Investor Presentation November 6, 2008 Exhibit 99.1 the STRENGTH of WORKING TOGETHER SM |
The Strength of Working Together 2 SM Forward-looking Statements and Segment Operating Earnings Forward Looking Statements: This presentation contains forward-looking statements, including statements about the future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not historical facts may be “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company’s present expectations. Accordingly, no one should place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Crawford & Company does not undertake to update forward- looking statements to reflect the impact of circumstances or events that may arise or not arise after the date the forward-looking statements are made. For further information regarding Crawford & Company, and the risks and uncertainties involved in forward-looking statements, please read Crawford & Company reports filed with the United States Securities and Exchange Commission and available at www.sec.gov or in the Investor Relations section of Crawford & Company’s website at www.crawfordandcompany.com. Segment Operating Earnings: Segment operating earnings represent earnings before net corporate interest expense, amortization of customer-relationship intangible assets, stock option expense, income tax expense, unallocated corporate and shared costs, and gains on asset sales. On January 1, 2008 the Company’s Strategic Warranty Services unit was moved from the Legal Settlement Administration segment to the U.S. Property & Casualty segment. Prior period results for both segments have been restated to reflect this transfer. Subsequent to March 31, 2007, the Company changed its method of allocating certain corporate overhead costs to each of its operating segments. Prior period results have been restated to reflect the current allocation method. Segment revenues and expenses do not include reimbursements for out-of-pocket expenses. |
3 Crawford & Company • World’s largest fully-integrated independent provider of global claims management solutions. • Four reporting segments: – International Operations • Serves the global insurance industry and multi-national corporations – U.S. Property & Casualty • Serves the U.S. insurance company market – Broadspire • Serves large national accounts, carriers and self-insured entities – Legal Settlement Administration • Provides administration for class action settlements, bankruptcy matters, and product performance. • Opportunities • Improved quality has restored client confidence, improved retention • Short term emphasis on cost control • Increase market share: both new clients and cross-selling existing services • Investment in enhanced technology • Crawford will benefit from global consolidation of TPA vendors |
The Strength of Working Together 4 Locations 700 locations in 63 countries SM |
The Strength of Working Together 5 Diversified Business Mix 2008 Revenues before Reimbursements of $786 Million Nine months ended September 30, 2008 • Property and Casualty Services • Global Technical Services • Global Marine and Transportation • Global Markets 42.7% 30.0% 7.3% International U.S. Property & Casualty • Property and Casualty Services • Catastrophe Management Services • Auto Appraisal Services • Centralized Claim Administration • Strategic Warranty Services 20.0% Legal Settlement Administration • Class Actions – Securities – Product Liability • Bankruptcy Administration Broadspire • Workers’ Compensation and Liability Claims Administration • Medical and Case Management • Long-Term Care Services • Integrated Disability Management • Risk Management Information Systems (RSG) • Claim Triage Solution (e-Triage) SM |
The Strength of Working Together 6 SM International (excluding U.S.) Property & Casualty Insurance Market Opportunities Crawford CL GAB Regional/Local Providers • Only 4.4% of dollars spent by rest of world (ROW) carriers on claims are outsourced to third party independent adjusters • Very few global claims providers • As ROW insurance carriers look to consolidate claims services vendors, small firms lose market share ROW Unallocated Loss Adjusting Expenses $41.1 Billion 95.6% $1.9 Billion 4.4% $1.053 Billion 55.6% $140 Million 7.3% ROW Outsourced Loss Adjusting Expenses $377 Million 19.8% Source: Crawford & Company $330 Million 17.3% Insurance Carrier Internal Claims Dept. Outsourced |
The Strength of Working Together 7 International Strengths and Opportunities • Best infrastructure among independents builds on industry trend of consolidation of clients. • Bench strength of International Leadership Team required to grow in industry marked by demanding, value-driven clients, with high service level expectations. • Global service differentiation from simple/low value claims through to complex/high value claims. • International specialities: Class Action, Subsidence, Counter Fraud Solutions, Managed Care, Desktop Claims, Affinity Business, Supply Chain Management. • Goals include product and market share expansion in Canada, UK, and Asia Pacific as well as development of Latin America and other emerging markets. SM |
The Strength of Working Together 8 SM U.S. Insurance Market Opportunities 4,000+ Local & Regional Providers National Providers Crawford U.S. Unallocated Loss Adjusting Expenses $21.7 Billion 86.1% $3.5 Billion 13.9% $3 Billion 86% $280 Million 8% U.S. Outsourced Loss Adjusting Expenses $193 Million 6% Source: Cochran, Caronia & Co. and Crawford & Company • Approximately 14% of dollars spent by U.S. carriers on claims services are outsourced to third parties – High propensity to outsource non-core lines and/or non-core states • Outsourced claims service provider market is highly fragmented – Crawford is the market leader with 6.0% • As insurance carriers look to consolidate claims services vendors, small firms lose market share – Most U.S. carriers are dramatically reducing the number of vendors on “approved lists” Insurance Carrier Internal Claims Dept. Outsourced |
The Strength of Working Together 9 U.S. Property & Casualty Growth Opportunities • Strategic Growth – Target large insurers who are consolidating their vendor lists and ensure Crawford is named an approved vendor • Quality improvement • Efforts toward training and product development – Target markets • Small and mid-market carriers • Managing general agents (London Market) • Non-standard insurers • Property & casualty programs run by self-insured corporations • Organic Growth – Key account plans for top clients – Account managers for each major client – Easily accessible database of client instructions SM |
The Strength of Working Together 10 U.S. Self-Insured Entities and Captives Market Opportunities 9 Largest Providers Broadspire Local and Regional Providers • Self-insured entities and captives outsource practically all of their claims services • Outsourced total claims management is fragmented • Local and regional providers unable to leverage technology investment $0.4 Billion $3.3 Billion Unallocated Loss Adjusting Expenses Outsourced Loss Adjusting Expenses $1.8 Billion 56.5% $1.1 Billion 33.3% $321 Million 10% Source: Cochran, Caronia & Co. and Crawford & Company SM Internal Outsourced |
The Strength of Working Together 11 Broadspire Strengths and Opportunities • Strengths – Proven faster return-to-work for employees and cost savings to clients – Superior measurement and reporting of those results – Fully integrated services that make programs easy to administer – Superior medical protocols that produce bottom-line results for customers – Greater flexibility and more success in customizing programs for clients – A proprietary web-based claims intake function that helps claim professionals identify potential problems and develop action plans to deal with them – Claims Advantage program utilizing e-Triage • Opportunities: – Increase sales of unbundled medical and case management services – Brand globalization – Grow integrated disability management business – Cross-sell Broadspire and Crawford customers SM |
The Strength of Working Together 12 Legal Settlement Administration • The Garden City Group, Inc. (GCG) Products and Services – Administers class action settlements – Designs and implements legal notice programs – Manages chapter 11 bankruptcy claims administration – Executes complete document management services – Obtains expert consultation in complex legal business matters • GCG Growth Opportunities – Win larger market share of class action settlements – Expand bankruptcy administration business – Take advantage of emerging cross border opportunities – Examine and pursue appropriate acquisition opportunities SM |
13 “The Strength of Working Together” “The Strength of Working Together” is unifying the Company around consistent goals: Adaptive leadership team responding to changing economic conditions Increasing emphasis on sources of additional revenue growth – Selling Crawford services into the existing client base through key account management Driving technology forward – Creating operational efficiencies – Global economies of scale Being a target-driven organization – Setting medium term goals for 2009 to 2011 |
The Strength of Working Together 14 SM Medium Term Goals • Grow revenues organically by 5% CAGR through 2010 • Achieve a 10% EBIT margin by 2010 • Continued commitment to sound financial management and maximizing shareholder value • Target debt as a percentage of total capital at 25% to 30% |
Financial Review the STRENGTH of WORKING TOGETHER SM |
The Strength of Working Together 16 SM Year-to-Date September 30, 2008 Overview • Strong performance in a difficult operating environment Revenue growth of 7.6% Net Income up 86.7% • Strong revenue growth internationally and in U.S. Property & Casualty offset declines in other lines International growth (before currency effects) of 16.8% U.S. Property & Casualty growth exclusive of catastrophe impact • Solid earnings per share performance at $0.47 Double-digit operating margin in U.S. Property & Casualty and Legal Settlement Administration All four segments reported positive operating earnings and margin improvement SG&A costs as a percentage of revenues reduced by 1.4% • Planned for difficult U.S. economy Continued growth trends internationally Ongoing emphasis on growing existing client base through cross selling Focus on cost control and improving liquidity 700 720 740 760 780 800 YTD 2008 YTD 2007 Revenue $ in millions 0 5 10 15 20 25 YTD 2008 YTD 2007 Net Income $ in millions $785.7 $729.9 $23.9 $12.8 |
The Strength of Working Together 17 SM Year-to-Date September 30, 2008 Financials Nine Months Ended September 30 2008 2007 % Change Revenues: Revenues Before Reimbursements $785,693 $729,919 8% Reimbursements 69,578 54,874 27% Total Revenues 855,271 784,793 9% Costs and Expenses: Cost of Services Provided, Before Reimbursements 574,243 547,189 5% Reimbursements 69,578 54,874 27% Total Cost of Services 643,821 602,063 7% Selling, General, and Administrative Expenses 162,128 160,975 1% Corporate Interest Expense, Net 13,406 13,172 2% Total Costs and Expenses 819,355 776,210 6% Gain on Sale of Subrogation Business - 3,980 nm Gain on Sale of Former Corporate Headquarters - 4,844 nm Income Before Income Taxes 35,916 17,407 106% Provision for Income Taxes 11,994 4,595 161% Net Income $23,922 $12,812 87% Diluted Earnings per Share - After Gains on Asset Sales $0.47 $0.25 88% Diluted Earnings per Share - Before Gains on Asset Sales (1) $0.47 $0.14 236% (1) 2007 Diluted Earnings Per Share Before Gains on Asset Sales defined as: 2007 Diluted Earnings per Share After Gains on Asset Sales ($0.25) less 2007 Diluted Earnings Per Share attributed to gains on asset sales ($0.11). CRAWFORD & COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (In Thousands, Except Earnings Per Share and Percentages) |
The Strength of Working Together 18 SM 130000 140000 150000 160000 170000 YTD 2008 YTD 2007 Revenue 0 5 10 15 20 YTD 2008 YTD 2007 Operating Earnings $ in millions $ in millions $148.7 $156.9 $8.1 $17.8 Revenue improvement complemented by strong cost control Improved operating earnings and margin Catastrophe revenue up $5.1 million from 2007 to 2008 Claims up 1% Growth in tough environment Year-to-Date September 30, 2008 Financials Summary Results, U.S. Property & Casualty For the nine months ended September 30, 2008 and 2007 in Thousands Except Percentages Unaudited 2008 2007 % Change Revenues 156,935 $ 148,727 $ 5.5% Total Operating Expenses 139,113 140,640 -1.1% Operating Earnings 17,822 $ 8,087 $ 120.4% Operating Margin 11.4% 5.4% |
The Strength of Working Together 19 SM 200 220 240 260 280 300 320 340 YTD 2008 YTD 2007 Revenue 0 5 10 15 20 25 30 YTD 2008 YTD 2007 Operating Earnings $ in millions $ in millions $335.5 $269.3 $28.0 $14.8 Revenue increased 16.8% on a constant dollar basis Increased operating margin Strong operating earnings growth Significant new client wins in Canada Strength in Canada, UK and Asia Pacific Claims referred flat with 2007 period Year-to-Date September 30, 2008 Financials Summary Results, International Operations For the nine months ended September 30, 2008 and 2007 in Thousands Except Percentages Unaudited 2008 2007 % Change Revenues 335,505 $ 269,330 $ 24.6% Total Operating Expenses 307,478 254,520 20.8% Operating Earnings 28,027 $ 14,810 $ 89.2% Operating Margin 8.4% 5.5% |
The Strength of Working Together 20 SM 100 150 200 250 YTD 2008 YTD 2007 Revenue 0 1 2 3 4 5 6 YTD 2008 YTD 2007 Operating Earnings $ in millions $ in millions $236.3 $246.1 $5.4 Revenue decline Improved margin through strong cost management produces positive operating results Strong client retention Claims frequency down 7.4% in worker’s compensation Increased cross selling, new RFP activity, Expanding BPO operations $3.5 Year-to-Date September 30, 2008 Financials Summary Results, Broadspire For the nine months ended September 30, 2008 and 2007 in Thousands Except Percentages Unaudited 2008 2007 % Change Revenues 236,289 $ 246,092 $ -4.0% Total Operating Expenses 230,923 242,563 -4.8% Operating Earnings 5,366 $ 3,529 $ 52.1% Operating Margin 2.3% 1.4% |
The Strength of Working Together 21 SM 50 55 60 65 70 YTD 2008 YTD 2007 Revenue 4 5 6 7 8 9 YTD 2008 YTD 2007 Operating Earnings $ in millions $ in millions $57.0 $65.8 $7.8 $8.5 Revenue decline due to timing of business Operating margin increases minimized decline in operating earnings Backlog of $43.5 million Year-to-Date September 30, 2008 Financials Summary Results, Legal Settlement Administration For the nine months ended September 30, 2008 and 2007 in Thousands Except Percentages Unaudited 2008 2007 % Change Revenues 56,964 $ 65,770 $ -13.4% Total Operating Expenses 48,472 57,975 -16.4% Operating Earnings 8,492 $ 7,795 $ 8.9% Operating Margin 14.9% 11.9% |
The Strength of Working Together 22 SM September 30, 2008 Balance Sheet Crawford & Company Consolidated Balance Sheet Highlights As of September 30, 2008 and December 31, 2007 In thousands, except percentages Unaudited September 30, December 31, 2008 2007* Change Cash and cash equivalents $56,819 $50,855 $5,964 Accounts receivable, net 178,429 178,528 (99) Unbilled revenues 131,752 136,652 (4,900) Total receivables 310,181 315,180 (4,999) Deferred revenues, net 99,567 111,036 (11,469) Accrued pension liabilities 52,190 76,977 (24,787) Current portion of long-term debt, capital leases and short-term borrowings 30,199 31,864 (1,665) Long-term debt 181,790 183,449 (1,659) Total debt 211,989 215,313 (3,324) Total stockholders' equity 281,822 254,215 27,607 Net debt* 155,170 164,458 (9,288) Total debt / capitalization 43% 46% *Derived from the audited Consolidated Balance Sheet **Net debt is defined by the Company as total debt ($215,315 at December 31, 2007 and $211,989 at September 30, 2008), net of cash and cash equivalents. ($50,855 at December 31, 2007 and $56,819 at September 30, 2008). |
The Strength of Working Together 23 SM Crawford & Company Total Company Total Revenue Trend Currency: USD Crawford & Company Confidential *Results for any interim period are not necessarily indicative of results to be expected for the full year or any other future period. As of September 2008 ($000s) 2008 Actual * 2007 Actual 2006 Actual 2008/2007 2007/2006 2006/2005 1st Quarter 987,046 861,524 789,255 As of September 30 8% 19% 6% 2nd Quarter 1,009,775 909,458 795,856 FULL YEAR 19% 6% 3rd Quarter 1,030,917 958,174 808,194 4th Quarter 975,143 819,522 NOTES: Revenues are measured as total revenue before reimbursements for client expenses. 12-Month Moving Total Revenue Average Annual Rate of Change - 12 Month Moving Total 12-Month Moving Revenue 750,000 800,000 850,000 900,000 950,000 1,000,000 1,050,000 Actual |
The Strength of Working Together 24 SM Crawford & Company Total Company Operating Earnings Trend Currency: USD Crawford & Company Confidential *Results for any interim period are not necessarily indicative of results to be expected for the full year or any other future period. As of September 2008 ($000s) 2008 Actual* 2007 Actual 2006 Actual 2008/2007 2007/2006 2006/2005 1st Quarter 49,540 29,399 30,221 As of September 30 91% -5% 27% 2nd Quarter 57,963 32,617 32,233 FULL YEAR 16% 28% 3rd Quarter 64,616 33,845 35,667 4th Quarter 37,230 32,195 NOTES: Operating earnings (loss) is defined as earnings before special charges/credits, net corporate interest, income taxes, stock option expense, and amortization of acquisition related intangible assets. 12-Month Moving Operating Earnings Average Annual Rate of Change - 12 Month Moving Total 12-Month Moving Operating Earnings 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 Actual |
The Strength of Working Together 25 SM Crawford & Company Total Company Operating Earnings-to-Revenue Ratio Trend Currency: USD Crawford & Company Confidential *Results for any interim period are not necessarily indicative of results to be expected for the full year or any other future period. As of September 2008 ($000s) 2008 Actual 2007 Actual* 2006 Actual 2008/2007 2007/2006 2006/2005 1st Quarter 5.02% 3.42% 3.83% As of September 30 2.74% -0.88% 0.72% 2nd Quarter 5.74% 3.59% 4.05% FULL YEAR -0.11% 0.68% 3rd Quarter 6.27% 3.53% 4.41% 4th Quarter 3.82% 3.93% NOTES: Operating earnings (loss) is defined as earnings before special charges/credits, net corporate interest, income taxes, stock option expense, and amortization of acquisition related intangible assets. Revenues are measured as total revenue before reimbursements for client expenses. 12-Month Moving Total Ratio Average Annual Rate of Change - 12 Month Moving Total 12-Month Moving Ratio 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% Actual |
The Strength of Working Together 26 SM Crawford & Company Total Company Operating Cash Flow Currency: USD Crawford & Company Confidential *Results for any interim period are not necessarily indicative of results to be expected for the full year or any other future period. As of September 2008 ($000s) 2008 Actual* 2007 Actual 2006 Actual 2008/2007 2007/2006 2006/2005 1st Quarter 51,372 11,989 61,066 As of September 30 105% -58% 2nd Quarter 40,619 27,204 52,017 FULL YEAR -56% 29% 3rd Quarter 52,537 25,585 60,539 4th Quarter 23,284 52,717 NOTES: Operating cash flow is defined as consolidated cash flows from operations. 12-Month Moving Operating Cash Flow Average Annual Rate of Change - 12 Month Moving Total 12-Month Moving Operating Cash Flow 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Actual |