Crawford & Co. Unveils Q2 Report

Atlanta-based Crawford & Co., an independent provider of claims
management solutions to insurance companies and self-insured entities, announced its financial results for the second quarter ended June 30, 2004.

Second quarter 2004 revenues before reimbursements totaled $172.0 million compared with $176.3 million in the 2003 second quarter. Second quarter 2004 net income was $5.5 million compared to $6.1 million for the 2003 second quarter. Second quarter 2004 net income per share was $0.11 per share compared to $0.12 in the prior-year quarter.

During the 2004 second quarter, the company settled a tax credit refund claim with the Internal Revenue Service which increased net income by $2.8 million, or $0.06 per share. Operating earnings (earnings before net corporate interest and taxes) in the 2004 second quarter totaled $5.7 million compared with $10.7 million in the prior year quarter.

U.S. revenues before reimbursements were $109.6 million in the second quarter of 2004 compared with $121.9 million in the 2003 second quarter. Revenues from the insurance company market were $48.4 million in the 2004 second quarter compared with $62.2 million in the 2003 period, reflecting a continued softening in the company’s U.S. insurance company referrals for high-frequency, low-severity claims in the current quarter.

Revenues from self-insured clients were $40.4 million in the 2004 second quarter compared with $42.1 million in the 2003 quarter, primarily reflecting declines in U.S. employment levels and associated injury rates which have contributed to a reduction in workers’ compensation claims. Recently reported gains in U.S.
employment levels should benefit future revenues from self-insured clients.

Class action services revenues were $20.9 million for the 2004 second quarter, compared with $17.6 million in the comparable year-ago quarter. This increase is primarily the result of work commenced on several new projects awarded during 2004.

Second quarter 2004 international revenues grew to $62.4 million from
$54.5 million for the same period in 2003. This growth is largely due to foreign currency fluctuations. During the 2004 second quarter, 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 $56.2 million in the 2004 second quarter, reflecting growth in revenues on a constant dollar basis of
3.4%.

In addition, during the 2004 second quarter, international operating
expenses increased by $6.6 million in U.S. dollars, a 12.2% increase, and by 1.4% on a constant dollar basis.

Marshall Long, CEO of Crawford & Co., stated, “Our second quarter results reflect the ongoing industry-wide contraction in U.S. claims frequency, as we experienced volume declines in both the insurance company and self-insured markets. These declines more than offset the growth we enjoyed in our class action services unit during the
current quarter.

“While we continue to endure challenging industry circumstances, we were pleased that we successfully reduced our U.S. operating expenses, excluding severance costs, by 6.4% in the current quarter as compared to the prior year period in response to the decline in claims volume and improved our U.S. operating margin to 3.5% as compared to 2.6% for the 2004 first quarter.

“Excluding severance costs of $1.2 million recognized in the 2004 second quarter, our U.S. operating margin would have been 4.6%. The second quarter 2004 operating margin in our international operations of 3.1% declined as compared to the 2004 first quarter, but has grown significantly over the operating margin of 1.0% in the 2003 second quarter. Our expectations for the insurance industry in 2004 remain cautious, but we believe we are well positioned to grow our margins, both in the U.S. and internationally, when claim frequencies begin to grow.

“We are pleased with the growth in our class action services business this year. We benefited from the award of several new
contracts during the second quarter and have a strong backlog of cases, which will contribute to revenues during the balance of the year. In addition, we have signed a letter of intent to sell an undeveloped parcel of real estate for a sales price of $10.4 million in cash. This sale is subject to certain contingencies but we expect to close this transaction in the third quarter, recognizing a gain of approximately $9.4 million.”