to accurate forecasting. –Revenues Before
Reimbursements are referred to as “Revenues” in both consolidated
and segment charts, bullets and tables throughout this presentation.
–Under
the
Financial
Accounting
Standards
Board’s
Accounting
Standards
Codification
Topic
280,
“Segment
Reporting,”
the
Company
has
defined
segment operating earnings as the primary measure used by the Company to evaluate
the results of each of its four operating segments. Segment operating
earnings exclude income taxes, interest expense, amortization of customer-relationship intangible assets, stock option expense, earnings or
loss attributable to non-controlling interests, certain unallocated corporate
and shared costs and credits, and special charges and credits.
Consolidated operating earnings is the total of segment operating earnings and
certain unallocated and shared costs and credits. –In certain periods,
the Company has paid a higher dividend on CRDA than on CRDB. This may result in a different earnings per share ("EPS") for
each class of stock due to the two-class method of computing EPS as required
by the guidance in Accounting Standards Codification Topic 260 -
"Earnings Per Share". The two-class method is an earnings allocation
method under which EPS is calculated for each class of common stock
considering both dividends declared and participation rights in undistributed
earnings as if all such earnings had been distributed during the period.
Further references to EPS in this presentation will generally be
only for CRDB, as that is the more dilutive measure.
–For additional information about certain non-GAAP financial information
presented herein, see the Appendix following this presentation. |
 Crawford
& Company Crawford & Company at a Glance
at market close November 29, 2013
Exchange/Tickers:
NYSE: CRDA and CRDB
Trailing 52 week High/Low:
CRDA: $4.65-$8.48
CRDB: $5.62-$11.30
Market Capitalization :
$488.0 million
Quarterly Dividend/ Normalized Yield:
CRDA: $0.05/quarter or 2.6% yield
CRDB: $0.04/quarter or 1.6% yield
Analyst Coverage:
Adam Klauber, William Blair
Mark Hughes, Suntrust
Greg Peters, Raymond James
3 |
 Crawford
& Company A Business Services Leader since 1941
The world’s largest independent provider of global claims management solutions
Multiple globally recognized brand names: Crawford, Broadspire, GCG
Clients include multinational insurance carriers, brokers and local insurance firms
as well as over 200 of the Fortune 500 companies
4
EMEA-A/P
Americas
Broadspire
Legal Settlement
Administration
Serves the U.K., European,
Middle Eastern, African and
Asia Pacific markets
Serves the U.S., Canadian
and Latin American markets
Serves large national
accounts, carriers and self-
insured entities
Provides administration for
class action settlements and
bankruptcy matters |
 Crawford
& Company $1.2 Billion Revenue Company
700 Locations
70+ Countries
8,500 Employees
OUR GLOBAL STRENGTH
5 |
 Crawford
& Company Diversified Business and Clients
2012 Revenues of Approximately $1.2 Billion
•
Property and Casualty
Services
•
Global Technical
Services
•
Third Party
Administration
•
Global Markets
28.6%
21.6%
17.1%
EMEA/AP
Americas
•
Property and Casualty Services
•
Catastrophe Management Services
•
Contractor Connection
•
Centralized Claim Administration
•
Affinity Programs
32.7%
Legal Settlement Administration
•
Class Actions
–
Securities
–
Product Liability
•
Bankruptcy Administration
Broadspire
•
Workers’
Compensation and
Liability Claims Administration
•
Medical and Case Management
•
Long-Term Care Services
•
Integrated Disability Management
•
Risk Management Information
Systems (RSG)
•
Claim Triage Solution (e-Triage)
6 |
 Crawford
& Company Catalysts/Drivers
7
Cyclical Positive Industry Claim Trends:
Increased underwriting pressure creates a positive claim
trend.
Weather/Catastrophe Trends:
Catastrophic events worldwide are increasing in severity
and frequency. Crawford is uniquely positioned to serve
these markets.
Healthcare Reform:
Increased healthcare spending is a positive for
Broadspire’s medical case management and cost
containment services.
Future Inflation:
Rising interest rates drive interest income in Broadspire
and lower the Company’s anticipated pension obligations.
Market Position:
Leading market position in each of our segments. |
 Crawford
& Company Crawford Provides More Than Claims Services
8
P&C outsourced claims services provided
about $575 million, or 49%, of total
Crawford revenue in 2012
•
Claims services is a mature business in most geographies
•
Revenues are driven by claims volume, which is affected by
regional economies, economic growth
•
Severe weather and natural disasters can create volatility in
claims volume
•
Global Technical Services is the leader in mega-claims
$600 million, or 51%, was derived from
higher-value added business services
•
Third Party Administration
•
Direct repair services
•
Legal Settlement Administration
•
Medical Management
•
Analytics
•
Forensic Accounting
–BPO
–Consulting |
 Crawford’s
Expertise Claims Services: Thai Flooding Catastrophe Response
Business Process Outsourcing: Deepwater Horizon
Consulting: Medical Management |
 Crawford
& Company Catastrophe Response: Thai Flooding
Top ten historic insurance loss
Crawford handled losses in excess of $4
billion
Flooding affected an area the size of
South Carolina
Leveraged global capabilities through
deployment of 160 staff including 50
support staff and 35 senior adjusters
from other locations globally
In-house forensic accountants utilized
10 |
 Crawford
& Company Natural catastrophes worldwide 1980 –
2012
Natural catastrophes per year more than doubled over period
Crawford is uniquely positioned to respond on a global basis
11
Global Natural Catastrophe Update
©
2013 Munich Re
Source: Geo Risks Research, NatCatSERVICE –
As at January 2013 |
 Crawford
& Company High-Volume Claims Services: Deepwater Horizon
12
The Garden City Group (GCG) is the recognized
leader in legal administration services for class
action settlements and other claims
administration, bankruptcy cases and legal
noticing programs
Largest program is the combined GCCF/Deepwater
Horizon settlement
This special project resolves economic loss and
property damage claims related to the Deepwater
Horizon Incident
GCG’s other high-profile distribution matters
include:
–the
General Motors bankruptcy –the $6.15 billion WorldCom settlement
–the
$3.4 billion Native American Trust Settlement –the $3.05 billion VisaCheck/MasterMoney Antitrust settlement. |
 Crawford
& Company Garden City Group Ranks First
Among Claims Administrators
13
Source: Securities Class Action Services Report, Most Frequent Claims Administrators in SCAS
100, Jan. 2013 |
 Crawford
& Company 14
Consulting: Medical Management
Medical costs are currently 60% of workers compensation cost and
are estimated to be over 70% by 2016, increasing the importance of
effective medical cost containment.
Broadspire case managers proactively manage medical treatment in
the rehabilitation process, enabling our clients’
employees to
recover as quickly as possible in the most cost-effective manner.
Healthcare reform is expected to increase activity in the healthcare
market overall, which could negatively impact access to providers
and slow return to work, which could increase medical and workers
compensation cost and potentially increase claims frequency.
Broadspire’s in-house integrated model provides services to mitigate
increasing medical costs, ultimately decreasing our clients’
overall
loss costs. This is a key element of Broadspire’s value proposition to
clients.
|
 Financial
Review and Operational Focus |
 Crawford
& Company 2012 Business Summary
16
Record revenues of $1.177 billion
Record consolidated operating earnings of $110.2 million
Record operating cash flow of $92.9 million
Including special payment, dividends of $0.20 per CRDA and $0.16
per CRDB |
 Crawford
& Company YTD September 2013 Business Summary
17
Revenues increased 2% to $878.6 million
Consolidated operating earnings increased 5% to $74.7 million
Improvement in Broadspire and Americas operating results
Net income increased 16% to $40.2 million
Diluted earnings per share of $0.74 for CRDA and $0.71 for CRDB |
 Crawford
& Company Year To Date 2013 Financials
18
Crawford & Company Income Statement Highlights
Unaudited ($ in thousands, except per share amounts)
Nine months ended September 30,
2013
2012
% Change
Revenues
$878,566
$863,736
2%
Costs of Services
638,049
625,001
2%
Selling, General, and Administrative
174,077
173,967
0%
Corporate Interest Expense, Net
4,762
6,785
-30%
Special Charges
- 2,794
nm
Total Costs and Expenses
816,888
808,547
1%
Other Income
2,800
1,473
90%
Income Before Income Taxes
64,478
56,662
14%
Provision for Income Taxes
24,221
21,213
14%
Net Income
40,257
35,449
14%
Add: Net Income Attributable to Noncontrolling Interests
105
744
-86%
Net Income Attributable to Shareholders of Crawford & Company
$40,152
$34,705
16%
Earnings Per Share - Diluted:
Class A Common Stock
0.74
$
0.65
$
14%
Class B Common Stock
0.71
$
0.62
$
15%
Cash Dividends Per Share:
Class A Common Stock
0.13
$
0.10
$
30%
Class B Common Stock
0.10
$
0.07
$
43%
nm=not meaningful |
 Crawford
& Company Operational Focus
19
Sustain Operating Performance through Improved Profitability
Americas improvement in U.S. Property & Casualty and Canada
Continued progress in Broadspire
EMEA/AP improvement in the United Kingdom
Strengthen the Balance Sheet
Manage debt levels and pension obligations
Drive operating cash flow to support business growth
Enhance Total Return to Shareholders
Dividend policy to provide meaningful yield
Seek opportunities to repurchase outstanding shares below
intrinsic value |
 Crawford
& Company 2013 Guidance
20
Consolidated revenues before reimbursements between $1.13 and $1.15 billion
Consolidated operating earnings between $95.0 and $99.0 million
Consolidated cash provided by operating activities between $50.0
and $55.0
million
Consolidated net income attributable to shareholders of Crawford
& Company
between $51.5 and $54.0 million, or $0.90 to $0.95 diluted earnings per CRDB
share
On November 4, 2013, Crawford & Company affirmed and updated certain
aspects of its full year 2013 guidance as follows: |
 Crawford
& Company Enhanced Return to Shareholders
21
Dividends and Buyback:
TTM Total Return (12/3/12 to 11/29/13):
After the 2013 third quarter, Crawford declared a regular quarterly
dividend of $0.05 on CRDA and $0.04 on CRDB
During the first nine months of 2013, Crawford has paid dividends of $0.13
per
share
on
CRDA
and
$0.10
per
share
on
CRDB,
compared
to
$0.10
and
$0.07, respectively, for the comparable 2012 period
Through September 30, 2013, Crawford has repurchased 933,249 shares of
CRDA at an average cost of $5.07
CRDA price increased 57.6%. Total return was 62.1%
CRDB price increased 65.2%. Total return was 68.1% |
 Crawford
& Company Crawford Capital Structure
22
Improving Balance Sheet Supports Return to
Shareholders
Debt reduced by $62 million, or 25% since 2010
through 2012
Pension risk management program driving positive
results
Material improvement in cash flow from both
operations and working capital management
Net debt of $95.2 million at December 31, 2012 |
 Crawford
& Company 23
Crawford Dynamic Investment Policy Glide Path
9/30/13
Desired
Liability Hedging
60%
Plan Status
Frozen
Funded Status
82%
Asset Allocation
38/62
Road Map
Trade Equities for Long Bonds as Funded Status Improves
Hedging
60%
Hedging
60%
Hedging
60%
Hedging
66%
Hedging
74%
Return
Seeking
40%
Return
Seeking
40%
Return
Seeking
40%
Return
Seeking
40%
Return
Seeking
34%
Hedging
90%
Hedging
82%
Hedging
60%
Return
Seeking
10%
Return
Seeking
18%
Return
Seeking
26%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
<70%
70%
75%
80%
85%
90%
95%
100% +
Asset Allocation by Funded Status
Plan Status
De-risk & Maintain
Funded Status
Fully Funded
Asset Allocation
Risk Optimized
Liability Hedging
100% Hedged |
 Crawford
& Company Management Alignment with Shareholders
Short-Term Incentive Compensation Plan Matrix:
Metric:
Weight:
Revenues
30%
Operating Earnings
25%
Operating Margin
25%
DSO
20%
24
Stock Ownership Guidelines:
Multiple of
Officer:
Base Salary:
President/CEO
3x
CFO/EVPs
2x
Balanced short and long term system focused on strategic priorities and
aligned with shareholders
Long-term incentive compensation plan based on three-year EPS performance
tied to the Company’s strategic plan |
 Crawford
& Company Capital Structure and Governance
Class A and B Shares:
As of October 31, 2013, there were approximately 29.9 million shares of Class A Common
Stock and 24.7 million shares of Class B Common Stock outstanding.
The two classes of stock are substantially identical, except with respect to voting rights and
the Company's ability to pay greater cash dividends on the non-voting Class A Common
Stock than on the voting Class B Common Stock, subject to certain limitations.
In addition, with respect to mergers or similar transactions, holders of Class A Common
Stock must receive the same type and amount of consideration as holders of Class B
Common Stock, unless different consideration is approved by the holders
of 75% of the Class A
Common Stock, voting as a class.
Insider Ownership:
The Jesse C. Crawford family beneficially owned 40.1% of outstanding Class A shares and
52.0% of outstanding Class B shares as of March 5, 2013.
Board Diversification and Makeup:
Eight of nine members are independent, with the exception of the
CEO, Jeff Bowman. CEO
and chairman roles are split.
25 |
 Crawford
& Company Global Footprint
World’s largest independent provider of
claims management solutions
Diverse customer base
Global catastrophe response
Innovative Technology
Platforms
Analytics
RiskTech
Risk Sciences Group/Dmitri
Claims Management System (CMS)
Command Center
Specialized Resources
Legal Settlement Administration (GCG)
Global Technical Services (GTS)
Medical Cost Containment
Contractor Connection
Business Process Outsourcing
Gaining Market Share
North American vertical
Positioned to benefit from expected global
consolidation of TPA vendors
Emerging Asia Pacific and
Latin American markets
26
CRAWFORD IS POSITIONED FOR STRONG RETURNS |
 Crawford &
Company Appendix |
 Crawford
& Company Appendix: Non-GAAP Financial Information
28
Measurements of financial performance not calculated in accordance with GAAP should be
considered as supplements to, and not substitutes for, performance measurements
calculated or derived in accordance with GAAP. Any such
measures are not necessarily comparable to other similarly-titled measurements employed by
other companies. Reimbursements for Out-of-Pocket Expenses
In the normal course of our business, our operating segments incur certain
out-of-pocket expenses that are thereafter reimbursed by our clients. Under
GAAP, these out-of-pocket expenses and associated reimbursements are
required to be included when reporting expenses and revenues,
respectively, in our consolidated results of operations. In this
presentation, we do not believe it is informative to include the GAAP-required
gross up of our revenues and expenses for these pass-through reimbursed
expenses. The amounts of reimbursed expenses and related revenues offset each
other in our consolidated results of operations with no impact to our net income
or operating earnings (loss). Unless noted in this presentation, revenue and
expense amounts exclude reimbursements for out-of-pocket expenses. Segment and
Consolidated Operating Earnings Operating earnings is the primary financial
performance measure used by our senior management and chief operating decision maker
(“CODM”) to
evaluate the financial performance of our Company and operating segments, and make
resource allocation and certain compensation decisions. Management
believes operating earnings is useful to others in that it allows them to evaluate segment and consolidated operating
performance using
the same criteria our management and chief operation decision maker use.
Consolidated operating earnings (loss) represent segment earnings (loss)
including certain unallocated corporate and shared costs and credits, but before
net corporate interest expense, stock option expense, amortization of
customer-relationship intangible assets, special charges and credits, income
taxes, and net income or loss attributable to noncontrolling
interests.
Net debt
Net debt is computed as the sum of long-term debt, capital leases and
short-term borrowings less cash and cash equivalents. Management believes
that net debt is useful because it provides investors with an estimate of what the
Company’s debt would be if all available cash was used to pay down the
debt of the Company. The measure is not meant to imply that management
plans to use all available cash to pay down debt. |
 Crawford
& Company Non-GAAP Financial Information
29
Unaudited ($ in thousands)
2008
2009
2010
2011
2012
YTD through
September 30, 2013
YTD through
September 30, 2012
Revenues Before Reimbursements
Total Revenues
1,135,916
$
1,048,202
$
1,110,801
$
1,211,362
$
1,266,138
$
946,710
$
930,608
$
Reimbursements
(87,334)
(78,334)
(80,384)
(86,007)
(89,421)
(68,144)
(66,872)
Revenues Before Reimbursements
1,048,582
$
969,868
$
1,030,417
$
1,125,355
$
1,176,717
$
878,566
$
863,736
$
YTD through
September 30, 2013
YTD through
September 30, 2012
Costs of Services Before Reimbursements
Total Costs of Services
706,193
$
691,873
$
Reimbursements
(68,144)
(66,872)
Costs of Services Before Reimbursements
638,049
$
625,001
$
2008
2009
2010
2011
2012
YTD through
September 30, 2013
YTD through
September 30, 2012
Operating Earnings (Loss)
Americas
28,766
$
29,394
$
20,748
$
19,851
$
11,877
$
17,355
$
7,429
$
EMEA/AP
32,999
23,401
24,828
28,421
48,585
19,486
30,267
Broadspire
3,526
(1,602)
(11,712)
(11,434)
27
4,475
(573)
Legal Settlement Administration
10,814
13,130
47,661
51,307
60,284
38,714
42,114
Unallocated corporate and shared costs, net
(6,362)
(10,996)
(5,841)
(9,555)
(10,613)
(5,355)
(7,930)
Consolidated Operating Earnings
69,743
53,327
75,684
78,590
110,160
74,675
71,307
(Deduct) Add:
Goodwill and intangible asset impairment charges
-
(140,945)
(10,788)
-
-
-
-
Net corporate interest expense
(17,622)
(14,166)
(15,002)
(15,911)
(8,607)
(4,762)
(6,785)
Stock option expense
(861)
(914)
(761)
(450)
(408)
(652)
(322)
Amortization expense
(6,025)
(5,994)
(5,995)
(6,177)
(6,373)
(4,783)
(4,744)
Special charges and credits
(788)
(4,059)
(4,650)
2,379
(11,332)
-
(2,794)
Income before income taxes
44,447
$
(112,751)
$
38,488
$
58,431
$
83,440
$
64,478
$
56,662
$
|
 Crawford
& Company Non-GAAP Financial Information, continued
30
Unaudited ($ in thousands)
December 31,
2012
Net Debt
Short-term borrowings
13,275
$
Current installments of long-term debt and capital leases
838
Long-term debt and capital leases, less current installments
152,293
Total debt
166,406
Less: Cash and cash equivalents
71,157
Net debt
95,249
$
Reconciliation of Non-GAAP Items |
 Crawford &
Company |