Crawford & Co (CRD.A) 2011 Q3 法說會逐字稿

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

(Operator Instructions)

As a reminder, ladies and gentlemen, this conference is being recorded today, Monday, November 7, 2011. Some of the materials to be discussed in this conference call and its supplementary financial presentation may include forward-looking statements that involve risk and uncertainty. These statements may include, but are not limited to, statements regarding the funded status of our defined benefits pension plan, our expectations related to future revenues and expenses, our long-term liquidity requirements, 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.

In addition, you are reminded that opening results for any historical period are not necessarily indicative of the results to be expected for any future period. 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, 2010, filed with the Securities and Exchange Commission, particularly, the information under the headings business, risk factors, legal proceedings, management discussion, and analysis of financial condition and the results of operations as well as subsequent Company's filings with the SEC. This presentation also includes non-GAAP financial measures as defined under the SEC rules. As required, our 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. 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. In line with our previous calls, I will begin with some opening comments on our third-quarter and year-to-date results. Bruce will then review the third-quarter financials in more detail, which will be followed by a review of our business segments, comments on our strategic initiatives, and conclude with our corporate focus and increase to our 2011 guidance.

I'm pleased to report strong consolidated financial results for the third quarter. Revenue was up 11%, and net income attributable to Crawford & Company was $15.3 million, compared with $13 million in the prior year. We saw our claims assignments for the group increase 6.2% in the quarter, and were up 9.8% year-to-date. Our consolidated GAAP diluted earnings per CRDA and CRDB shares reached $0.28 in 2011, compared to $0.24 in 2010. This year's result includes an $0.11 award related to the final resolution of the Broadspire arbitration. This result is our fifth consecutive quarterly improvement year over year, and it continues to be a very good year.

As we have discussed over the past several quarters, the special project in our Legal Settlement Administration segment has been very important to our revenue and earnings performance over all of 2011. However, very pleasingly, we saw strength in our core property and casualty business, both in the US and in the EMEA/AP business segment, reflecting weather-driven increases in claims frequency. Today, we are engaged in the claims emerging from recent flooding in Thailand, which should provide activity in our Asia-Pacific region over the next several quarters.

For Crawford, 2011 has seen an increase in global weather events over the past several months. Our response to these events for our clients has been rapid, nimble, and innovative. As previously reported, the Americas' segment claims activity has accelerated through the year, as the third quarter saw significant increases due to weather events in the US. Our claims intake in the US in the third quarter increased following Hurricane Irene as well as the catastrophic weather we had in April through June across the Midwest, Southwest, and Southeast. Our Americas business unit reported a 10.4% increase in claims assignments over the prior quarter.

In our Americas segment, claims volumes are increasing and our share of the market has grown, which should improve results. We remain very confident that the strategies and actions taken by Management during the prior years will deliver strong operating results heading into 2012. Our EMEA/AP segment reported solid third-quarter results following the weather-related claims in Australia, which occurred in the first quarter. EMEA/AP reported several shifts in claim activity in the third quarter, which saw strong gains in the Asia-Pacific area offsetting claims volume declines in the UK.

Our guidance reflects continued strong performance in Legal Settlement Administration, despite our expectations that the overall volume in this segment will slow as we move through 2012. We also expect a continued improvement in claims counts in the US property area and continued stabilization of Broadspire's casualty and workers' compensation markets. I will talk further on the Broadspire progress in a moment. Significant attention is being given to days sales outstanding or DSOs. The management of accounts receivable, both billed and unbilled, resulted in a spike due to new business received. We see our DSO figures beginning to drop as we enter the fourth quarter.

In all our business units, we continue to be focused on cost reductions as a result of process efficiencies through the increased use of technology. As we announced last quarter, on July 25, the panel deciding the Broadspire legal arbitration issued a final decision, which resulted in a third quarter after tax gain of $5.9 million. I am very pleased that this ends the outstanding arbitration matters related to the Broadspire acquisition.

We have also made an acquisition in Legal Settlement Administration. Settlement Services, Inc., SSI, located in Florida, is a corporation that deals with labor and employment cases and will expand our capacity and leverage relationships. As the labor and employment class action market continues to grow, we will be able to take advantage of the opportunities in this market as they present themselves.

Today, we announced a dividend on the Class A and Class B shares of $0.03 and $0.02 accordingly. As I have noted before, we are very pleased that the Company has reinstituted a quarterly dividend, which has been made possible by improving our financial performance, the progress made in addressing the Company's pension issues, and the resolution of the arbitration case. We sincerely believe that a healthy cash yield is an important part of Crawford's return to shareholders. 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 2011 third quarter were $283 million, up 11% over the $254.5 million in the prior year's third quarter. Double-digit growth in our Legal Settlement Administration, EMEA/AP and Americas segments accounted for the improvement. Our net income attributable to Crawford & Company totaled $15.3 million in the 2011 third quarter, increasing 18% over $13 million in the 2010 period. Third-quarter diluted earnings per share for CRDA and CRDB were $0.28 in the 2011 period, compared to diluted earnings per share of $0.24 in the 2010 period.

As Jeff mentioned, the Company received an arbitration award of $5.9 million, net of tax, or $0.11 per diluted share, related to the previously disclosed arbitration with Platinum Equity. The Company's Selling, General and Administrative expenses, or SG&A, totaled $53.6 million, or 18.9% of revenues in the 2011 third quarter, increasing $3.5 million from $50.2 million or 19.7% of revenues in the prior-year quarter. This increase in cost is primarily due to higher arbitration-related expenses, noncapitalized professional fees associated with IT system implementations, and higher compensation and travel expenses.

In the 2011 third quarter, the Company paid a higher dividend on its CRDA common stock than on its CRDB shares. This dividend differential can result in different earnings per share for each class of stock due to the class method of computing EPS as required by Generally Accepted Accounting Principles. Revenues, net income attributable to Crawford & Company, and earnings per share in the 2011 third quarter were positively impacted by a few nonoperating items including the positive effects of the 2011arbitration award and positive foreign exchange movements, partially offset by the absence of a nonrecurring 2010 tax credit. The shortfall in the Company's underlying operations was primarily due to an increased operating loss in Broadspire.

As compared to the 2010 period, during the 2011 third quarter, the US dollar was weaker against most of the major foreign currencies in which we operate globally. This had an overall positive impact on the Company's consolidated revenues in the Americas and EMEA/AP segment revenues in the 2011 third quarter compared to the 2010 period. Revenues from the Americas segment totaled $94.7 million in the 2011 third quarter, increasing 11% from the $85.7 million reported in last year's quarter. A sharp increase in weather-related claims in the US was aided by an increase in Canadian revenues primarily as a result of the positive impact of exchange rate movements.

Before reflecting the positive impact of exchange rate fluctuations, Americas revenues increased by 7%, to $92 million during the 2011 quarter on a constant dollar basis. Revenues generated by our catastrophe adjusters in the US totaled $12.9 million in the 2011 third quarter, increasing from $4.6 million in the 2010 quarter. The increase in revenues was primarily due to the surge in claims we experienced from Hurricane Irene during the 2011 quarter. Given the timing of the event of Hurricane Irene, the Company also incurred deployment costs in the third quarter which affected the margin from the catastrophe claims. The Company expects margins associated with these claims to improve in the fourth quarter, as these deployment costs are non-continuing.

EMEA/AP revenues increased 27% in the 2011 third quarter, to $87 million, from $68.7 million in the 2010 period. Our revenue performance reflects weather-related claim increases in our Asia-Pacific operating region and the positive impact of exchange rate movements. Before reflecting the positive impact of exchange rate fluctuations, EMEA/AP revenues increased by 12% to $77 million during the 2011quarter on a constant dollar basis.

EMEA/AP operating earnings increased to $5.7 million during the current quarter, up from last year's third-quarter operating earnings of $5.1 million. The operating margin in this segment was 6.5% in the 2011 quarter, decreasing from 7.5% in the 2010 third quarter. Before reflecting the positive impact of exchange rate fluctuations, EMEA/AP operating earnings totaled $4.7 million during the 2011 quarter on a constant dollar basis, or 6.1% of revenues.

Revenues from our Broadspire segment decreased to $58.9 million in the 2011 third quarter, down 4.6% from $61.7 million in the prior-year quarter, reflecting lower levels of revenues from our existing clients, in part due to a lengthening in the duration of workers' compensation claims which is having the adverse impact of slowing down the revenue recognition pattern on these claims. Broadspire's operating earnings in the 2011 quarter totaled a loss of $2.9 million, or negative 5% of revenues, declining from the operating loss of $0.7 million or negative 1.1% of revenues in the 2010 third quarter.

Legal Settlement Administration revenues comprising class action and bankruptcy claims administration services, as well as significant special project revenues, totaled $42.5 million in the 2011 third quarter, increasing 11% over the $38.4 million in the prior-year quarter. Both the 2011 and 2010 periods reflect the benefit of the ongoing Gulf-related special project which began in the 2010 third quarter. Operating earnings totaled $10.8 million in the 2011 third quarter, or 25.4% of revenues, as compared to $11 million, or 28.5% of revenues, in the prior-year period. Legal Settlement Administration continues to have a strong backlog of projects awarded, totaling $72.5 million at September 30, 2011, as compared to $75 million at September 30, 2010.

Our cash and cash equivalent position at September 30, 2011, totaled $68 million as compared to $93.5 million at December 31, 2010, reflecting borrowings held at the end of 2010 that were used to make a $20 million contribution to the frozen US defined benefit pension plan in January 2011, and cash used to fund working capital expansion for the first 9 months of 2011, resulting from the increase in revenues. Our investment in unbilled and billed receivables has increased by $47 million during 2011, as a result of higher year-to-date 2011 revenues. Our pension liabilities declined through September 30, 2011, by $28.6 million, primarily as a result of the $20 million contribution to our frozen US defined benefit pension plan during January 2011. Our total debt has increased in 2011 by $18.4 million, reflecting borrowings to fund our working capital expansion in 2011.

Cash used in operations totaled $17.6 million for the first 9 months of 2011, compared to $25.1 million used in operations in the prior-year period. This $7.5 million decrease was primarily due to higher net income during the 2011 period as a result of growth during the year. Free cash flow improved by $10.4 million, reflecting a benefit from lower mandatory principal payments on the Company's long-term debt. 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 in-flows usually occurring in the fourth quarter from some of our major markets. Back to you, Jeff.

Thanks, Bruce. Let me comment on the overall case growth, which was up 6.2% versus the third quarter a year ago, driven by weather events and new business gains. That gives us an increase of 9.8% year-to-date. We have always indicated that our business is sensitive to catastrophic weather events that trigger large numbers of insurance claims. Over the past several months, we have seen a number of these events occur globally. In short, indemnity dollars in 2011 are well ahead of the past 3 years, underscoring the sharp increase in weather and CAT losses over the global marketplace.

This demonstrates the industry-wide significance of catastrophe losses through 2011 to date. We know that the number of global catastrophic events in the first 6 months was 355, and the insured industry losses totaled $72.5 billion, compared to $75.1 billion for the whole of 2008, $38.8 billion in 2009, and $49.6 billion in 2010. We read in industry reports that estimates on Hurricane Irene are at $3.6 billion, and the recent weather event in the northeast is estimated at $1 billion, flat. Thailand is currently estimated at $15 billion. Based on those adjustments, that gives the 2011 estimate of a total insured losses of $92.1 billion to date. That represents a 23% increase over 2008, and an 85% increase over 2010.

Where we saw the increases in claims is mainly in our US and Asia-Pacific arenas, where the following events have had an effect. In Australia, Queensland and Victoria flooding December 2010 to January 2011; the New Zealand earthquakes in February 2011 and June 2011; the Japan earthquake in March 2011; US tornadoes and severe storms, February to June 2011, Hurricane Irene in the US in September 2011; US severe weather in the northeast due to snow in October; and the recent flooding in Thailand, which we are currently responding to.

Based on recent information, we also see the number of federal disaster declarations is significantly up. 2011 is 90 year-to-date. The highest number prior to that was 2010 at 81 for the whole year. All of this activity puts pressure on markets to respond with premium rate increases. This is not yet evident, but there are reports of some markets hardening.

Let me now turn to the outlook for each of our business units, starting with the Americas segment which represents 31% of our overall [totes] consolidated revenue year-to-date. While premiums remain relatively soft, United States saw claims frequency increase sharply during the first 9 months of 2011, with particular acceleration in quarter 2 and 3. We executed a very strong response to the catastrophic events and, from our analysis, we are satisfied that we are gaining market share by securing new accounts and expanding our services to our current clients.

Some additional bright spots for the US property and casualty division that give us confidence in our 2011 outlook are as follows. The US property and casualty group has invested in resources for our casualty services business, especially in the US transportation area for the trucking business, and we are growing in this area through new client wins. Our continually stated goal of growing Global Technical Services, GTS, our large complex claims unit in the United States, is on track as we continue to be nominated on accounts with high value complex claims and as a result, we continue to add Executive General Adjusters, EGAs, aggressively, as our GTS claims volume increases. At the close of quarter 3, claims were up 63.5% and 27.9% year-to-date.

Our industry-leading contractor connection business in the US still continues to build momentum as we add more contractors to the program and, more importantly, several new clients. 2011 claims are up 9% over 2010 in the third quarter, and 11.6% year-to-date. The ongoing expansion of contractor connection in the US is a result of insurance carriers moving high frequency, low severity property claims directly to repair networks. We expect this trend to continue in the future, and we are positioned as the market leader in this important area. It is worthwhile to note that, in the third quarter, we successfully launched a consumer service product with a major client and are planning further expansion of this service in 2012.

Our operations in Canada improved significantly over last year, with an increase in cases received of 11.6%, mainly due to more weather-related events. However, we experienced a small decrease in claims in the third quarter. Revenue is up in the third quarter by 4.2%, assisted by exchange rates and new revenue from the Canadian contractor connection business on flat claims volumes. We continue to manage cost as we grow the business. Lastly, in the Latin American Caribbean operations, third quarter revenue increased 5.8% in local currency, over the comparable quarter last year, due to the growth of our GTS division in Brazil. Claims volumes decreased in the third quarter versus the prior year due to the loss of a high-volume low-severity affinity program in Brazil that was taken in-house by a client.

Now, turning to our EMEA/AP operations, which represent 29.5% of our consolidated revenue today, our focus on sustainable client revenue has been successful in this business segment. In the third quarter, our revenue grew 27%. Our claims volume reflected an increase of 3.1%. In the quarter, we have seen a decrease of 18.2% in claims in the United Kingdom, due to the benign weather and a lack of volume in the market, although year-to-date we are up slightly. Asia-Pacific continues to grow with a 36.3% claims growth in the quarter, and a 44.1% growth in the claims year-to-date. We also made good progress with our initiatives to grow our Lloyd's market share and have recorded increased activity this year and have significantly elevated our profile.

We continue to expand our Broadspire TPA services in Europe with US multinational clients supporting our global initiatives of cross-selling our services worldwide. To date, we are providing these services from 14 of our international locations. In early 2011, the UK operation benefited from the surge in weather following severe cold weather through December and January. The resulting small homeowner's claims are flowing through the UK this quarter and this inventory should significantly reduce through quarter 4. We have been right-sizing the UK, post-surge, to ensure financial performance improves in 2012.

In Continental Europe, the Middle East and Africa, or EMEA, we continue to see encouraging developments and positive changes. Our revenue increased in the third quarter over 2010 by 19% on flat claims performance. Our newly appointed management team is driving a new performance culture into this region to improve overall operational and financial performance.

Now turning to Asia-Pacific, the significant weather events that continued into 2011 for Australia and New Zealand have increased our revenue by 60% for the quarter over 2010. We are handling claims throughout Queensland and the city of Brisbane, which were devastated by widely reported flooding. Many of the claims were of a significant size and we continue to monitor the full extent of our clients' aggregated reserves. Market feedback has been excellent, acknowledging the response we were able to provide, from around the world. We currently have teams working in New Zealand and in Tokyo, responding to both local and international instructions on events. We have also seen an increase of claims in China, Singapore, and Malaysia as we expand high-frequency, low-severity programs to our clients.

Our Broadspire operation, which represents 20.5% of consolidated revenue year-to-date, reported a loss for the quarter on lower revenues. The third quarter has been a positive in respect to technology and new sales development. We remain firmly committed to the business and believe strongly that Broadspire's solid market position, integrated service model, and quality of service offer the market a truly competitive product. Broadspire's internal ability to fully integrate all of our services -- claims management, medical management, and medical bill review -- gives us the market-leading capabilities to provide innovative solutions and improve the bottom line for our customers. This is critical to Crawford's strategic development, as we take every opportunity to cross-sell our service and work on improving results in these operations.

Broadspire is an integral part of the Crawford product line and strategy. In the third quarter, we saw a small increase in workers' compensation claims at Broadspire, due to increases in staffing and healthcare segments, while the manufacturing and construction areas wait for a return to job growth. Quarter 3 casualty claims were influenced by a global product recall assignment which will continue for some years. We continue to receive significant numbers of new RFPs, which confirm that our prospects in our pipeline are very encouraging. Our focus is to convert these opportunities into new revenue.

Our sales run rate improved in the third quarter, with new sales in quarter 3 being more than the whole of 2010. We are emphasizing the development of new business opportunities with an enhanced value proposition and a target market approach, executed by the cross-selling of additional services and balancing our cost base over this period. The trend to outsourcing medical management is a positive for Broadspire. As reported last quarter, following the recent mergers and acquisition activity involving our competitors, we have secured a number of new programs and we are seeing opportunities for further client wins as our competitors grapple with integration issues. We are also seeing large carriers shortening the approved number of TPAs, which will benefit the larger players including Broadspire and Crawford.

Service innovation is a critical success factor for Broadspire. We continue to enhance current services through technology and to develop new ways of managing lost cost to meet the complex challenges in today's marketplace. We are on plan to have 85% of our claims on one platform by the end of quarter 4. Our new products include Chronic Pain Protocol, a treatment regime using our clinical resources that incorporates managing the physical and physiological aspects to reduce the drug and physical dependencies to return the injured worker back to work more quickly.

Broadspire @ Home is a program that provides needed clinical services in the home setting, reducing the cost of hospital expenses by moving the individual to their home with services provided by specialty companies that can provide the same level of needed care. Workers On Loan and Broadspire My Claim also add new functionality to our service list. As we continue to drive our sales and marketing plans, we expect to see sequential improvement in Broadspire's financial performance in quarter 4 over the third-quarter 2011 results.

We are very pleased with the Legal Settlement Administration, or LSA, segment's revenue and operating earnings this year. As previously reported, we have just announced the acquisition of SSI, and the quarterly results were strong, although margins reflected ongoing shifts in the mix of claims being handled. LSA represented 18% of our consolidated revenues year-to-date and the quarter was a continuation of the very strong performance of the second half of 2010 and the first 6 months of 2011, with respect to both revenue and operating earnings. Both reflect the benefit of the special project that started in the 2010 third quarter.

Our intention to assist in the creation and management of the Gulf Coast claims facility has been a very important assignment for the Corporation and has had a very positive effect on our results. Our outlook for this project is that activity will slow over the next several quarters from their extraordinary levels of the past year. Our LSA backlog remains substantial. Additionally, the class action market remains challenging. However, we've been retained in new significant class actions and have seen a significant number of bankruptcy assignments lately. That concludes my comments on the business segments.

Let me turn to our 2011 guidance and 2012 operational focus. As discussed, we have updated and increased our guidance for 2011. Factors affecting these increases include the special project in Legal Settlement Administration and the catastrophic events in the US and Asia-Pacific. Our revised guidance is as follows -- consolidated revenue before reimbursements between $1.1 billion and $1.13 billion; consolidated operating earnings between $83 million and $89 million; consolidated cash flow provided by operating activities between $30 million and $35 million; net income attributable to Crawford on a GAAP basis between $45 million and $47.5 million, or $0.81 to $0.86 diluted earnings per CRDB share.

During the year, our focus on attracting new business and retaining our current customers continues to be linked to the Crawford system of claims solution. Our global and local clients range from the largest multinational insurance carriers to local insurance companies. Significant attention has been put into key account management and cross-selling initiatives throughout our businesses globally. Today, our clients include more than 200 of the Fortune 500 companies. Our clients worldwide continue to 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 [adranalytics]. With many improvements occurring, we believe we are well positioned to handle these challenges going forward, and I'm also very pleased with the global response of our organization this year in the light of the increased number of catastrophic events. We have proven we can respond quickly and efficiently to catastrophic situations as they occur.

As we look to 2012, we are focused on 5 operating areas -- first, bringing Broadspire to an acceptable operating level; second, significant debt reductions; thirdly, continue to grow revenue and operating earnings; fourthly, capitalizing on global opportunities; and, fifthly, enhancing returns to our shareholders. Crawford has delivered a significantly improved financial position. We are focused on delivering operating improvement in our Broadspire business, both domestically and globally, and we will continue to grow and improve our Americas, EMEA/AP, and LSA business segments for the balance of 2011.

Our worldwide management team is aggressively executing on our strategies as laid out and is continuing to create a culture in which our employees worldwide understand the values that foster improved performance for our clients and shareholders. Our results and 2011 guidance are tangible evidence of the benefits of having a diversity of earnings in a volatile market. Given the market strength and reputation of our business segment and the balance of earning power for our Corporation, we continue to remain very optimistic and confident about our growth opportunities as we execute on our corporate strategies for our shareholders.

Thank you for your time. We look forward to your questions. Operator, would you please explain the process for asking questions to our audience.

Yes, sir. (Operator Instructions)

[Jack Shark] with SunTrust.

Thank you very much. Just first off, just a minor housekeeping question. The diluted share count for the quarter, I didn't see it in the release.

Yes, it's in the 10-Q.

Okay. All right. And then claims count, you mentioned it was up 6.2% for the quarter. What was it in year-ago?

Yes. For the year-to-date period, the variance is 9.8% positive. So we're up for the nine month period 9.8% over the prior year.

Okay. But do you have the year-ago quarter, Bruce, what it was? How much were you up from 3Q of '10?

Over the third quarter '09?

Yes, what was the growth last year?

Hold on just a second.

(Operator Instructions)

Jack, it was up about 3.6%, third quarter 2010 over third quarter 2009.

Adam Klauber, William Blair.

Thanks. Good afternoon, everyone. Couple different questions. On Broadspire, you said you're expecting a turnaround next year. Does that mean moving to profitability? And assuming claim volumes don't improve, how are you going to go from, I guess, losing money to making money next year?

Well, I mean, there's several aspects to that, Adam. We're expecting sequential improvement on our results within Broadspire. And the objective for 2012 is to be in a profitable situation. We've really got 5 issues that we're dealing with on Broadspire that are going to lead us to that effect. First is new sales. Quarter 3 was a very good quarter for the group in terms of new sales closed and obviously that revenue will start to come into the 2012 period.

We also are continuing on our cost management. That's something that we've been doing for a while as we address the revenue cost scenario that we've got and cost management is something that we're pushing through in the Broadspire operation. We've also -- and this is really very -- quite an exciting bit. On the technology, we get to this quarter where the actual risk tech system -- we'll have 85% of our claims now, which has been our major target, on one system. That in itself creates efficiencies within the organization which we're building into our plan in 2012. And that's quite a significant issue for us.

And then obviously the sequential results as we push through into next year. The other area where we've got a lot going on within Broadspire is on the cross-selling programs between our client basis and our organization, not only on the US basis, but overall. You take all that together, as long as the economy doesn't get any worse and we've seen a stabilization, actually slight uptick in Q3 on the workers' comp claims, I think that should bode well for us in 2012. So there's lots of activity around getting this part of the operation, as I said and our strategic objectives, as being profitable.

Okay. Thank you. With the BP business, could you just give us a ballpark how much, in this quarter, how much of the revenue came from the initial assignment versus the continuing type work?

Adam, we're not talking about the contributions that individual clients make to our results. So, we really can't get into what the contribution is for that particular project. I think if you go back and you look at where we were in '10 prior to the project starting in the third quarter of '10 and kind of where we've been from there, a substantial part of the increase is related to that project and it's been a significant project for us. It's not the only piece of business that we have in legal settlement and they still have a very active securities class action and bankruptcy practice that they are very active in and we're seeing a lot of new projects come from those two areas, as the BP project is winding down and will continue to wind down as we go through 2012.

The BP project in and of itself, it's -- like a lot of our businesses, we don't have perfect visibility into how the project is going to ultimately conclude and our visibility really is limited to kind of a 90-day window or so if you look forward. So, we think that for the next 90 days through the end of February or so, that it's going to be an active program for us. But after that date, it's difficult to know what the future of the program's going to be, just due to the nature of the project and decisions that could be made by the claims administrator and how those claims will ultimately be concluded.

Thanks. Also, in the same, in Garden State, are there any BP-like projects that are potentially out there?

Not that I'm aware of at this moment. There are similar type -- you mean within the oil and petrochem industry?

Or just big, very large, more than one class action or one bankruptcy, things that go across multiple jurisdictions such as BP did.

Yes. We have one project we're working on at the moment that's come in through Broadspire which is a product recall or product liability project that goes across 34 countries that we're working on at this moment. That has certainly been a very interesting type project, but nowhere near the size of what the BP project has been.

Okay. Then as far as the catastrophe-related business, Thailand is obviously relatively new and it seems like some of the other US catastrophes are pretty widespread. Are those going to be mainly 2011 or are those going to be -- some of that business pushed into 2012?

The majority of the claims that are being handled will be settled within the 2011 financial year. The larger claims, the more complex ones which will be a small percentage will then push over into the first quarter of 2012. That's a fairly normal type of pattern for those claims. I mean we are, as a result of increased technology improvement in our overall service level agreements, we are closing claims much more quickly these days than we used to do before. But the larger projects, the larger assignments will move a little bit into 2012.

Okay. Thank you. And also, Bruce, I think you talked a bit about the margin in the Americas was down from last quarter. Is that due to -- I think you mentioned there's some ramp-up of contract employees and also you mentioned maybe some arbitration expenses. What was driving the lower expense and will that change in the fourth quarter?

Yes, it wasn't so much the arbitration expenses. Those are in our corporate unallocated line. So within the Americas, we had some deployment cost related to getting the adjustors out to the scenes of the losses with Hurricane Irene. And given the timing of that storm happening somewhat late in the quarter, we had a higher level of cost than we normally would associated with those revenues. As the claims close in the fourth quarter, we will have much higher margins associated with that storm, because we won't have those deployment costs that were a drag on earnings in the third quarter. So, the financial benefit of Hurricane Irene really kind of straddles the third and fourth quarter and we should see a margin improvement in the Americas in the fourth quarter as a result.

Okay. And one final question. As far as pension expense, what should that run in 2011? And any visibility on whether that should go up or down in 2012?

Yes. The cost in 2012, we do not know yet. Our measurement period for the defined pension plan in the US is December 31. So, at the end of December we'll work with our actuaries to determine what our pension expense and pension funding will be in the US for 2012 and we'll be disclosing the results of that in the 10-K next year.

Okay. Thank you very much.

Thanks, Adam.

(Operator Instructions) We have a follow-up from Jack Shark with SunTrust.

Thank you very much. I have a question about the EMEA growth you mentioned of 19% on the flat claims. What do you attribute that to? Was it taking share, more outsourcing, or some color there?

I think it's closure of a lot of claims that were coming through from the earlier part of the year, Jack. You've got the close-down of significant numbers, although the new claim intake was flat. So, it's really just that sort of --

Just the wind down?

It's the spike you get in the first quarter. You know, you get sort of a period then where you start to work the claims much harder and then you start to get the close down and the ultimate billings.

Okay. And then on Broadspire, you mentioned the new sales in 3Q were more than all of 2010. Any particular verticals there or was that just more outsourcing or kind of what are you seeing there?

Well, we're seeing some increase in pharmacy type companies where we've got a good market share. Then there's some general accounts that have come out to bid that we've been involved in and with the revamping of our sales processes, et cetera. We're having some success which we're very pleased about.

Okay. Great. Thank you very much.

Thanks.

At this time, we have no further questions and I would hike to turn the call back over to Mr. Bowman for closing remarks.

Thank you. Thank you very much, all, for your time and questions this afternoon. I'd like to thank everyone for joining us and wish you all a great week. Bye.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6 PM today through 11.59 PM on November the 15th, 2011. The conference ID number for the replay is 21518137. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. Thank you. You may now disconnect.