Crawford & Co (CRD.A) 2011 Q4 法說會逐字稿

Good afternoon. My name is Bonita and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company fourth quarter and year end 2011 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, Monday, February 13, 2012. Some of the matters to be discussed in this conference call and in the supplementary financial presentation may include forward-looking statements that involve risks and uncertainties. These statements may include, but are not limited to, statements regarding the funded status of our defined benefit pension plan, or 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 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 an unanticipated event. In addition, you are reminded that operating results for any historical period are not necessarily indicative of 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 and management discussions and analysis of financial conditions and results of operations, as well as subsequent Company filings with the SEC. This presentation also includes certain non-GAAP financial measures as defined under SEC rules.

As required, a reconciliation is provided for those measures for 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'm 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.

I will begin with some opening comments on our strong annual results and then an overview of our fourth quarter results. Bruce will then review the quarter and year-end financials in more detail, which will be followed by a review of our business, comments on our strategic initiatives, and conclude with our corporate focus and initial 2012 guidance.

If you called in to the call earlier than the start time, I hope you enjoyed the video, named "2011 A Year In Review." You will be able to see this on our corporate website from Thursday, the 16th of February. I'm very pleased to report for the year record revenues. Before reimbursements they increased $94.9 million to $1.125 billion. Net income attributable to Crawford & Company shareholders was $45.4 million, compared to a $28.3 million in the prior year, an increase of 60%. Consolidated GAAP diluted earnings per CRB share reached $0.83 in 2011, compared to $0.53 in 2010.

In December, we were very pleased to enter into a new $325 million revolving credit facility, which replaced a $100 million revolving credit facility and $218.6 million syndicated term loan. The new arrangement, which matures in December 2016, provides us with the financial flexibility we need to pursue our long-term strategic plans. It also reduces the Company's borrowing costs, extends the maturity of our credit facility and improves our access to capital.

We believe this agreement is a reflection of our solid operational performance and is an important endorsement of the financial security of Crawford & Company. We have also announced today the dividend on the A and B shares of $0.03 and $0.02, respectively. As I have noted before, we are very pleased that this year the Company has reinstituted a quarterly dividend, which has been made possible by improving our financial performance.

We sincerely believe that a healthy cash yield is an important part of Crawford's return to shareholders. With $380 billion in estimated global direct economic losses and $105 billion in insured losses, 2011 was a year of unprecedented weather-related and catastrophic events. The events of 2011 allowed Crawford to demonstrate its global capabilities, leveraging the use of our advancing technology and business solutions.

Our client base includes more than 200 of the Fortune 500 companies, from the largest multinational insurance carriers to local insurance firms. As a trusted partner and service provider, Crawford & Company is uniquely positioned to meet their increasing expectations for responsiveness, experience, and resources. Our value proposition has never been higher.

More than ever, Crawford has an unmatched portfolio of business services. Our continuous investment in technology and effort to meet the demands of our customers offers sustainable performance improvement, speed, automation, and analytics, essential components of the Crawford system. What we call the Crawford system of claims solutions allows us to attract new business, retain current customers, and affirm our position as an industry leader and the world's largest fully integrated provider of global claims management services.

Turning to our reported results for the quarter, as we have discussed through the year, the Gulf Coast Claims Facility, GCCF, a special project in our industry-leading Legal Settlement Administration segment, has been very important to our revenue and earnings performance over all of 2011. We have referred to this assignment as a special project, both because of its significant effect on our business, and because we recognize that this assignment's volume would taper and end at some point.

In the fourth quarter, we saw an expected contraction of activity related to the special project, which is visible in our segment results. In addition, against the background of an unprecedented year of catastrophic losses and events, the weather in the fourth quarter was comparatively mild on a global base.

Both our Americas, US and Canada and our UK businesses saw claims intake decline as milder weather affected results. The Americas segment saw a decline in case referrals during the 2011 fourth quarter, as relatively mild weather in the US and Canada reduced industry-wide claims volumes and our related revenues. This drop in new cases and related revenues offset increased catastrophic revenues from the completion of Hurricane Irene claims in the 2011 fourth quarter.

Quarterly revenues declined 12%, and net income attributable to Crawford & Company was $4.5 million compared with $14.8 million in the prior year. We saw our case volume for the quarter decline 3.8%, reflecting more moderate weather in the quarter versus last year as just discussed.

Our EMEA/AP segment turned in its best performance of the year during the fourth quarter. This part of our business continued to be positively impacted by revenues from an increase in weather-related claims activity in our Australian market throughout 2011. We expect the recent catastrophic flooding and related events in Thailand to benefit this segment in 2012.

Also, as mentioned, our Legal Settlement Administration segment saw a decline in work required to support the GCCF special project. This project continued to wind down during the fourth quarter and we expect activity to decline significantly through the first half of 2012.

However, we still have a healthy backlog of awarded projects in this segment and are very confident in the long-term growth prospects of this business. Overall, our group performance in 2011 was a significant improvement over prior years. Our strategy is to achieve product and geographic diversification on a global scale in our business units.

This portfolio management style has given us greater balance between those business units exposed to the property and casualty frequency issues and those that are not. We continue to pursue opportunities for improved profitability growth in our businesses around the globe, and we are well-positioned to continue to do so in the future.

Looking ahead to 2012, our guidance reflects a reduction in Legal Settlement Administration and a more normal weather pattern through the year. We also expect improvement in claim counts in the US property area and improvement in Broadspire's results as its casualty and workers' compensation markets stabilize. I will discuss Broadspire's progress in a moment. That concludes my initial remarks. Bruce, would you please review the Company's overall performance for the fourth quarter?

Sure. Company-wide revenues before reimbursements in the 2011 fourth quarter were $265.6 million, down 12% from the $301.5 million in the prior year's fourth quarter. Expected declines in our Legal Settlement Administration segment and weakness in the Americas segment accounted for the revenue drop.

Our net income attributable to Crawford & Company totaled $4.5 million in the 2011 fourth quarter, decreasing 70% from $14.8 million in the 2010 period. Fourth quarter diluted earnings per share for CRDB were $0.08 in the 2011 period compared to earnings per share of $0.28 in the 2010 period.

During the 2011 fourth quarter, the Company recorded $4.6 million in special charges, consisting of a $3.4 million write-off of deferred financing cost related to the repayment of our then-outstanding Term Loan B and $1.2 million in severance expense related to our Broadspire segment. We also recorded a tax benefit of $5.5 million related to a change in the valuation allowance for foreign tax credits.

The net of these items increased earnings per share by $0.05 in the 2011 fourth quarter. Beginning in the 2011 third quarter, the Company paid a higher dividend on its CRDA common stock than on CRDB shares. This dividend differential can result in different earnings per share for each class of stock due to the two-class method of computing EPS, as required by current accounting guidance.

References to EPS in this call will generally be only for CRDB as that presents a more dilutive measure. Revenues, net income attributable to shareholders of Crawford & Company, and earnings per share in the 2011 fourth quarter were impacted by a number of non-operating items including the positive effects of a tax adjustment and foreign exchange movements, partially offset by the special charges related to our debt refinancing and severance expenses. However, the Company's underlying operations reflected an expected decline in our Legal Settlement Administration segment and weakness in our Americas segment.

As compared to the 2010 period, during the 2011 fourth quarter the US dollar was weaker against many of the major non-North American foreign currencies. This had an overall positive impact on the Company's consolidated revenues and the EMEA/AP segment revenues in the 2011 fourth quarter compared to the 2010 period.

Revenues from the Americas segment totaled $82 million in the 2011 fourth quarter, substantially unchanged from the $82.1 million reported in last year's fourth quarter. An increase in Hurricane Irene related revenues in the US was offset by an industry-wide weak claim volumes in the US and Canada as a result of mild weather.

Operating earnings in our Americas segment were nearly break-even in the 2011 fourth quarter. This is compared to operating earnings of $2.4 million, or 3% of revenues in the prior year quarter. The impact of changes in foreign exchange rates on revenues and operating earnings for this segment were insignificant in the 2011 fourth quarter.

Revenues generated by our catastrophe adjustors in the US totaled $9.1 million in the 2011 fourth quarter, increasing from $5.5 million in the 2010 fourth quarter. The increase in revenues was primarily due to the completion of Hurricane Irene claims we received in the 2011 third and fourth quarters. EMEA/AP revenues increased 11% in the 2011 fourth quarter to $86.2 million, from $77.9 million in the 2010 period.

Our revenue performance reflects weather-related claims 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 6% to $82.4 million during the 2011 quarter on a constant dollar basis. EMEA/AP operating earnings decreased to $8 million during the current quarter, down 17% from last year's fourth quarter operating earnings of $9.6 million.

The operating margin in this segment was 9% in the 2011 quarter, decreasing from 12% in the 2010 fourth quarter. Before reflecting the positive impact of exchange rate fluctuations, EMEA/AP operating earnings totaled $7.5 million during the 2011 quarter on a constant dollar basis.

Revenues from our Broadspire segment decreased to $58.2 million in the 2011 fourth quarter, down 4% from $60.7 million in the prior year quarter, reflecting lower levels of revenues from our existing clients. Broadspire reported an operating loss in the 2011 quarter of $2.3 million, or negative 4% of revenues, improving from the operating loss of $6.9 million or negative 11% of revenues in the 2010 fourth quarter.

We continue to focus on cost efficiency and business development opportunities within this segment. Legal Settlement Administration revenues, comprised of class action and bankruptcy claims administration services, as well as significant special project revenues, totaled $39.2 million in the 2011 fourth quarter, decreasing 52% from the $80.8 million in the prior year quarter.

This revenue decline was anticipated as our work in the Gulf-related special project, which began in the 2010 third quarter, continues to wind down. Operating earnings totaled $8.8 million in the 2011 fourth quarter or 22% of revenues, as compared to $27.8 million or 34% of revenues in the prior year period.

Legal Settlement Administration continues to have a strong backlog of projects awarded, totaling $64 million at December 31, 2011, as compared to $90 million at December 31, 2010. This reduction in the backlog was anticipated. Our cash and cash equivalent position at December 31, 2011 totaled $77.6 million, as compared to $93.5 million at December 31, 2010, reflecting borrowings held at year end 2010 that were used to make a $20 million contribution to the frozen US defined benefit pension plan in January 2011. Our investment in unbilled and billed receivables has increased by $3.6 million during 2011 as a result of higher 2011 revenues.

Our pension liabilities declined through December 31, 2011 by $31 million, primarily as a result of the $20 million contribution to our frozen US defined benefit pension plan during January 2011, and $15 million in discretionary contributions to our UK defined benefit pension plans during 2011. Our total debt has decreased in 2011 by $9.1 million, reflecting deleveraging we were able to achieve in the 2011 fourth quarter due to our strong year-end cash performance. Cash provided by operations totaled $36.7 million for 2011, compared to $26.2 million provided by operations in the prior year. This $10.5 million increase was primarily due to reduced net working capital balances in 2011.

Free cash flow improved by $14.5 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. Consolidated cases decreased 3.8% versus the fourth quarter a year ago, reflecting a moderating weather and event environment in North America. For the year, case volumes increased 6.7% which we were pleased with. The difference between the fourth quarter and the year as a whole demonstrates the industry-wide significance of catastrophe losses through 2011. The number of global catastrophic events in the year was 820 per Munich Re, and the global insured industry losses totaled $105 billion, compared to $75.1 billion for the whole of 2008, $38.8 billion in 2009, and $49.6 billion in 2010.

The previous highest annual insured loss value was 2005 at $101 billion, and that was the year of Hurricane Katrina. Munich Re reports that Asia and Australasia/Oceania represented an estimated $63 billion in insured losses; America, $42 billion; and Europe, $2 billion in 2011, making up the $105 billion in global insured losses.

For the fourth quarter, we saw the increasing claims mainly in our Asia-Pacific arenas where the following events were reflected. In Australia, Queensland and Victoria flooding that took place in December 2010 to January 2011, the New Zealand earthquakes in February 2011 and June 2011, the Japanese earthquake and tsunami and massive flooding in Thailand.

Based on the recent information, we also see the number of Federal disaster declarations is significantly up. In 2011, there were 99 disasters declared in the year. The highest number prior to that was 2010 at 81 for the 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 hardening.

We saw price firming in specific commercial lines in the second half of 2011 but the property casualty underwriting cycle remains volatile. Underwriting profitability has not deteriorated to the lows of previous cycles and substantial unused underwriting capacity remains in the industry. Although some premium and loss drivers hinder the pending cycle return, it is likely to be in a particular segment and market rather than industry-wide.

Let me now turn to the outlook for each of our business units, starting with the Americas segment which represents 32% of our consolidated revenue in 2011. While premiums still remain relatively soft, the United States saw claims frequency increase sharply during the first nine months of 2011, with a decrease in the fourth quarter due to a lack of weather events nationwide.

Some bright spots for US property and casualty that give us confidence in our 2012 outlook. 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, 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 adjustors, EGAs, aggressively, as our GTS claims volumes increase.

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. In 2011, claims are up 3.6% over 2010. 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. A major client using contractor connection has recently expanded its consumer products nationally in 2012 which follows a successful pilot in 2011.

Our operations in Canada followed a similar trend with strong nine-month performance followed by a decline in case and revenue volumes in the fourth quarter. We continue to actively manage costs in this area as we grow the business. In the Latin American/Caribbean operations fourth quarter revenue increased 11.2% over the comparable quarter last year, due to the growth of our GTS division in Brazil.

Claims volume decreased in the fourth quarter versus the prior year due to the loss of a high volume, low severity affinity program in Brazil. Now turning to our EMEA/AP operations which represent 30% of our consolidated revenues in 2011 and continues to grow year-on-year.

Our focus on sustainable client revenue has been successful in this business segment over the entire year. In the fourth quarter, our revenue grew 10.7%. We saw our claims volume decrease in the UK due to the benign weather and lack of volume in this market.

Asia-Pacific continues to grow with a 39.6% claims growth in the quarter and an impressive 43% growth in claims for the year. We continue to make good progress with our initiatives to grow our Lloyd's market share and have recorded a 30% increase in activity this year as we have significantly elevated our profile in that marketplace.

We continue to expand our Broadspire third party administration services in Europe with US multinational clients, supporting our global initiative of cross-selling our services worldwide. To date, we are providing these services from 14 of our international locations. As we have indicated in earlier quarters, the surge in claims in the UK in early 2011 resulted in small homeowner's claims that significantly reduced through quarter 4. We have been right-sizing the UK post surge to improve our financial performance going into 2012.

In Continental Europe, the Middle East and Africa, or CEMEA, we continue to see encouraging developments and positive changes. Our revenue increased in the fourth quarter over 2010 by 12.8% on 7% claims performance. Our management team is driving a new performance culture into this region to improve operational and financial performance and we are encouraged for 2012 in a difficult economic environment.

Now turning to Asia-Pacific, the significant weather events that took place in 2011 for Australia and New Zealand have increased our revenue for the quarter over 2010 by 31.8%. We are handling claims throughout Queensland and the City of Brisbane, which were devastated by widely reported flooding.

In addition, we currently still have teams working in New Zealand and Japan, responding to both international instructions on the catastrophic events affecting those countries in 2011. In late 2011 and early 2012, we expanded our team in Thailand to deal with the significant flooding of seven industrial estates and expect to see additional revenue in 2012 from these events.

Our Broadspire operation, which represented 21% of consolidated revenues in 2011, reported a reduced loss for the quarter despite lower revenues. 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 a market-leading capabilities to provide innovative solutions and improve the bottom line for our customers. This is critical to Crawford's strategic development and 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 fourth quarter, we saw a small increase in workers' compensation claims at Broadspire due to the increases in the staffing and healthcare segments, while the manufacturing and construction areas wait for a return to job growth.

In quarter 4, 2011, casualty claims were down compared to 2010 due to another large global product recall assignment we received in the fourth quarter of the prior year. We continue to receive a significant number of new RFPs which confirms that the prospects in our pipeline are very encouraging.

We are very pleased that our sales run rate improved again in the fourth quarter, following a strong third quarter performance. This is excellent progress and we are expanding our new business opportunities with an enhanced value proposition and increased targeted marketing executed by the cross-selling of additional services and the balancing of our cost base over this period.

The trend to outsourcing medical management is a positive for Broadspire. Service innovation is a critical success factor for Broadspire and we continue to enhance current services through technology and to develop new ways of managing loss costs to meet complex challenges in today's marketplace. In quarter 4, we completed the rollout of RiskTech 1.2 which means that we have migrated 85% of our claims to one technology platform.

Broadspire successfully migrated more than 10 million claims in 2011 and this has now given us the ability to retire several legacy systems. As we continue to drive our sales and marketing plans, we expect to see sequential improvement in Broadspire's financial performance in 2012.

We are very pleased with the Legal Settlement Administration, or LSA, segment's revenue and operating earnings this year. LSA represented 17% of our 2011 revenue. The quarterly results were strong, although volumes reflect the run-off of claims associated with the GCCF project, a trend we currently expect to continue in the first half of 2012.

Our retention to assist in the creation of management of the GCCF 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 few months from their extraordinary levels of the past year. Our LSA backlog remains substantial, nonetheless.

Additionally, the class action market remains challenging. While security class action lawsuits edged up in 2011, primarily driven by merger and acquisition activity, the total number remained below average for the third year in a row according to the Stanford Law School report. A total of 188 Federal security class actions were filed last year, up from 2010, when there were 176 such filings. However, we continue to be retained in new significant class actions. In the fourth quarter, we also received a significant number of bankruptcy assignments. That concludes my comments on our portfolio of businesses segments.

Let me now turning to our guidance and 2012. We have issued our initial guidance for 2012 as follows. Consolidated revenues before reimbursement between $990 million and $1.03 billion. Consolidated operating earnings between $63 million and $70 million. Consolidated cash provided by operating activities between $30 million and $35 million. And net income attributable to Crawford & Company on a GAAP basis between $30.5 million and $35 million (Sic- See Press Release), or $0.52 to $0.62 diluted earnings per CRDB share.

Over the past year, Crawford & Company has met and resolved a number of key challenges. We have improved our financial performance and restored a dividend to shareholders. Now it is time for us and our businesses to move to a more proactive strategy. During the year, our focus on attracting new business and retaining our current customers continues be linked to the Crawford system of claims solutions. 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 data analytics.

As we look to 2012, we are focused on five areas. First, bringing Broadspire to an acceptable earnings profile. Second, significant debt reduction. Third, continuing to grow revenues and improve operating earnings. And fourth, capitalizing on global opportunities that we see occurring. And fifthly, to continue to enhance our returns to shareholders.

Looking forward, Crawford should benefit from a significantly improved financial position. We are very focused on delivering operational 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 in 2012. We have a first-class worldwide management team that is aggressively executing on our strategies as laid out and is developing and executing a changing culture in which our employees worldwide understand the values that foster improved performance for our clients and shareholders.

Our results in 2011 and our 2012 guidance are tangible evidence of the benefit of having a diversity of earnings in a volatile market. Given the strong market strength and reputation of our business segments and the balance of earnings 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 and we look forward to your questions. Operator, will you please explain the process for asking questions to our audience?

(Operator Instructions). We will pause for just a moment to compile the Q&A roster. Mark Hughes with SunTrust.

Thank you. Good afternoon.

Good afternoon, Mark.

Hi, Mark.

The guidance, could you give me a sense of what you were incorporating for pension expense? What was it for the full year in 2011? What do you expect in 2012?

Sure. For 2011, our overall pension expense was about $6.2 million, and for '12 that should be in the $3.3 million range.

And then what is the outlook for cash contributions, and maybe just a broader question about what are your cash flow targets, cash from operations, CapEx and pension contribution?

Okay. Pension contributions in the US should be about $13 million for 2012, and then looking at the UK for 2012 we'll probably be in the $6 million to $7 million range, so total for the defined benefit plans, think about $20 million. And we will be - we will have forward-looking information related to that in the 10-K when we file that in a few weeks, we'll put a five-year cash contribution table in the K when we file it. There will be more information around the DB plans that you can get at that point in time.

For operating cash flow, we're looking at $30 million to $35 million and that would be inclusive of those pension contributions. That's the initial guidance range that we're setting. That doesn't include any significant improvement in days sales outstanding, so to the extent that we can get some more traction in managing our receivable balances, that could help us beat that number.

How about the CapEx?

CapEx, we're anticipating about $28 million for the year.

$28 million. Then the number of RFPs within Broadspire, is that -- does that number continue at a high level as we start here early in 2012? I know that's probably a lot of calendar year starts but what's the sense of sales opportunities?

Yes, we've got a very active RFP pipeline at this moment. I think from our perspective, it's been one of the -- it's at one of the highest levels we've ever had, and I think it follows on from the very strong third and fourth quarter wins that we've had as an organize -- the Broadspire organization has had. We're very positive about going forward on that basis with our new revenue plan from both current RFPs and future ones. I think it's a testament to the improvement in the technology and the quality of the processes that we're putting in place which are getting recognized by the marketplace.

Can you give us a sense of how much business you've won, if fourth quarter revenue was down a little bit in Broadspire, when might we anticipate that could stabilize?

Well, are you talking about the profitability, Mark, or the revenue?

I was thinking revenue right there.

Okay. I think the revenue, obviously, a lot of it is recurring revenue from the contracts and it's about, really about client retention, and we have very specific initiatives in place at this moment to ensure that we have a very aggressive client retention process in place. I mean, we're seeing Broadspire's profitability being a significant initiative in 2012, now that we have RiskTech 1.2 out there and we see the take-up from our clients of both the technology and their quality issues I mentioned earlier.

How long will it take for that to show up in the P&L?

Our expectation is that Broadspire will be at a minimum break-even at the end of 2012.

Okay. Then one final question. The Gulf Coast business, when does that bottom out and can you give us some sense of how much it contributed to the top line in the legal settlement in the fourth quarter?

Well, we've never disclosed the individual portions of the LSA segment and it's something we won't do on the call. But we have, as we've stated prior to, we have fairly limited transparency into the future on the GCCF project, and that has been really the same since day one when we started working on it. We really look at 90-day windows at a maximum, and as we've said, we do see, as we've seen in the fourth quarter, that start to taper off as expected.

(Operator Instructions). Adam Klauber with William Blair.

Thanks. Good afternoon.

Hi, Adam.

Hi, Adam.

Why is it that the Americas broke even this quarter, where in past quarters revenue dipped on weather you still made money?

Yes. It's made up of really two issues. First is that in the hurricane claims that we had, that went up the northeast, we had higher than expected costs to service what was a very difficult hurricane from - in terms of a geographical spread where it went up a good portion of the East Coast of the United States. Although that was profitable for us, it wasn't as profitable as we would normally expect. The other big issue in the -- dealing with the US first -- is that the claims volume in the regions really, because of the lack of any weather, really came in much harder than we've seen in prior periods.

We saw a sort of compensating effect on that in the fourth quarter in the US, together with the mildest winter that Canada has ever had in its history, and, again, claims volumes in the fourth quarter were very weak from our organizational point of view. And that left us with a revenue shortfall that we haven't seen in a while. Now we've put initiatives in to deal with some of the cost issues around that if we don't see improvement in the first quarter of this year.

In your guidance number, what level of, or just rough terms, what level of weather are you expecting in the Americas? Is it a year more like, say, a 2009 which was sort of a light weather year or is it more like 2011? Could you give us, I guess, some guide there?

I'll give you a conceptual discussion first. Number one is we do not budget hurricanes or earthquakes or catastrophes and, obviously, that is excluded from our guidance. What we budget for is weather events and we're looking at a normalization of weather events really in the US and in the Asia-Pacific marketplace which will, accordingly, be down on the prior year.

We have included in our guidance some revenue for the Thailand event which is beginning to mature from our perspective at this moment. And we have, as I said in my commentary, we have put people into the region to deal with that. But it's more of a normalization. I don't have the '09 figures with me, but --

Yes, Adam, kind of year in, year out, when we're setting our budgets and in our initial guidance we think of kind of the weather-related work that we'll use catastrophe adjustors for in the US as about a $17 million to $18 million expectation and that excludes any hurricanes or earthquakes or other sort of headline-grabbing catastrophic events. It's more the day-to-day weather that may tax our resources where we have to bring in catastrophe adjustors.

Okay. That's helpful. On the Thailand loss, was there much revenue that flowed through in the fourth quarter or is most of it going to flow through in 2012? How does that compare to some of the events you saw in Australia and New Zealand?

Two very different events, for sure. Firstly, there was no revenue associated with the 2011 figures because it was maturing as our international operations have October -- an October year end, as you're aware. It was -- the effect was coming in the first quarter. We still are getting our hands around what is a fairly dynamic situation out there and it's very difficult at this moment to anticipate what our revenue pattern's going to be until we see, I think, at least another month or two out of the situation from where we are.

We've got a significant amount of claims and it's been a very difficult CAT event to actually manage because of the location, the water events and then the production facilities and getting information out of them to handle the actual claims. It's a moving event at this moment and we've got several teams that are putting schedules together to try and get our hands around it. We've got a good handle on the claims themselves for our clients, but not so much on where the revenue is going to come in terms of the long term on that. I'm actually going out there next month to visit with our team there.

Clearly, it's still developing but does it have the potential to be the size of, again, the New Zealand or Australia events, from your perspective?

I think it would be bigger than New Zealand, but I don't think it would be as big as Australia. Australia was many ten - sorry, many thousands of claims, Thailand is not that environment. There's much more business interruption claims within Thailand because they're production facilities.

Okay. Thanks. Then on Broadspire, you mentioned the potential for break-even sometime in 2012 or toward the end. Does that mean you feel comfortable by the back half or the very end or is it possible that it could be break-even for the year?

We're looking at sequential improvement on a quarterly basis. We've put in place some significant cost reduction programs. We out - we bought in the technology. As I said, I think the year-end break-even is our goal at the moment, and I think we're in good shape with the revenue wins if we continue on that, with that progress, to be in good shape at year end.

Okay. That's helpful. Legal administration, clearly, revenue has dropped, dropped a fair amount from BP. If we're trying to think about the first half of this year versus first quarter, I'm sorry, versus fourth quarter, is there still material drop from what we saw in the fourth quarter that will likely be experienced in first quarter and second quarter? Or have we seen most of the drop to date?

As Jeff -- this is Bruce, Adam. As Jeff indicated in his comments, we have kind of a 90-day outlook on this project and it's subject to dramatic changes and twists and turns, and we have a fairly good sense of where we're going to be in the first quarter but after that it's difficult to say. We don't have very high expectations for this outside of the first quarter. As we go through this quarter and things -- that could change one way or another, but that's just kind of the nature of this particular project in that it doesn't give us the ability to forecast out for long periods of time.

Right. As you look at the first quarter, again, not looking for an exact number, but is the drop from fourth quarter to first quarter going to be very significant or is it going to be more moderate?

It's hard to say. I think it would be probably moderate in the first quarter and then what happens after that is kind of the big question mark.

Okay, okay. That's helpful. Also in the legal settlement business, there's a lot in the headlines about a potential mortgage foreclosure settlement, a broad-based settlement. Is that something you have the potential to be involved in?

No comment on that at the moment. That's -- we've seen the headlines on that as well but I'm not going to talk about those issues over the phone.

Okay.

One thing I would say, Adam, is that the -- both the Americas and the EMEA/AP region in the property and casualty arena, they're looking at increases in their base revenue in 2012. There's some positives that are coming out on the revenue side, will offset somewhat some of the decreases we're expecting in the LSA division because of the rundown of GCCF, but not to the degree of the rundown.

And those increases, are those more from the complex or liability side?

Well, there's a whole range of issues around the programs that we've been putting on place through our taking over claims programs, nominations that we've received, both internationally and in the US which we're very excited about.

At this time, I would like to turn the call back over to Mr. Bowman for closing remarks.

Thank you. Thank you, everyone, for your time and questions this afternoon. I'd like to thank everyone for joining this afternoon and wish you a great rest of the week. Thank you.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6.00 PM today through 11.59 PM on February 13, 2012. The conference ID number for the replay is 47598056. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. Thank you. You may now disconnect.