Crawford & Co (CRD.A) 2006 Q4 法說會逐字稿

Good afternoon. My name is Cynthia and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Co. fourth quarter 2006 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. Instructions will follow at that time. (OPERATOR INSTRUCTIONS) As a reminder, ladies and gentlemen, this call is being recorded today, Monday, February 12, 2007.

Some of the matters to be discussed in this conference call may include forward-looking statements that involve risks and uncertainties, including statements regarding our acquisition of Broadspire Services Inc., the integration of Broadspire, and our ability to pay dividends in the future. Crawford & Co. faces risks associated with the acquisition including but not limited to risk that the integration of Broadspire Services Inc. into the Company's operations may not be successful or maybe more expensive than anticipated and that the anticipated results of the combined company following the acquisition may not meet expectations. The Company's actual results achieved in the future quarters could differ materially from the results that may be implied by such forward-looking statements. For a complete discussion regarding factors which could affect the Company's financial performance, please refer to the Company's form 10-K for year ended December 31, 2005 filed for the Securities and Exchange Commission, particularly information under the headings business, legal proceedings, and management's discussion and analysis of financial conditions and results of operation.

The Company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of the call or to reflect the occurrence of unanticipated events. This presentation includes certain non-GAAP financial measures as defined under the SEC rules. As required, reconciliation is provided for those measures to the most-directly comparable GAAP measures which is available on our website at www. CrawfordandCompany.com/quarterlyreleases.

I would now like to introduce Mr. Tom Crawford, Chief Executive Officer of Crawford & Co.

Good afternoon, everybody. Thanks again for joining us today. This our -- for the fourth quarter conference call. I am Tom Crawford, Chief Executive Officer of Crawford & Co., and joining me at the table today is Bruce Swain, the Chief Financial Officer, Jeff Bowman, the Chief Operating Officer, and Allen Nelson, our Chief Legal Counsel. Today, we will be discussing the quarter-end and the year-end results for '06 and later as you know, we will be happy to respond to the questions you have. Hopefully, all of you received the press release we issued this morning.

I am going to start things off today and before I turn it over to Bruce and chat with you a little bit about what we think is pretty important items. We feel we have made some important progress during the past year. In fact, we have been making it now for I would like to think over 24 months and this includes improvements in three out of the last four quarters. On an annual basis, we have improved performance in terms of revenue growth, profitability, and operating returns.

My comments on our accomplishments in 2006, I believe, have to begin with the maturation of the many programs developed over the past two years, all of which were aimed at improving quality within our operations. We believe Crawford's quality levels are now as good as they had ever been in the Company's history. Our quality results are verified by our clients, the state regulatory organizations, and our own audits. I think I've said this before that we have worked hard. Just about every program we've introduced, from compensation, to the audit process, to sitting with our clients, all addressing what I believe is one of the most important items of the Company as we go forward and that is the quality of our service.

We have asked our associates, our customers, and our shareholders and we believe that quality is, again, perceived as a central asset of this Company and we believe that will make us the claim solution Company of choice on a global basis. I am saying that and I know you know and we know, we say this knowing that we have been facing challenges in the U.S. operations. And I think will have some significant things to talk about today in regards to the U.S. operations.

The improvements open the door for additional business opportunities and as a result, in 2006, Crawford was able to renew key client relationships, add new customers, and expand service lines. Along with that, we have improved our technology. In '06, we pursued a number of initiatives to build a better Crawford.

Let me outline a few of these for you, the largest of which was the acquisition of Broadspire. We will talk about that more in depth a little bit later. Other transactions that I would like to just remind you of was the acquisition of the Specialty Liability Services, which is known as SLS, and that was a UK operation with revenues of about $10 million. That has been accretive from day one. We also purchased, and I think we have talked about his before, e-Triage, which is a three-point contact methodology we use in handling the work comp claims, which gives us, we think, a decided advantage going forward in handling of work comp.

Other areas that we think move forward is RiskTech and CMS-2. We will talk little bit more about those as we get into the presentation. Also included in this is the opening of Garden City's national processing center in Dublin, Ohio. We are now represented very well in the West, in Seattle, in the Midwest, and certainly with our operation in New York. We also made the decision to move to new corporate headquarters and that will take place in the April/May/June timeframe this year. That is on schedule.

We are also nearing completion in creating a unique global platform that is the foundation for sustainable long-term financial performance. We are already number one in two of our three markets and I don't want you to get this mixed when we talk about four segments. We consider ourselves in three major markets, Global Property and Casualty, Broadspire, which is our self-insured marketplace, and the Garden City group in New York serving legal settlement area. It remains our overall goal is to become the third-party administrator choice in the world.

Let me turn for a moment to our operating performance. We are coming off three quarter-over-quarter operating improvements, three of four actually. We actually reported a loss for the quarter, which was short of our expectations. This was due to the initial costs associated with the integration of Broadspire, together with the absence of weather-related revenue in the fourth quarter and the moderating results of Garden City group.

I would just go back to the weather-related and tell you that it is not the fact that is all catastrophe. It was one of the calmest fourth quarters probably in recent history and regardless of whether you have cats or not, it does affect your overall operation and the industry's. I will just call your attention the fact that the industry reported a 91% combined ratio this past year, which was the best in the last 50 years, basically driven by frequency.

Despite a fourth quarter that was softer than we would like, we remain pleased with Crawford's progress in '06, as we continue to strength building in the operating results of our claims administration business. For the year, revenues grew 6% and net income grew 17% over 2005 and operating margins increased to 3.9% from 3.2%.

U.S. property and casualty revenues declined 6% on the year, but this operation regained positive operating momentum, reporting a $4.8 million in operating profit versus a loss last year. Operating margin of 2.3% represents a first step in this business unit's recovery, as we improved operating efficiency in our field operations during the year. We continue to gain efficiency in the U.S. claims organization.

Let me update you on the Broadspire acquisition. For those new to Crawford on this call, in the fourth quarter, we closed the acquisition of Broadspire Services, a leading third-party administrator, offering casualty claims and medical management services. The combination of Crawford's self-insured business with Broadspire doubles the scale of our operations in the self-insured market. In fact, I just saw a notice today from Business Insurance magazine. We are now number two. I think the last time I talked you, we said it would move us to number three. We are now number two in the self-insured marketplace and that is being reported by Business Insurance.

This immediately brings us additional business opportunities and, just as important, scale. Dennis Replogle, who was the President of Broadspire when we made the purchase, has an outstanding reputation in the self-insured marketplace and will guide us in returning this segment to profitability in '07. Revenues from the combined Broadspire operations were $175.2 million for the year. Revenues associated with Broadspire acquisition totaled $33.1 million, which means our existing self-insured operations continued to contract during the quarter, but at a rate that has slowed throughout the year.

We recorded an operating loss of $14.7 million in 2006. This has been a subject that we have talked about in the past, about reporting on a segment basis. And I think that be fairly interesting information for you. This is compared with an operating loss of $10.1 million in 2005.

We expect these organizations to be substantially different in '07, as the benefits of synergies and scale begin to emerge following the acquisition. We have taken significant steps to reduce our operating expenses in the combined Broadspire unit and are well on our way to realizing the $22.5 million to $26.5 million in operating synergies that we have discussed with you in the past. We are confident that these operations will turn around in '07.

Now, this whole process, while difficult on some of our prior associates, I think we've clearly said it would be 10 to 12% of our associates on the combined organizations. Well, taking these steps, our future has certainly been solidified and, in our opinion, is much brighter for the associates remaining in the Broadspire operation. We are off to a good start already in terms of new wins and renewals. In January, Broadspire won $2 million in new business. Also in January, with more than one-quarter of Broadspire's business up for renewal, the revenue retention came in at a solid 98%.

Now, let me skip over to the legal settlement administration. Their revenues were a record $130.7 million for '06, compared with $114.3 million in '05. For '06, legal settlement administration had record operating earnings, up $24.4 million, with the operating margin improving to 18.7% in '06. These operations, which operate primarily under the GCG brand name, have grown rapidly over the past several years and we expect continued strong performance, but at a more-moderate pace in '07.

Let me talk about international for a few minutes. Their revenues grew by 6.4% to a record $303.7 million in '06. Operating earnings in the international segment improved to $16 million in the current year, up 20.3% from last year. This includes expansion of claim contracts throughout our global operations. We've been very happy with what is going on in the international side of our business.

Now looking ahead, our outlook for '07 reflects the work done to strengthen our U.S. P&C business and our expectations for a substantial improvement in our combined Broadspire operations. Recognizing that 2006 revenues did not include any significant storm-related activity, we have not budgeted for any major catastrophe activity in '07. I think we all understand that the weather would be nice across the board and we are, in fact, having that as we enter in the first quarter. I think most of you can read the papers and see that there has been a substantial difference at the beginning of this year compared to last.

Now, let me summarize. We expect accelerated progress at Crawford over the next year, as our acquisition is integrated and our programs continue to mature. We continue to forecast conservatively and more aggressively to build a world-class business. We have put in place the factors that encourage and lead to growth. I will go for some of those with you.

The quality of our work is now good and getting better every day. It is being recognized by the industry. Clearly, the integration of Broadspire is important and it continues at a rapid pace. Our new systems, like RiskTech and CMS-2, our offering opportunities for improved efficiency. By the end of March, the rollout of CMS 2, our new claims management system for U.S. property and casualty operations, will be complete. The new system, used by all U.S. property and casualty branches, will bring efficiencies to many current processes allowing us to capture and document work product in an electronic environment, a major step for us. I would just tell you that it is up and operating in about 42 of our branches today and will be complete by the end of March.

Garden City will continue to lead the legal settlement marketplace, another important part of our business, as you know. We expect it to continue into '07. Our energy, and I really want to emphasize this, our energy and resources will be focused on delivering incremental business in the U.S. market. I remained encourage about the long-term prospects for Crawford & Company and today after completing my second year with the Company, I am more encourage than ever that we are moving rapidly toward our goal of being the claims solution Company of choice on a global basis.

Before I close out, I want to reiterate something that is extremely important to this team. Our team fully expects to re-establish our dividends by the end of '07 and I hope that was heard by everybody. That is our expectations and that is this team is working for. What I will now is turn things over to Bruce and let him go over the numbers and then we will welcome some questions from our audience.

Thanks, Tom. Companywide revenues before reimbursements increased by 5.2% in the quarter to $228.3 million. The Company acquired Broadspire management Services Inc. on October 31, 2006. Revenues associated with the acquisition were $33.1 million in the 2006 fourth quarter. Excluding the impact of these acquired revenues, companywide revenues would have decreased 10% to $195.2 million in the quarter. This decline is primarily due to a $19.7 million decline in revenues generated by the Company's catastrophe adjustor group during the 2006 quarter.

Our pre-tax loss totaled $1.2 million, as compared to the $9.2 million in pretax income we reported in last year's fourth quarter. We recognized a net loss per share of $0.03 for the current quarter, as compared to earnings per share of $0.12 in last year's fourth quarter. The pre-tax loss in the 2006 fourth quarter included a charge of $3.1 million as a result of restructuring activities from the Company's recent acquisition of Broadspire and the associated refinancing of the Company's credit facilities.

After reflecting income taxes, this charge reduced earnings per share by $0.04 for cents per share for the current quarter. As a result of the acquisition of Broadspire Management services Inc., we have realigned our U.S. structure and expanded our operating segments. Effective with the 2006 fourth quarter, the Company will report for operating segments comprised of U.S. property and casualty, which sires the U.S. property and casualty insurance company market; international operations, which serves the property and casualty insurance company market outside of the United States Broadspire, which serves the U.S. self-insurance marketplace and includes the Company's former Crawford Integrated Service business line, and legal settlement administration, which serves the securities, bankruptcy, product warranties and inspections, and other legal settlements market.

Revenues from the U.S. property and casualty segment totaled $44 million in the 2006 fourth quarter, down 37.6% from the $70.4 million reported in last year's fourth quarter on in 28% decline in claim referrals. The decline in claims in this market is primarily due to the nearly 26,000 catastrophe-related claims referred in last year's fourth quarter related Hurricanes Katrina, Rita, and Wilma. There were approximately 5000 catastrophe claims in the 2006 fourth quarter, as no hurricanes impacted the U.S. during 2006.

Excluding the impact of claims referred to our catastrophe services group, claims referrals from our U.S. property and casualty unit were down 15.4% in the 2006 fourth quarter. This decline is primarily due to the mild weather experienced in 2006 fourth quarter. Operating earnings in this unit declined to a loss of $1.4 million or an operating margin of -3.1% of revenues in the 2006 fourth quarter, as compared to an operating profit of $1.7 million or 2.4% of revenues in the prior year quarter. This decline is primarily due to the sharp decline in claims volumes as a result of the relatively mild recent weather and an absence of hurricane activity in the 2006 third and fourth quarters. Revenues generated by our catastrophe adjustors totaled $2.1 million in the 2006 fourth quarter, as compared to $21.8 million in the fourth quarter of 2005 when the Company was responding to claims resulting from the hurricanes.

Revenues from our Broadspire unit increased 90.5% in the quarter to $68.2 million, aided by incremental revenues of $33.1 million from the recent Broadspire Management Services acquisition. Excluding the impact of the acquisition, the Company's former Crawford Integrated Services units revenues declined slightly during the 2006 fourth quarter to $35.1 million on a 7.4% decline in claims volume. This decline in volume is due primarily to a reduction in claims referrals from our existing client only partially offset by net new business gains.

The combined Broadspire units' operating loss improved in the 2006 fourth quarter to a loss of $2.7 million, or 3.9% of revenues, from a loss of $3.3 million, or -9.2% of revenues, in the 2005 fourth quarter. These results were aided by the incremental profits generated by the acquired Broadspire entity and the initial results of the cost reduction initiatives begun in November of 2006.

Legal settlement administration revenues, including both administration and inspection services, declined 18.8% in the quarter to $31.7 million. This unit generated record revenues in the 2005 fourth quarter related to several major securities' class-action projects, which were substantially completed during 2006. However, the Company continues to enjoy a strong backlog of projects awarded totaling approximately $34.1 million at December 31, 2006.

Operating earnings totaled $4 million in the 2006 fourth quarter, or a margin of 12.5% of revenues, as compared to $8.9 million, or 22.7% of revenues, in the prior-year period. International revenues surged 17.8% in the quarter on a local currency basis and by 13.2% in U.S. dollars to $84.5 million on an 18.4% increase in claim referrals. This growth reflects increased claim referrals in the United Kingdom, Asia-Pacific, and Latin American regions, resulting from claims management agreements entered into during 2005 and 2006.

Operating earnings improved to $7.3 million in the current quarter, more than doubling last year's fourth quarter operating earnings of $3.3 million. This improvement reflects an increase in the operating margin from 4.6% of revenues in the 2005 fourth quarter to 8.7% in the 2006 quarter.

Our cash and short-term investment position at the end of the year totaled $6.6 million, as compared to $66.7 million -- as compared to $51.8 million at the end of last year. Cash provided by operations totaled $52.7 million for 2006, up $12 million from $40.8 million for the prior year.

We are providing the following guidance for fiscal 2007. Consolidated revenues before reimbursements between $962 million and $1.01 billion; consolidated operating earnings between $49.3 million and $54.5 million; after reflecting stock-based compensation expense, net corporate interest expense, intangible amortization expense, special credits and charges, and income taxes, consolidated net income between $20.5 million and $23.7 million, or $0.42 to $0.48 cents per share.

This wraps up my comments. Now I'd like to give our callers a chance to ask any questions they might have about our fourth quarter release. Operator, would you please explain the procedures for handling questions to our audience?

(OPERATOR INSTRUCTIONS) David Lewis, SunTrust Robinson.

Congratulations on the progress that it appears you are continuing to make. Tom, if I recall from a slide you showed me a year ago, Crawford & Company had about 6.4% of the U.S. property casualty market share. I know you have made tremendous progress on the quality throughout the organization on a more consistent basis and I know also that insurance companies are inherently slow to make change. But it seems to me that there is no reason we should not see consolidation within the industry as you saw in Europe a few years ago. What is your guess on how long that takes and what kind of feedback are you getting from existing and potentially new clients?

I'm going to take the first part of that and then I will switch it over to Jeff, because as you know, he is running the global property and casualty side of things and certainly his part of that is the U.S. operations. I think we're certainly holding our own and improving in the market. There has been an incredible decrease in frequency in the industry and I told you when I first took this job, we would not use that as a rationale for our results. I do not today, because I see some signs here that I'm going to Jeff talk about from our results. But Jeff, go ahead and take it and then I will flip back to me, if you don't mind.

If you divide this into two segments, one international and then U.S., on the international side, we are seeing at the moment in increase of approximately just slightly under 10% increase in claim assignments to the organization on a global basis. That is predominantly driven by Asia-Pacific, United Kingdom, and the Americas, being Latin America, through affinity programs that we're putting in place and contractual relationships with large insurance carriers all through the region. We see that continuing throughout the next 12 months as well.

When you look at the U.S., really there's two stories within that. We have maintained a market where frequency is down, but severity is slightly up. Our property and casualty assignments, that has stayed in place. Where we have seen the decrease is obviously in two areas. One is catastrophe, where we saw about just under a 30,000-claim shortfall over the prior year, and in vehicle services, where we saw, again, about a 25,000-claim reduction.

The catastrophe obviously Tom has touched on, but from the vehicle services side, we are beginning to through our re-engineering of the operation, beginning to get claim volume back into that area. We see the property stable at the moment from Crawford's point of view year-on-year, in a market where the frequency is down. But we do see us beginning to actually start making inroads to increase that in the '07.

David, I will just add to that too. We are confident certainly as it presents a claim volume too. And our market share in the self-insured market was 4.6%, if you recall. I'll just take over that side why we're talking about it. And with the acquisition, we go to 9.8%. So, surely we have taken -- that is market share, whether it is inorganic or not. In that area, we expect to grow in '07.

We are off to a good start and we do not have an immense amount of revenue coming off the self-insured, side. So the plan, what we put in motion here from a plan standpoint certainly wouldn't be impacted up or down from a revenue standpoint as we go through a period of time where I'm sure some clients are waiting to see to what degree we integrate and with the quality in which we integrate. But at this point in time, we're not going to talk a lot about the start of the quarter. But January is off to a solid start, including our claim counts on the property and casualty side.

That's encouraging.

I think we have held our market share in property and casualty and certainly have increased it dramatically on the self-insured side. I expect that to continue and I do think there is consolidation going on.

Good. And Jeff, can you maybe contrast what is happening in the U.S. and maybe where in the early stages of kind of consolidating the outsourced claims adjusters? Do you think that's something that evolves over the next five years? What is kind of the process you see? Again, any kind of specific feedback maybe you are hearing from existing or potentially new customers?

I think on the outsourcing, David, there will be with tier two insurance companies a significant amount of opportunities to put business propositions to them on outsourcing. Then I think on the tier one, it is providing a quality, efficient service that is technology-driven in the future.

Just clarify, when we're talking tier two, we're talking regional and your smaller insurance companies. And there's a lot of them in this country. tier one would certainly be your national organizations.

Okay, that's helpful. Any outlook for legal settlements? I think, Tom, you indicated you would expect to see some growth, although moderating a bit. And I know that business bounces around a good bit. The backlog actually declined about $9 million from the end of the third quarter.

It did and it is cyclical. It has proven to be that way since I have been here, but year in and year out, they get the job done and there is just no reason to believe, and I have chatted with that leadership. In fact, for this call standpoint, we will invite the senior executives, one or two of them, to the call next quarter. I think it will be interesting, because they're very confident of what they're planning and very confident that the future remains bright. We certainly expanded their exposure around the country and it may be made up of more medium-sized class actions than the mega class actions. But I think they have positioned themselves well to go forward and we are very pleased with the plan that they have submitted.

Good, just final question on margins as it relates to your guidance, Tom or Bruce. Do you think that the international operations will maintain something in the 7 to 8% operating margin? Then, it appears that your guidance provides for consolidated minimum operating margin of about 4.9%

Well, I guess we get the conservative comments about our guidance. And I would reiterate, we think it is conservative and the international operation is moving very steadily forward. In fact, we think it is off to -- two months behind in everything but Canada, so we feel very confident that we can exceed some of our estimates even at that this point. We will update that at the end of the first quarter and as I said at the last call -- I believe it was the last quarterly call, not the call about Broadspire -- that the end of first quarter is going to be a significant communication from the standpoint of not only breaking things down as we have by segments, but actually being able to give you more information about where we stand with the synergies and the growth in all four of the segments. We are pleased to the start of things.

Good, thank you.

Manny [Reiser], Wachovia.

And first I would just like to say thanks a lot for the increased transparency. I find that quite helpful, Tom and Bruce. A question. In the fourth, quarter we had that significant decline in U.S. property margins. If we would have seen a normalized forth quarter regarding catastrophe -- not anything like we had a year ago, but more of a normalized -- what would we have seen on the bottom-line with margins and what would that division have looked like?

First off, Manny, we've taken from a loss to a profit. The fourth quarter certainly took a little wind out of the sales, but not a lot because we have seen the activity taking place and the efficiencies that we are gaining. That is just really beginning from a technology standpoint. I can let Jeff talk about that a little bit, but it is hard to project.

I think that we had a very unusual fourth quarter. And I really do not like using -- you talk about weather and all of a sudden, it becomes an excuse. And we're not making excuses. We had a good turnaround year and our expectation is that this segment of our business has margins that we have been talking about since I have been here. And that is to get it in the 7.5 on average and get there is fast as possible.

Right now, we feel very good about what is happening to our property and casualty business. Our property claims by themselves, even with the fourth quarter, is very slightly ahead on claim counts. The casualty and the inspections of autos is the one that really hurt us. And as you think about property claims, no storms, no weather, I think it tells you that the people are turning to us to do their work for them now that we have the quality where we want it. Jeff, you can expand upon that if there's anything you want to say.

Absolutely, we are seeing a lot of efficiencies coming out of the technology we're putting in. In the first -- in January and really February with some of the bad weather, the claim count is increasing. The claim count from our perspective is really around the decrease in vehicle services and catastrophes. And we are obviously load-leveling all of our business models to ensure that we get to the margins that we need to achieve in that particular area.

Manny, I would just add this. Certainly we're looking at significant improvement in the margins in property and casualty in the U.S. for '07.

And that is based on taking some costs out, technology, but not weather. Is that correct, Tom?

I've told you once before, I've told everyone before that basically what we put into our plan is about $20 million. I think we got $21 million in for this year. Last year, I think we had $23.5 million, $23.4 million without major storms. So we're being very conservative and we already have seen an immense amount of weather this year. But I think the main thing is that we're seeing a very positive trend in our property and casualty and we're not backing off because of the quarter. Because I know what Jeff is putting in-place on the technology side and what we have been talking about, efficiencies and overcapacity, that will be gone by the end of the first quarter.

Okay, with the increased quality of the Company, have we picked up any significant new contracts on the domestic side that you could talk about?

We certainly can't talk about names. We can tell you that we have some inroads into some major companies taking place as we speak, but I can't talk names, Manny. Right now, we see -- and certainly the severity is up. If we say we are equal on the claim counts and severity is up, that equals certainly more revenue for the Company. But at this point in time right now, we see a fairly nice improvement in claim counts, and that is without a carryover for catastrophe from '06 like we had in the '05. So pretty pleased at the solidity of our P&C operations.

Okay, moving over to the dividend question, Tom, you indicated that you're hopeful that we would see a resumption of the dividend by the fourth quarter. Do we have any guidelines as to what the dividend payout ratio will be? Is it 20% of earnings? Can you give us a little bit of help on that side?

There's no guidelines that we currently have, Manny. That would be a decision taken by the Board at the time that we are ready underneath our debt covenants to declare dividend as a Company, which we believe will be at the end of the fourth quarter.

Okay and regarding the debt appres, do we have any thoughts as to what our debt pay-down situation would look like 12 months now?

During 2007, as part of our plan, we have assumed that we will pay down in the neighborhood of about $22 million this year.

Okay, and.

Our goal is to beat that. You probably know that. We've got the $40 million out there as the level that we want to maintain. We will maintain that in the first quarter as we go through some pension funding and some bonuses and some extraordinary payments we make always -- almost every year in the first quarter, but if we were over the $40 million in cash and we have been doing a good job there, and I think we still room for collections on our outstanding bills. I think that we're going to be in a position to better that. That is our goal.

When we set that in the plan, Manny, it was a conservative level.

Okay, and finally on the surveillance side of things. How is that working out right now with the referrals and are we pleased with the developments over there?

I am pleased that we made this move and I'm pleased that we do not have that particular section of our business, only because I think, one, it is a specialty area and it can distract what you're trying to do from a core standpoint. We think we have aligned ourselves with a worldwide organization that has a strong reputation. And I'll let Jeff talk about it's fairly early to evaluate it because its a couple of months old, but Jeff?

We're working very closely with the Broadspire division management to ensure that we have MJM involved in the surveillance hang-ups that we can hand off to them. There is no doubt that it is -- the system itself and the process is working very much better than it was initially for the organization. Hopefully, we will have the returns that we expect from it. I don't see, really, us not achieving that.

My final comment is this. Tom and Jeff, you come across in a quite-optimistic fashion, but I would like to say is what I have said before on previous conference calls. I am still little bit bothered and concerned by the lack of stock ownership by some of the top management people. I brought that up on a regular basis, both privately and on the calls. I have yet to see some of the top management go into their pocketbooks and buy stock in the market.

I think this would be a significant vote of confidence. I think anything less than that is not servicing, not serving the shareholders the way they should be served. You've talked about the associates of the Company, Tom. Well, from a shareholder perspective, I know there have been improvements in the Company, but the reality is we have had increased debt added to the Company. We've had a dividend that has been eliminated. And a stock that is essentially flat over the last few years.

Yet if we really believe in the outlook, I think behooves the management to buy stock in the market. I think it is critical and anything less than that is a disservice to the shareholders.

I will say little about that and then we will be glad to talk to you off line if you would like to chat further about it. I have got a management team right now that I feel is very dedicated to this Company and the evaluation that you may make -- and I appreciate what you're saying. I have to evaluate them on a daily basis and I think you know that I am not hesitant to make the right changes for this Company going forward if I don't see that total dedication or involvement. And I will continue to do that. The Board is aware. I can't tell you at this point in time what they will or will not do about that particular issue or whether they would pass a resolution to make it a requirement.

I am 100% absorbed in getting the results that hopeful will not only be where they are today, but accelerate as we go forward. I have said at the beginning that I would surround myself with some of the best in the industry and we have some of the best in the industry. When we get into the area of requiring them to own stock, I think, one, I try to do it on a regular basis and I will continue to do that. The Board, if they pass a resolution, I will certainly expect our management team to abide by it.

But I think our main criteria of evaluating management comes from my evaluation of this management team. And if it is not 110%, then I am not about to run very long with them. I think that is the main, most important piece for the shareholders to understand and that is one I can impact immediately. And I have since I have been here. This management team has been changed.

The people we brought in -- people like Allen Nelson, who is sitting here and I will flatter him just a moment -- has eliminated every item of concern from a legal standpoint in this Company. And I concern myself more with that, Manny, today than I do the shares of stock that he owns. Now I am not taking lightly what you say. If that is your strong feeling, then I think probably taking it and chatting with you off line might be the best thing to do with that.

But I have been doing this for a long time and I think one of my reputations is to surround yourself with the very best you can. I think I have that. Regardless of -- I don't even know at this point in time. I can't tell you that I have looked at it recently, how much people own from a stock standpoint. But I would prefer to talk to you off line about it, Manny, if I can.

I'll be glad to do that, Tom.

(OPERATOR INSTRUCTIONS) At this time, there are no further questions. Mr. Crawford, are there any closing remarks?

I would just tell you that I am more than pleased with the first 90 days -- it's actually more than 90 days now, right at 90 days plus -- of where we stand with the Broadspire acquisition. I think is extremely important this Company. I think now that we have shown you the segment break down, which I am very happy about. I think you know some of the things we inherited was the reporting relationship.

I think the purchase of Broadspire gives us the opportunity, and we have taken it, to be more open. I think that from a shareholder standpoint, it is a major positive move for this Company and I support it 100%. I also think you can see clearly what one of our major challenges was when the quality of the organization was a little bit of a factor back in the early 2000s. It certainly had repercussions. We have recovered from that.

I cannot overemphasize the feedback we are getting on the quality of this organization and the services it delivers today. I would also add one more thing. We have an outstanding person in Dennis Replogle going forward and leading Broadspire. He brings a great reputation in the marketplace. He is a hands-on individual who was brought into Broadspire in the very beginning by the private equity firm that we bought the company from. And he demonstrated what he could do by the results they attained in the two and a half years, three years that he and his team were managing Broadspire.

One of the things that I think is interesting is that they were bigger and they certainly had some positive results. They have contributed positively from a profit standpoint in November and December. I think that would be of interesting news to everybody. So with that, we're going to charge ahead and look forward to the call at the end of the first quarter. Take care and we will talk to you later.

Thank you for participating in today's Crawford & Company's conference call. This call will be available for replay beginning at 6 PM Eastern time today through 11:59 PM Eastern time on February 19, 2007. The conference ID number for the replay is 7223448. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. Thank you. You may now disconnect.