Crawford Reports Q1 Numbers

Atlanta-based Crawford & Company, an independent provider of claims
management solutions to insurance companies and self-insured entities, announced its financial results for the first quarter ended March 31, 2005.

First quarter 2005 revenues before reimbursements totaled $184.3 million, up 8.5% over the $169.9 million reported in the 2004 first quarter. First quarter 2005 net income was $2.4 million, equaling net income for the 2004 first quarter. Net income per share was $0.05 per share for both the 2005 and 2004 first quarters.

U.S. revenues before reimbursements were $112.5 million in the first
quarter of 2005 compared with $109.3 million in the 2004 first quarter.
Revenues from the insurance company market were $54.0 million in the 2005 first quarter compared with $50.5 million in the 2004 period, reflecting a $3.9 million increase in revenues generated by the company’s catastrophe adjusters involved in finalizing claims resulting from the hurricanes which struck the U.S. during late 2004.

Revenues from self-insured clients were $39.3 million in the 2005 first quarter compared with $40.4 million in the 2004 quarter, due primarily to a reduction in claim referrals from the company’s existing clients, only partially offset by new business gains.

Class action services revenues, including administration and inspection services, were $19.2 million for the 2005 first quarter, compared with $18.5 million in the 2004 quarter. These revenues can fluctuate based on the timing and size of project awards.

First quarter 2005 international revenues grew 18.6%, to $71.8 million
from $60.5 million for the same period in 2004. This growth is partially due to foreign currency fluctuations. As compared to the 2004 first quarter, during the 2005 period the U.S. dollar weakened against the British Pound and the euro, resulting in a net exchange rate benefit in the quarter.

Excluding the benefit of exchange rate fluctuations, international revenues would have been $67.4 million in the 2005 first quarter, reflecting growth on a constant dollar basis of 11.4%. This growth reflects increased case referrals in the United Kingdom and European operations resulting from claims management agreements entered into during 2004, as well as hurricane-related revenues from Hurricanes Frances and Jeanne claims. International operating expenses increased by $10.1 million in U.S. dollars, a 17.4% increase, and by 10.0 % on a constant dollar basis.

Thomas Crawford, CEO of Crawford & Company, stated, “During the first quarter, we continued to see an increase in property claims referred to us due to the hurricanes that hit Florida and other southeastern states during late 2004. Property claim referrals from the U.S. insurance company market were up nearly 19% during the 2005 first quarter as compared to the 2004 period. However, this increase in property claims was partially offset by continued weakness in casualty and workers’ compensation claims referrals during the current quarter.

“We were disappointed by our U.S. operating margin of 1.6% in the quarter, down from 2.6% in last year’s first quarter. Despite the increase in catastrophe-related revenues during the quarter, we experienced downward pressure on our margins as many of these claims involved re-inspections and supplemental damage appraisals on previously handled claims, due to delays in damage repairs, and the associated fees only covered our direct costs of finalizing the claims.

“In addition, we have substantially increased the operating capacity in our class action services unit in order to administer the large backlog of projects that exists as of the end of the quarter. This record backlog, totaling $35.3 million, should provide strong growth in revenues and operating earnings for this unit during future quarters. Our U.S. margin was also impacted by higher legal expenses related to audits of workers’ compensation claims handled on behalf of clients in the State of California and our response to a subpoena received in December 2004 from the New York Attorney General’s office.

“Our international operating margin grew to 4.7% from 3.6% in the 2004 first quarter. Strong case referrals, primarily as a result of recent client wins in our United Kingdom and Europe operations and hurricane-related claims in the Caribbean, contributed to the margin improvement. We remain confident that the substantial new business awarded to us during 2004 will provide healthy international operating margins throughout 2005.”