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Crawford records Q3 loss with $11 million in restructuring and special charges


November 10, 2015   by Canadian Underwriter


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Claims management provider Crawford & Company announced Monday it recorded a net loss of $1.087 million during the three months ending Sept. 30, amid restructuring charges, while revenues before reimbursements in Canada dropped nearly 20%.

Worldwide, Atlanta-based Crawford reported revenue before reimbursements of $293.3 million in the latest quarter, essentially unchanged from $293.8 million in Q3 2014. All figures are in United States dollars.

Q3 revenues were flat for insurance claims provider Crawford and Company

The Q3 net loss of $1.087 million came when Crawford reported restructuring and special charges of $11.078 million in the third quarter. In Q3 2014, Crawford had reported net earnings of $10.2 million.

In Canada, for all service lines, Crawford reported revenue before reimbursements of $27 million in the latest quarter, down 19.6% from $33.6 million during the third quarter of 2014.

For the nine months ending Sept. 30, Crawford reported revenue before reimbursements of $85.2 million in Canada, down 13% from $98 million during the same period in 2014.

In Canada, Crawford provides claims management in catastrophe and accident benefits. It also operates a global technical services (GTS) unit, which specializes in complex claims including aviation, environmental, cyber, energy, marine and transportation. Crawford also manages a network of property repair and restoration contractors, known as Contractor Connection.

During the third quarter, charges included establishment of a global business services centre in Manila, Philippines, for $1.6 million. On top of that, Crawford recorded integration costs of $4.2 million related both to various activities outside North America. Those included restructuring – in Europe, the Middle East, Africa and Asia Pacific – and the acquisition of GAB Robins Holdings U.K. Ltd. Crawford completed that $73-million acquisition in December, 2014.

Also in Q3 2015, Crawford recorded special charges of $5.0 million for “certain legal and professional fees and employee separation costs.”

Charges for other restructuring activities, in the Americas segment, in the third quarter, were $319,000 in Q3 2015.

“As we aggressively reduce administrative and back office expenses, we expect to drive margin expansion across our entire company without loss of competitiveness or revenue generation ability,” stated Harsha Agadi, Crawford’s interim chief executive officer, in a release. “We believe that this will position Crawford for healthy revenue growth and profitability assuming no improvement to the current challenging market backdrop. We are just beginning to see the benefits from our initial cost reduction plans from earlier in the year as our Americas segment exceeded its operating margin target of 10% in the third quarter with a 13% margin.”

Agadi – who is also on Crawford’s board of directors – was appointed interim CEO last August, replacing Jeffrey Bowman. At the time, the firm stated a search for a permanent CEO is expected to take a few months.

Bowman had worked for Crawford for 24 years and was appointed CEO in January, 2008. Bowman had stated in August that “after nearly eight intense and challenging years” as president and CEO, he had “agreed with the Board to step down.”

Agadi is chairman of GHS Holdings LLC, an investing and restaurant consulting business. His previous roles include executive chairman of sandwich restaurant chain Quiznos LLC, CEO of Friendly’s Ice Cream LLC and CEO of Church’s Chicken.

For the Americas segment, Crawford reported revenues before reimbursements of $92.0 million in the third quarter of 2015, down from $92.2 million in the third quarter of 2014.

“The slight decrease, resulting from a decrease in the U.S. Claims Field Operations service line revenues due to a reduction of weather-related case volumes, was substantially offset by an increase in the U.S. Catastrophe Services service line revenues resulting from an outsourcing project for a major U.S. insurance carrier and an increase in U.S. Contractor Connection revenues,” Crawford stated in a release. “Changes in foreign exchange rates reduced our Americas revenues by approximately 6% for the three months ended September 30, 2015.”

Crawford reported total revenue was $310 million in Q3 2015, down 1.6% from $314.9 million in Q3 2014.

For the nine months ending Sept. 30, Crawford reported revenue before reimbursements of $885.5 million this year, up 3.3% from $857.4 million during the same period in 2014.

Total revenues for the first nine months were $941 million this year, up 3.3% from $911 million for the first nine months of 2014.

Crawford reported net income of $6.1 million in the first nine months of this year, down 77.7% from $27.3 million in the same period of 2014.