Crawford & Co (CRD.A) 2010 Q3 法說會逐字稿

Good afternoon. My name is Casey and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company third-quarter 2010 earnings release conference call.

In conjunction with this call, a supplementary financial presentation is available on our website at www.crawfordandcompany.com under the Investor Relations section. 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 conference is being recorded today, Thursday, November 4, 2010. Some of the matters to be discussed in this conference call and any supplementary financial presentation may include forward-looking statements that involve risks and uncertainties, including statements regarding liabilities associated with our defined benefit pension plans and our ability to pay dividends in the future.

The Company's actual results achieved in future quarters could differ materially from the results that may be implied by such forward-looking statements. 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.

For a complete discussion regarding factors which could affect the Company's financial performance, please refer to the Company's Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission, particularly the information under the headings Business, Risk Factors, Legal Proceedings, and Management's Discussion and Analysis of Financial Condition and Results of Operations. This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required, a reconciliation is provided for those measures to the most directly comparable GAAP measures.

I would now like to introduce Mr. Jeffrey Bowman, President and Chief Executive Officer of Crawford & Company. Mr. Bowman, you may begin your conference.

Thank you. A warm welcome to our investors, clients, and employees this afternoon for a discussion of our 2010 third quarter, together with our current outlook for the balance of 2010 and my commentary on the key events of each business segment.

I am Jeffrey Bowman, President and CEO of Crawford & Company. Joining me from the global executive management team this afternoon are Bruce Swain, our CFO; and Allen Nelson, our General Counsel and Chief Administrative Officer.

We will begin with some comments on the industry and economic environment, and a brief overview of our improved third quarter. Bruce will then review the third-quarter financials in more detail which will be followed by our review of our business segment progress and our strategic initiatives and conclude with our comments on our corporate focus and guidance.

The third quarter was a strong quarter for the group, both financially and operationally. Our worldwide team continues to make progress building on the operational strategies we are implementing through our strategic initiatives. Like everyone in our marketplace, we face economic conditions or challenges outside our control. Nonetheless, we continue to execute on our plans to strengthen our Corporation for medium and long-term growth and increase shareholder value. The global economic outlook appears to be slowly improving in many respects, but as it affects the US insurance industry, conditions remain challenging.

As evidence of this, the US market saw a 13.4% reduction in claims reported from 2007 to 2009 and claim counts are forecast to full in 2010 from 2009 levels according to the Insurance Service Office, ISO, and National Association for Insurance Commissioners, NAIC. Therefore, the [accrual] for the experience of an 8% claims reduction over the 2007 to 2009 period and an anticipated modest decrease in company claims for the current year suggests to us that we are winning accounts and gaining market share in a difficult environment.

Unemployment, which remains at a painfully high level, significantly affects our Broadspire workers' compensation business. On a positive note, in the third quarter, we saw an increase in workers' compensation claims in our temporary staffing and healthcare accounts, which we believe will ultimately offset to some degree the losses in manufacturing. However, we cannot expect to see workers' compensation frequency recover until there is job growth in the USA. In this environment, growth comes from winning new accounts.

As a measure of the economic impact on our Property and Casualty clients, research firm Insurance Performance Association, IPA, reports that industry-wide claims adjusting employment is down more than the broad economy since the recession began.

When premium growth returns and IPA suggests that we will see this beginning in the latter part of 2010, we believe that our clients' capacity constraints will offer Crawford a real growth opportunity. Therefore, we continue to be optimistic on the outsourcing of claims by carriers. Crawford's ability to reduce the cost of delivery by turning fixed-cost in-house claims departments into a variable cost continues to be a key positive business value proposition for us.

During the third quarter of 2010, even with weather that was unusually benign, globally claim assignments to Crawford increased by 4.2%. In the US, catastrophe events remained below average in the year-to-date 2010.

Looking forward, we continue to expect claims activity to stabilize followed by a slow increase tracking the economic recovery going forward. We feel confident that we are well-positioned to take advantage of any upturn.

Now turning to our third-quarter corporate performance. Against this industry and economic background, I am pleased to report that Crawford delivered a strong set of operating results in a difficult business environment.

Third-quarter revenue improved over the two previous 2010 quarters and over the previous year. International operations and legal settlement administration had strong quarters.

I am pleased to report, in Broadspire, we also saw the highest number of cases since the third quarter of 2008. This demonstrates that our continued focus on Broadspire is beginning to stabilize this business segment.

On a consolidated basis, our expense reduction efforts gained ground throughout the year. Producing increased cost efficiencies in the third quarter, particularly in selling, general, and administrative costs where we can report a 7% decrease over 2009.

The administrative cost reductions completed in the second quarter are assisting our results and we continue to see improvement in our self-insured professional indemnity expense as we have implemented special monitoring processes and have continued to improve our overall quality.

For the third quarter 2010, we are pleased to report a GAAP earnings per share of a profit of $0.24 with no special charges in the quarter.

Moving from the GAAP earnings per share to an adjusted non-GAAP earnings per share, the comparison for the quarter was $0.24 per share for the current quarter, compared with $0.14 in the 2009 quarter.

For the prior year, the reported loss of $0.76 reflected a goodwill impairment charge of $0.90 related to our Broadspire segment. After adjusting for the impact of goodwill impairment charges in the 2009 period, earnings per share on adjusted non-GAAP basis in 2009 were $0.14.

For the nine months, the reported earnings per share gives an adjusted non-GAAP earnings-per-share result of $0.44, against an adjusted prior-year figure of $0.33 earnings per share. We are pleased with that result.

That concludes my initial remarks. Bruce, would you please review the Company's overall financial performance for the third quarter?

Company-wide revenues before reimbursements in the 2010 third quarter were $254.5 million, up nearly 4% over the $245.8 million in the prior year's third quarter. Strong growth in our Legal Settlement Administration segment and organic growth in our International Operations segment accounted for the improvement.

Our net income attributable to Crawford & Company totaled $13 million in the 2010 third quarter, compared to a loss of $39.5 million in the 2009 period.

Third-quarter diluted earnings per share on a GAAP basis was $0.24 in the 2010 period, compared to a loss per share of $0.76 in the 2009 period.

The Company's selling, general, and administrative expenses, or SG&A, totaled $50.2 million or 19.7% of revenues in the 2010 third quarter, decreasing $3.6 million from $53.8 million or 21.9% of revenues in the prior year quarter. This decrease in cost is primarily due to lower self-insurance costs and reduced expenses associated with the termination of a computer system hosting contract and other cost reduction efforts.

In the 2009 third quarter, the Company recorded a non-cash goodwill impairment charge of $46.9 million or $0.90 per share.

Revenues net income attributable to Crawford & Company and earnings per share in the 2010 third quarter were impacted by a number of items, including the positive effects of decreased defined benefit pension expense and the slightly negative impact of foreign currency changes as well as charges associated with the write-offs of certain portions of the Company's goodwill in the 2009 period.

As compared to the 2009 period, during the 2010 third quarter, the US dollar was stronger against most of the major currencies in which we operate. This had a slight negative impact on the Company's consolidated and International Operations segment revenues in the 2010 third quarter compared to the 2009 period.

International revenues increased 4.4% in the 2010 third quarter on a local currency basis and after reflecting the slight negative impact of an exchange rate fluctuation, international revenues increased by 4.1% in US dollars to a $105.7 million.

Our revenue performance in local currencies primarily reflects weather-related increases in our United Kingdom and Asia-Pacific operating regions.

International operating earnings increased to $7.8 million in US dollars during the current quarter up 4.7% from last year's third-quarter operating earnings of $7.5 million. The operating margin in this segment was 7.4% in both the 2010 and 2009 third quarters. When measured on a constant dollar basis, international operating earnings were $7.6 million in the 2010 period.

Revenues from the US Property and Casualty segment totaled $48.7 million in the 2010 third quarter, decreasing 7.2% from the $52.5 million reported in last year's third quarter. Revenues generated by our catastrophe adjusters totaled approximately $4.1 million in the 2010 third quarter, declining from $6.3 million in the 2009 quarter.

Apart from the decline in catastrophe-related revenues, the revenue decrease in the 2010 third quarter was driven by a reduction in field operations revenues as a result of a reduction in overall industry-wide claim frequency.

Operating earnings in our US Property and Casualty segment totaled $3.6 million, or an operating margin of 7.4% of revenues in the 2010 third quarter. This is compared to operating earnings of $4.8 million, or 9.1% of revenues in the prior year quarter. This operating earnings decline primarily reflects the lower revenues generated during the current quarter partially offset by ongoing cost control measures.

With regard to catastrophe activity in the US, during the 2010 third quarter, US CAT activity remained below prior year levels due to relatively benign weather during the first nine months of the year.

Revenues from our Broadspire segment decreased to $61.7 million in the 2010 third quarter, down 12.4% from $70.4 million in the prior year quarter, reflecting lower workers' compensation claim referrals and the impact of a previously-announced 2009 nonrenewal of a major contract within the segment.

Broadspire's operating loss in the 2010 quarter totaled $659,000 or 1.1% of revenues improving from the operating loss of $1.2 million or 1.7% of revenues in the 2009 third quarter. We continue to focus on cost efficiency within this segment in light of claim trends.

Legal settlement administration revenues comprised of class action and bankruptcy claims administration services surged 80.1% in the 2010 third quarter to $38.4 million from $21.3 million in the prior year quarter.

Operating earnings totaled $11 million in the 2010 third quarter, or 28.5% of revenues as compared to $4.1 million or 19.2% of revenues in the prior year period.

Legal Settlement Administration has a record backlog of projects awarded totaling approximately $75 million at September 30, 2010, as compared to $55.4 million at September 30, 2009.

Our cash and cash equivalent position at September 30, 2010 totaled $42.2 million, as compared to $70.4 million at December 31, 2009.

Our investment in unbilled and billed receivables has increased by $53.1 million in US dollars during 2010 as a result of a 9.7 day increase in days sales outstanding, or DSO, to 77.8 days at the end of 2010 third quarter, primarily due to growth in Legal Settlement Administration and International Operations. We expect our level of DSO to improve in the fourth quarter as we collect these balances.

Our pension liabilities declined in 2010 by $23.5 million reflecting the higher contributions to our frozen US defined benefit pension plan required during 2010.

Our total debt has increased in 2010 by $23.8 million due to the increased contributions to our US pension plan and the impact of higher working capital levels.

Cash used in operations totaled $25.1 million for 2010, compared to $9.8 million provided by operations in the prior year period. This $34.9 million swing was primarily due to increased defined benefit pension funding during the 2010 period and growth in unbilled revenues and billed accounts receivable during 2010.

The Company's cash requirements typically peak during the first half of the year and decline over the balance of the year, with substantial cash inflows usually occurring in the fourth quarter from some of our major markets.

Our free cash flow stood at a negative $58.5 million for the 2010 period, decreasing $49.6 million from the negative $9 million in the 2009 nine-month period.

In addition to the factors impacting our operating cash flow, this decline reflects the principal payment we made against our outstanding debt in the 2010 first quarter and the additional purchase price consideration paid for Broadspire.

Back over to you, Jeff.

Thanks, Bruce. Let me now turn to the outlook for each of our business units. Starting with International Operations which represent more than 40% of our consolidated revenue. The International segment reflected an increasing claims volume of 11% in the third quarter and 8% year to date over 2009.

The biggest single variance in quarter three, as it was in the first half of the year, remains the reduced frequency in personal lines activity in Canada in part due to benign weather.

We continue to be pleased by our fast-growing Contractor Connection division in Canada, which we launched in the second quarter. The results to date for Contractor Connection have been excellent, and we believe there is a very strong market in Canada for this product.

Our UK operation is still benefiting from two surges of the weather events in the first quarter. And our Australian operation has also had weather events in both Melbourne and Perth. The buildup of unbilled work in progress continues to be a focus of our effort in the third quarter and should result in better DSO figures and improved cash balances by the end of the year.

In our International Operations, we continue to be focused on new client acquisition and sustainable revenue from the acquisitions of new claims program. We were successful in the third quarter in winning new programs. In pursuit of new business, we continue to make excellent progress with our initiative to grow Crawford's market share of the Lloyd's Market. Our goal is to increase our visibility in Lloyd's so that we will be viewed as the claims provider of choice on a global basis.

We also continue to be pleased with the growth of our Latin American business, where we have taken on significant number of affinity claims programs, and we see growth in these new programs in Brazil, Peru, Mexico, and Colombia. Our Chilean operation, continues to handle claims that arose from the very significant earthquakes that occurred in February 2010.

As mentioned earlier, the significant weather claims in Australia, have increased our outstanding claims count. We are now working these claims through the system, and again, fully expect DSO to improve in the fourth quarter.

I am very pleased that our Australian operation was awarded the prestigious claims adjuster of the year award by the Australian Insurance Industry recently. And I am very encouraged by the new client opportunities in front of our international operations as we continue to develop meaningful collaborative relationships with our clients.

Our International [Operations] segment has proven it has a market-leading position and we are confident about our future in these markets.

Now turning to the USA. Our US Property and Casualty segment was challenged during the third quarter by lower industry-wide claims volume in certain product lines and the continued relatively low level of weather-related activity. The decline in claims intake that began in September 2009 has continued to date. As a result, revenue and earnings declined during the prior year.

Expenses continue to be managed to enable revenue increases in future months to yield bottom-line improvement. But it's also important to reiterate that there are some very good bright spots in the US Property and Casualty segment that give us confidence as we go into 2011.

Firstly, in line with our goal of growing Global Technical Services, GTS, which is our large complex claims unit in the United States, we continue to aggressively add executive general adjusters, EGAs, which will result in more high complex claims nominations on a US basis.

Secondly, our industry-leading Contractor Connection business in the US continues to build momentum as we add more contractors to the program and, more importantly, several new clients.

Year-to-date claims are up 31.5% over 2009. To demonstrate the success of the Contractor Connection business, our 15th Annual Contractor Conference in Washington, DC, had 105 exhibitors, nearly 2,000 attendees, and over 30 clients participating in educational seminars and workshops.

The ongoing expansion of Contractor Connection is a direct result of insurance carriers moving high-frequency, low-severity property claims to repair networks. We expect this trend to continue to grow in the future where we are the current market leader.

We are not satisfied about our claims intake but know that our performance is better than the overall industry decrease year on year. We continue to secure new accounts and program nominations, and this will benefit us in the future when the expected increase in claim frequency reemerges. Winning new accounts and being nominated in advance on claims programs is critical.

Now moving on to our Broadspire segment. The high US unemployment rate continues to place pressure on the revenue stream from existing customers and reduce the lift from new business wins. Having said that, we increased our new business wins for our TPA business to $8 million annualize on a year to date basis. And in the third quarter, produced an excellent 96% retention rate.

We are pleased that the third-quarter revenue was an increase over the second quarter. Our increasing claims volume in quarter three is also an encouraging data point.

We have received a significant number of new RFPs, which confirm that both our reputation and quality are growing, and have currently 137 prospects in our pipeline, which is very encouraging.

Our Broadspire results are not yet where we want them to be. We have made substantial progress in increasing new business, reducing costs, restoring our quality reputation, improving our technology and developing new products. This is a journey we are on to create significant profitability.

The TPA market has become very aggressive in pricing for new business and renewals. We continue to emphasize the development of new business opportunities with an enhanced value proposition and target market approach, executed by cross-selling additional services and balancing our cost base over this period. As a result of the current economic environment, service innovation is a critical success factor for Broadspire. We continue to enhance current services and develop new ways of managing loss cost to meet the complex challenges in today's marketplace.

Broadspire's internal ability to fully integrate all of our services, claims management, medical management, and medical bill review, gives us our market-leading capabilities to provide innovative solutions and improve the bottom line of our customers. We believe that this positions us well to weather the economic conditions and prepares us to take advantage of future opportunities as they emerge.

Now turning to Legal Settlement Administration. We are pleased with this segment's revenue and operating earnings compared to last year's quarter three and year to date. Revenue and earnings have increased significantly due to the special project started in quarter two.

Our retention by the independent administrator, Kenneth Feinberg, to assist in the creation and management of the independent Gulf Coast Claims Facility, GCCF, has been an important assignment for the Corporation and has had a very positive effect on our results for the quarter.

In the third quarter, we were also retained in several new significant class action and bankruptcy matters. While the bankruptcy marketplace is definitely slower than last year, we believe our position as a market leader has produced an increased flow of opportunities. Some bankruptcy lawyers and experts are predicting that the rate of filings will increase in the next 6 to 12 months.

Based on the record backlog at Citigroup, we are excited about the potential performance in the balance of 2010 and into 2011.

That concludes my comments on our business segment. Let me briefly turn to our strategy going forward.

Let me first continue by offering a cautious outlook for the insurance industry for the coming quarters. While some measures of economic activity are improving, as I said earlier, unemployment levels, a key factor driving our Broadspire business, have shown only slight improvement. Consequently, we are still expecting a challenging workers' compensation claims environment for the remainder of the year and into next year in the Broadspire segment.

We also expect absent weather-related events, a slow general improvement in property claims activity. The cost reduction strategies of our Property and Casualty clients should be a positive for Crawford in the business processing outsourcing arena as the economy improves.

While the economy may be difficult, Crawford is not sitting idly by waiting for conditions to improve. Over the past two years, we have developed and implemented various strategic planning initiatives to improve our work product, implement innovation, protect our clients' relationships, and generate new business opportunities even in a shrinking market. At the same time, we continue to reduce our fixed costs and improved our technology enabling us to gain operational efficiencies.

Let me review some of these initiatives with you now as a way of gaining insight into our planned activities during the remainder of 2010 and into 2011.

Our focus on attracting new business and retaining our current customers is linked to the loans last year of the Crawford system of claims solution, which is permanently displayed on our website. The system defines our competitive advantage, reinforces our industry leadership, and clarifies our portfolio of businesses to our clients. Significant attention has been put into key account management and cross-selling initiatives throughout our businesses globally.

One area of engagement with clients that we are concentrating on is business process outsourcing, where we have already won several claims programs from clients to handle the full claims administration process.

The expansion of our Global Technical Services business and high-value complex claims business and the international expansion of Broadspire as a TPA have been very well received by our clients in USA and overseas.

And also as a result of our client discussions, we are seeing our clients challenge us to be more responsive in our claims handling as they demand sustainable performance improvement through better control of indemnity spend, improved business processes, better automation, and increased data analytics. We believe we are well positioned to handle these challenges going forward.

We are focused on innovation as a means of creating value for our clients. As one example, by accelerating our overall technology strategy and investment to deliver better analytics for both our local and global clients. And we have introduced new technology that provides effective central oversight for our claims organization, and we are seeing improvements in the quality of our products as a result.

We will continue to be diligent on expense control, as demonstrated by the reductions in force taken earlier this year, and we will stay focused on maintaining our long-term goals of improving operating performance and maximizing our cash generation.

Following our strong performance in the third quarter and expectations for the fourth quarter, we have revised our guidance upwards for fiscal 2010 as follows.

Consolidated revenues before reimbursements between $980 million and $990 million. Consolidated operating earnings between $63 million and $66 million. Consolidated cash provided by operating activities between $25 million and $30 million.

After reflecting stock-based compensation expense, net corporate interest expense, customer-relationship intangible asset amortization expense, goodwill impairment, special charges and income taxes, net income attributable to Crawford & Company on a GAAP basis between $23 million and $25 million, or $0.43 to $0.47 diluted earnings per share.

Before reflecting the special charge of $0.13 per share related to goodwill impairment incurred in quarter two, net income attributable to Crawford & Company on a non-GAAP basis between $30 million and $32 million, or $0.56 to $0.60 diluted earnings per share.

To our shareholders, clients, and employees, we are still dealing with the most difficult economic period since the Great Depression. Over the past few years, we have created in Crawford a worldwide management team that will aggressively execute our strategies as laid out. We have employees worldwide that understand the value that create an environment to produce and execute improved performance.

Our strong third-quarter results and updated year-end guidance are tangible evidence of the benefit of having a diversity of earnings in a difficult market. Given the market strength of our business segments and the diversity of earnings power for our Corporation, we continue to remain very optimistic and confident about our growth opportunities as we execute on our corporate shift strategies for our shareholders.

Thank you for your time, and we look forward to your questions. Operator, will you please explain the process for asking questions to our audience?

(Operator Instructions). Mark Hughes, SunTrust.

Thank you very much. The sustainability of the uptick in Broadspire claims, was there anything unusual in the period? Is there some reason to think that would slow down in future periods?

I think the Broadspire uptick is based on a couple of issues we've seen from some of our temporary services and healthcare clients, a small uptick in their workers' comp claims. We've also got one special project that we're working on which has some sustainability through in 2011. And generally, it's the addition of some new clients as well that I think is that brief tick up that we have seen, whether that lasts through the balance of the year it really depends very much on the unemployment situation, but it's an encouraging data point.

Is the one special project a meaningful part of the uptick?

It's a fairly large project. It's not the whole balance, so --

Probably about half of it.

About 50%.

Yes. How about the system's implementation you talked about savings in SG&A from contracts being discontinued. How much incremental savings is there, if any, related to RiskTech or any other systems implementation going forward?

There is still fairly significant amount of administrative cost savings that we'll see in the ultimate implementation of the system, both on the IT side as we continue to retire older systems, as well as in the support areas that have to work on all of these multiple systems and as you can imagine there is an inefficiency created with that.

At this point in time, we're not prepared to talk about a number or the timing other than to say we expect to see some of these savings begin in the latter part of '11 as we complete this next leg of the system implementation and then there will be further cost savings after that.

Our focus, Mark, on the RiskTech integration for 2010 and 2011 is now the conversion of clients in our new release which should be impacted in the third quarter of next year on converting them from old legacy systems in Crawford over to the RiskTech program.

Right.

We are absolutely on target for meeting those dates at the moment.

Okay. And then the dynamic of the decline in claims adjuster employment, you see that in the Bureau of Labor Statistics data as well. Other than just at a very high level, have you seen among your clients that they have really cut back on their internal staff? I know you're talking about thinking you could pick up some incremental share here, but can you expand on that, as I say, that dynamic a little bit?

Yes, absolutely. One of our Company strategies is the business process outsourcing and it goes back to something I have said many times which is turning that fixed cost for our clients into a variable cost. What has happened with the decrease in our clients' claims department is that we put pressure on them obviously when surges start to happen or whether the claim intake starts to increase, and obviously through the systems that we've set up and the processes we have put in place and the discussions we are having with clients, we feel we are in a very good position to take advantage of that in the future because that really plays into the technology and the number of employees that we have within the organization that are able to provide that quality service that the client requires from intake through to the final settlement of claims as it happens.

Is that an operational level or your folks telling you that their counterparts have been cutting staff?

Absolutely.

Yes.

Yes. I mean, I think, you read all of the major carriers' press releases. They are attacking costs. In a soft market, you are going to see that.

Yes. Final question. The legal backlog, how much of that is the project from the Gulf versus your underlying or legacy business?

Mark, we don't break our backlog out by customers and don't discuss the specific aspects of customer arrangements. I will say that our backlog is broad-based and reflects an overall health in that business that we're excited about.

Great. Thank you.

Thanks, Mark.

(Operator Instructions). Adam Klauber, Macquarie.

Thank you. Good afternoon.

Hi Adam.

Hi Adam.

When we look at the US P&C, revenues are down by 10%, or excuse me 11% on a nine-month basis. How much of that would you say is from wider weather, weather catastrophes or just less storms?

Adam, this is Bruce. The revenue that we track specifically related to our catastrophe adjusters is down over $8 million for the year. Now that is not the only impact we see from lighter weather because those resources serve as an overflow mechanism when we get saturated in our branches. So the field operations are also down on a nine-month basis about $14 million or $15 million and the majority of that is going to be related to property claims, which is directly attributable to the lighter weather that we've had in the US.

Okay. That is helpful. Just following up on the Broadspire. So if we exclude maybe new clients, what was the organic growth of the existing book of business as far as claim counts?

In terms of claim counts?

Yes. In other words, if we exclude new clients, would claim counts have been up?

I don't have that specific information in front of me. I think that I believe they probably would have been up or at least been flat. I mean we've got new programs that are coming on and then you've got some few programs that we've lost along the way.

Adam, I think, to give a little bit more color to that is that if we look at our industry groups, the industry groups that are off at the moment whether claim counts are moving forward on existing clients are the temporary service type organizations and healthcare companies. That is a fact that we have gone up.

The manufacturing side still remains depressed, but the new client breaking that down from claims to the organic growth, I mean that is a statistic we don't have in front of us at the moment, but we have seen an uptick in the casualty type claims in Broadspire which is very encouraging as well. And that's coming in obviously through some new programs that we've put on place.

Okay, that is helpful. And then in the legal settlement business, you mentioned that you are seeing, I just want to make sure I'm correct, you are seeing some more class actions because class actions have been pretty quiet over the last year or two. Are you seeing a bit more of a pickup in class actions?

Our expectation is that we will see that. We've had a couple of nominations recently and that's something we're looking to the future for to see the increase in the filings that were taking place start to materialize into certified actions. But it's something else, it is a core part of the Citigroup business.

And why do you think you're seeing more of an increase there?

Because already the increase in the filings in the past two years.

Okay.

They start to get certified.

Okay. And then a couple of technical questions. The tax rate was lower this quarter. I guess what sort of tax rate should we assume going forward?

Yes, I think our effective tax rate will be in the 28% range going forward. The rate that you saw in the third quarter was lower primarily due to the impact of some discrete items that are not included in that 28% effective tax rate.

We have items related to 1048 adjustments, which are uncertain tax positions that did impact us each quarter as either new uncertain positions are reserved or statutes roll off of other positions. The main driver within the third quarter this year was in the fourth quarter of '09, you may recall, we did an international restructuring where we realigned our international operations to more closely line up with the internal management structure and get some benefits from that.

There was a tax impact to that which was booked in the 2009 fourth quarter and as we prepared the returns this year and trued up our position there, there was a positive tax true up that flowed through in the third quarter of this year that is the primary driver of lower rate in this year's third quarter. As we look forward ongoing the 28% rate is probably what you ought to be looking at.

Okay, that's helpful. And last question, can you give us any guidance or indication on pension expense for next year?

The pension expense for next year is going to be determined at the end of 2010. We have a 12/31 measurement date for that and so we won't know until then. What we do now and have disclosed in our Q this quarter is what our estimated cash contributions will be next year, and we expect them to be based upon current market conditions as of 9/30 to be slightly below $21 million. So that would be about a $4 million positive benefit on the cash side in terms of the contributions. We're hopeful that we'll see a positive impact on the expenses at the end of the year, but there's a lot that can happen between now and then.

Sure.

And they could also impact the cash contributions.

Okay, thank you very much.

Thanks.

Thanks.

(Operator Instructions). And it appears that we have no further questions, I will now turn the call back over to Mr. Bowman for closing remarks.

Thank you. Thank you very much for your questions. Let me just finish by making a couple of comments.

Our strategies as a group remain intact. Firstly and most importantly, securing new business wins for all of our business units. Secondly, focusing on improving operational efficiencies and driving results to our clients. Thirdly, a disciplined approach to expense management and working capital. Fourthly, our employee commitment and engagement. We continue to emphasize having a positive attitude which manifests itself in exceeding the requirements that our clients have. And fifth, our 100% commitment to our shareholders that we are improving the Corporation.

For the balance of 2010, we will continue to manage the Corporation with integrity and innovation every day to ensure we are building sustainability. We will continue to fully capitalize on the opportunities presented that will drive current and future growth for our shareholders.

I'd like to thank everyone for joining us this afternoon and wish you all a great week. Thanks and good bye.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6.30 PM today through 11.59 PM on November 11, 2010. The conference ID number for the replay is 2007-9739. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. Thank you. You may now disconnect.