CRD.B (CRD.B) Q1 2014 Earnings Report, Transcript and Summary

Good afternoon. My name is Dietrie, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company First Quarter 2014 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. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Monday, May 5, 2014. Now I would like to introduce Allen W. Nelson, Crawford & Company's General Counsel and Chief Administrative Officer.

Thank you, Dietrie, and we apologize to our call participants for the slight delay in beginning our call. Some of the matters to be discussed in this 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 pension benefit plans, our 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 unanticipated events. 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-Q for the quarter ended March 31, 2014, filed with the Securities and Exchange Commission, particularly the information under the headings Business Risk Factors, Legal Proceedings and Management's Discussion and Analysis of Financial Condition 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 to the most directly comparable GAAP measures. I would now like to introduce Jeff Bowman, President and Chief Executive Officer of Crawford & Company. Jeff, you may begin our conference.

Thanks, Allen. 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 first quarter 2014 results. Bruce will then review the financials in more detail, which will be followed by a review of our business performance, comments on our strategic initiatives and conclude with our 2014 corporate focus and an update to our revised 2014 guidance. Our first quarter results were below expectations, despite the fact that they reflect profitable results in all segments and meaningful improvement in 2 business units. In particular, we were pleased to report a recovery in our Americas business based on higher case levels and stronger volume and margin results on our Broadspire operations. Operating earnings in the Americas segment more than doubled from the first quarter of 2013, as our Canadian operations showed improvement, and we saw a continued strong growth in our Contractor Connection operations. This more than offset the slowdown in catastrophe claims year-over-year due to the comparison with 2013 claims associated with Superstorm Sandy in the northeastern USA. An anticipated decline in revenue in our EMEA/AP segment results was due to finalized claims arising from the 2011 catastrophic flood losses in Thailand, which was accelerated by benign weather in CEMEA and Asia Pacific. While we are making great progress with our clients in Crawford specialty markets, we missed the initial revenue projections, which impacted the EMEA/AP segment margin. We are acting positively today on opportunities to reduce cost and improve revenue performance in this segment, which will improve results as the year progresses. We are also investing in manpower in our Crawford specialty markets lines to accelerate revenue growth, and our expectations are very positive. In Broadspire, we saw a steady and significant improvement in both revenue and operating profitability in fiscal year 2013 and into the first quarter of 2014. We are pleased with the progress made in this operation during the quarter. And in particular, the incremental margin and leverage we are seeing as claims volume ramp up. Broadspire's results were affected by the severe winter weather in the first quarter, which caused office closing and lost revenue, which we estimate to be approximately $1.2 million for the quarter. The improved strength in this business is encouraging, and we remain focused on delivering significant operating improvements in 2014. Results from our Legal Settlement Administration segment during the first quarter of 2014 were supported by continued activity in the Deepwater Horizon class action settlement of, albeit with volumes that declined at a faster level than anticipated. We also saw a faster rate of decline in a few other meaningful class action and bankruptcy matters we are administering. Weather did reduce revenue by approximately $700,000 during the quarter, but our focus is on balancing anticipated declines in revenue for the remainder of the year with a number of initiatives that should improve our margin as the year goes forward. That concludes my initial remarks on the first quarter. I will discuss the business unit operations after Bruce has reviewed the financials. Bruce, would you please review the company's overall performance for the first quarter?

Company-wide revenues before reimbursements in the 2014 first quarter were $275.3 million, down 4% from $286.3 million in the prior year's first quarter. In the prior year period, our revenues benefited from stronger results in our Legal Settlement Administration and EMEA/AP segments related to special projects, including the Gulf oil spill and flooding claims in Thailand, respectively. Our net income attributable to Crawford & Company totaled $6.7 million in the 2014 first quarter, down from $9.7 million in the 2013 period. First quarter 2014 diluted earnings per share were $0.12 for CRDA and $0.11 for CRDB compared to diluted earnings per share of $0.18 for CRDA and $0.17 for CRDB in the 2013 period. Included in other income from the 2013 first quarter was a $2.3 million gain from the sale of the rights to a customer contract in Latin America. There was a similar gain of $0.4 million in the 2014 first quarter under the terms of the sale agreement. This amount is included in the Americas segment operating earnings. Consolidated operating earnings, a non-GAAP financial measure, totaled $14.1 million for the 2014 first quarter, down from $18 million reported in the 2013 first quarter. The company's selling, general and administrative expenses, or SG&A, totaled $59.7 million or 21.7% of revenues in the 2014 first quarter, up 1% from $59 million or 20.6% of revenues in the prior year quarter. Revenues from the Americas segment totaled $87.9 million in the 2014 first quarter, up 4% from $84.2 million reported in last year's quarter. This increase was primarily due to the handling of claims from the severe winter weather in North America during the 2014 first quarter. Operating earnings in our Americas segment were $6.9 million in the 2014 first quarter or 8% of revenues. This is compared with operating earnings of $3.2 million or 4% of revenues in the prior year quarter. Revenues generated by our catastrophe adjusters in the U.S. totaled $6.3 million in the 2014 first quarter, down from $10.8 million in the 2013 quarter. The decrease in revenues was due to the impact of Superstorm Sandy-related catastrophe cases, which were largely completed in the 2013 period. EMEA/AP revenues decreased 8% in the 2014 first quarter to $80.3 million from $87.6 million in the 2013 period. Our revenue decline reflects the completion of claims related to the Thailand flooding in our Asia Pacific region during 2013 and declines in Australia and the U.K. EMEA/AP operating earnings decreased to $1.9 million during the current quarter, declining from last year's first quarter operating earnings of $6.8 million. The operating margin in this segment was 2% in the 2014 quarter, decreasing from 8% in the 2013 first quarter. Revenues from our Broadspire segment increased to $64.8 million in the 2014 first quarter, up 12% from $57.8 million in the prior year quarter. The improvement was primarily due to higher claims management and medical management revenues, which also improved operating earnings. Operating earnings in Broadspire totaled $2 million or 3% of revenues in the 2014 first quarter, reversing an operating loss of $1.8 million or negative 3% of revenues in the 2013 first quarter. Legal Settlement Administration revenues totaled $42.4 million in the 2014 first quarter, decreasing 25% from $56.7 million in the prior year quarter. This revenue decrease was largely related to our work on the Deepwater Horizon class action settlement and a few other large projects, which declined during the 2014 period. Operating earnings totaled $5 million in the 2014 first quarter or 12% of revenues, as compared to $12 million or 21% of revenues in the prior year period. Legal Settlement Administration's backlog of projects awarded totaled $101 million at March 31, 2014, as compared to $135 million at March 31, 2013. The company's cash and cash equivalent position at March 31, 2014, totaled $48.5 million as compared to $76 million at the 2013 year end. Our investment in unbilled and billed receivables has increased by $22.4 million during 2014, primarily as a result of an increase in receivables in most of the company's operations. Pension liabilities decreased by $5.1 million, reflecting cash contributions during the 2014 first quarter. Our total debt has increased in 2014 by $48.6 million, reflecting our usual heavy cash usage in the first part of the year to fund incentive compensation payments, retirement plan contributions and other costs traditionally incurred at the start of the year. Cash used in operations totaled $65.3 million for the 2014 first quarter compared to $41.4 million in the prior year period. The company's operating cash needs typically peak during the first half of the year and decline during the balance of the year. Free cash flow declined in the 2014 first quarter by $23.8 million from the 2013 period. For the 2014 first quarter, the company repurchased approximately 174,000 shares of CRDA under its share repurchase plan at an average cost of $7.99 per share. Since the inception of the May 2012 share repurchase plan, the company has repurchased over 1.3 million shares of CRDA at an average cost of $5.86 and 7,000 shares of CRDB at an average cost of $3.83. Also during the 2014 first quarter, the company paid a regular quarterly dividend of $0.05 on CRDA and $0.04 on CRDB. Back to you, Jeff.

Thanks, Bruce. Overall, Crawford has seen strong case growth over the past several quarters, both due to the continued success of Contractor Connection and strong growth in the number of high frequency, low severity claims we are handling. To some extent, these more frequent claims have offset the low level of catastrophe claims in the first quarter, but they typically have lower fees associated with them. At the same time, overall revenues have been steadily pressured over the past year as large projects like Thailand flooding and Deepwater Horizon have wound down. Our challenge, as results for the first quarter make abundantly clear, is to drive replacement revenue for these projects as they roll off, even if the transition to new business is not as smooth as we would like it. We are encouraged of pipeline opportunities that we see emerging over the remainder of the year, and I will touch on those in a moment. At the same time, our focus is on managing costs to anticipated run rates and in areas where these volumes will take a longer time to replace to move swiftly to manage margin performance as successfully as possible. So let me turn to the performance of each of our business units, starting with the Americas segment, which represented 32% of our overall total consolidated revenues for the 2014 first quarter. Overall performance in both revenue and operating earnings were supported by strength in our Canadian and Contractor Connection operations, as I mentioned earlier. We continue to emphasize with our clients that we have a unique cross-border capability within our Americas segment, which is a way we differentiate Crawford from our competitors and give carriers who have limited capacity, the ability to service their clients. Growth in revenue reflect gains in case volumes in both the U.S. and Canada despite the impact of Superstorm Sandy claims carried over from year-end 2012 into the first quarter of 2013. Severe winter weather in North America and expansion of the Contractor Connection network were a significant portion of that incremental volume in the 2014 period. Contractor Connection grew 22% in assignments and 73% in revenue over the first quarter of 2013, with both current and new insurer and consumer services plans being contracted. Canada also continues to benefit from this business line, which is a strong growth platform, an area of continued strategic focus. We have seen strong growth in cases received during the quarter, in part to the success of Contractor Connection and an increasing number of high frequency, low complexity claims. In the second quarter, we expect to benefit from activity tied to severe weather in the U.S. and Canada, and we are actively reducing costs in our U.S. property and casualty field offices as we redefine our service offerings. The EMEA/AP operations represent 29% of our consolidated revenues for the first quarter of 2014. We have discussed declining claims volume in Thailand, but we also saw declining volume in the U.K. and Australia due to benign weather for the quarter. The decrease in cases in the U.K. was also aggravated by a continued decline in the general property market due to a number of factors. The decline in operating earnings was also due to expenses in 2014 related to the continuing investment in the startup operations of our specialty market service line that commenced in the 2013 third quarter. We view Crawford specialty markets as an investment in high-margin claims, and we expect it to gain traction as the year progresses. Looking forward, we are encouraged by increased case volumes in CEMEA, and we also expect to realize additional revenues in the second quarter from winter storm activity. We continued to gain ground in the TPA revenue as well. However, until these revenue streams are realized, we will be reducing costs through staff reductions across the business segments to reflect current revenue levels and restore margin performance. This early in the year, we have been pleased with the improved execution of our sales and marketing plans in our Broadspire operation, which represented 24% of our consolidated revenue for the 2014 first quarter. Broadspire reported an increase in revenue and delivered a fourth consecutive quarter of positive operating earnings. We are seeing client gains and a very strong sales pipeline. Our retention rate for the quarter continued at an excellent rate. We continue to see overall case volumes increase through new client wins and a stronger workers' compensation environment. Opportunities continue to emerge in the area of medical management. We are gaining efficiencies from investment in technology that should continue to support profitability going forward. We also see growth in Broadspire as employers adjust to an improving employment market, reflecting the latest data putting the U.S. unemployment rate at 6.3%. We believe strongly that Broadspire's solid market position, integrated service model and quality of service offer the market a truly competitive product, and we expect both revenue growth and improved margins as we move through 2014. Legal Settlement Administration represented 15% of our 2014 quarter revenue. Following the first quarter results, Legal Settlement Administration is focused on improving both revenue replacement and operating margin performance. Volume declines should slow in the second and third quarter from first quarter rates. We expect to see margins recover in this segment as volumes stabilize. And as such, we expect to see stronger margin performance from GCG for the rest of the year. GCG is actively building its pipeline to maintain a stable top line and consistent margin performance. We continue to build our Mass Tort business and a number of new products in the bankruptcy and class action are coming onstream. Our backlog at the end of the first quarter was $101 million compared to $135 million at the close of the first quarter last year. That concludes my initial comments on our business segment. Let me now turn to the guidance and our 2014 focus. Based on our current projection, we are revising full year 2014 guidance as follows: consolidated revenues before reimbursement between $1.08 billion and $1.12 billion; consolidated operating earnings between $84 million and $98.5 million; consolidated cash provided by operating activities between $50 million and $60 million; net income attributable to shareholders of Crawford & Company on a GAAP basis between $46.5 million and $54 million or diluted earnings per share of $0.84 to $0.99 for CRDA and $0.80 to $0.95 for CRDB shares. Whilst our 2014 quarter was not as expected, our management efforts are currently focused on 2 areas: first, we will be working actively to deliver new and incremental revenue in all of our business segments. I think I've touched on some of these opportunities in my comments thus far, and we are encouraged by the opportunities we are seeing there. Second, we have in place cost management initiatives in EMEA/AP and U.S. property and casualty to ensure the overhead is balanced with revenue performance and margin gains are available. These initiatives also detail our intent to enhance our data management and analytical capabilities to further improve efficiency and flexibility of our claims management services to develop new lines of business and ultimately, to enhance our service to clients. With these actions, we expect to offer meaningful rewards to our shareholders as the year unfolds. 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] And your first question comes from the line of Mark Hughes from SunTrust.

Could you talk about your ability to sustain that momentum at the top line in Broadspire? What are you seeing in terms of pipeline, new business opportunities? Is there as much a dislocation going on among competitors that will allow you to keep up this nice top line activity?

Good question, Mark. We've just come back from the RIMS Conference in Denver, and I'm going to say my time at Crawford is the best RIMS I've ever had from our corporation's point of view. We have a lot of momentum in our sales and marketing campaigns going forward, which really is a result of the improved technology and the quality of the service we are providing. We're very, very optimistic about the balance of this year. We have the best pipeline that I've ever seen within the organization. We have a number of excellent prospects that were very near to concluding and we're very, very sort of optimistic about what's going on. What I can't obviously comment on is what's happening with our competitors. But from our perspective, we're seeing growth and we'll see growth both in the top line and in the bottom line for the Broadspire organization.

You talked about a number of cost control initiatives in the EMEA/AP in the U.S. How long until you see the results of those initiatives? Does that show up in Q2 or is that more second half?

I think, well, first of all, number one, we weren't surprised when the revenue falloff took place on obviously, Thailand, in that region. That's been something we've been talking about for a while. What we're seeing is the U.K. and Australia had benign winters. So we put in place very early on in the year, cost initiatives that would take out staff, and we should start to see those coming in, in the third and fourth quarter in those areas. The other area that obviously has affected the margin in that region is Crawford specialty markets. I mean, this is a high-margin business, this has -- we've recruited quite a number of individuals. And it might be worth just mentioning that Crawford specialty markets is the marine, aviation, offshore energy and forensic accounting divisions. And this has been specifically designed to support London market and then our local operations on the larger claims that come out of those markets. And we're very excited about this particular part of our business. And I just had a little bit of a cost drag as we build it up. But there are initiatives, they've already been acted on by the EMEA/AP management team to restore that balance.

In that latter case with the specialty markets, there just has not been as much claims activity as expected or as you'd hoped?

I think the -- in one or two of the areas the claims activity is down slightly. But I think as you build these teams, you're building expertise, which is first class within the individual business units. And that takes a little bit of time to get them in, get them running and then to get the revenue flowing through the operations. And we should start to see that in the third and fourth quarters of this year.

Could you talk about the outlook in Legal Settlement? I'm curious to get whatever language you can provide in terms of the pace of the slowdown with the Gulf spill business, and then what you see in the underlying legal settlement. Aside from that, how much of the decline in backlog was attributable to the non-Gulf operation?

Well, I mean, first of all on GCG, I mean, I think the first quarter is the stabilization of the operation. I mean, we've been warning about the Deepwater Horizon issues for some significant while, and I think the first quarter of this year was the realization of that change. I mean, from the GCG point of view, I mean, we feel very positive about the future there. I mean, there was a report out quite recently that Garden City Group had taken 7 of the top 12 security class action assignments last year. We've seen some increase in activity. We've got expectations that our second, third and fourth quarter will be an improvement on the first quarter. So those improvements come through the management and some of the new initiatives that we've been putting into GCG to replace that DWH revenue.

And then any additional language you can provide regarding the Deepwater Horizon outlook? Kind of the pace of deceleration, is it going to be similar to what we saw in Q1?

That's a very difficult question to answer. We feel that it's probably stabilized on all of the information we've got at the moment. But we're not in charge of the Settlement Administration. And therefore, we have to wait to see what they are going to actually do.

And then in the Broadspire, sequentially the margin was down a little bit, but the trend has been very positive here lately. Was that -- when you look at that sequential change, was that just bringing on new business or is there something there that was the nonrecurring and not a snap back in subsequent quarters?

Well, one thing we did get touched on a little bit, I don't like to use weather as an excuse, but we did lose about $1.2 million in the first quarter for the bad weather up in the Northeast, where not only our offices were shut down for a couple of days, but our staff also lost electricity, which caused some problems with our medical bill review side. We see the margin increasing for the balance of the year as we add on revenue at a rate that we've planned within the organization.

The other thing that can happen in the first quarter, Mark, is the level of payroll taxes tends to be higher in the first quarter than the remainder of the year, primarily around the federal and state unemployment. So you can see a little bit more cost pressure in the first quarter that won't continue through the rest of the year, just in a normal sense.

And then, Bruce, the sort of some of the receivables and the billings hurt cash flow in Q1. Is that going to snap back in Q2?

We think that it certainly snaps back during the course of the year, and that's reflected in our guidance. If you go to where our operating cash flows have trended historically, the first quarter is almost always a heavy cash outflow period because we make annual incentive compensation payment, annual defined contribution payments, big defined benefit pension plan contributions and a number of other annual cost outlays, be they software maintenance agreements or other things that tend to have payment due dates at the beginning of the year. And then we recover in the next 3 quarters. So we certainly anticipate to recover from the levels we're at now. And at the end of the year, we're guiding operating cash flow between $50 million and $60 million. So we expect to see improvement in AR, certainly, but then also improvement in other aspects of the working capital because those annual payments won't be made in the second, third, fourth quarter, so we'll build cash there.

Your next question comes from the line of Adam Klauber with William Blair.

A couple of different questions, some following up on by the prior. So as part of the legal business, can we expect the margin to start moving back up in the second quarter?

The expectations for that is yes. As we've guided before, we expect midteens, which is the pre-Deepwater Horizon margin to be the sort of standard margin within that part of the business.

Okay. And then you said a bit of this before but I just want to be clear. It sounds like you've been very successful winning 7 out of 10 big class actions. Did the revenue from those not start or didn't really start well in this quarter but will pick up throughout the rest of the year, is that correct?

That's the expectation. Some we have won already and there are a number that we are working on as a corporation. And sometimes, yes, they have a long gestation period before they get going. So you can win the assignment but then there's various factors that come into play before the revenue starts to accrue. And that would -- sometimes, we have no control over. But this is a vibrant business; it's run by excellent individuals. They understand their business, they're investing in new areas to get the corporation in and we've been doing that for some time as we've seen DWH running off. And it's a business that we have a lot of faith in.

[Operator Instructions] And you have a question from Joel Solomon [ph].

Just a quick question. I wasn't sure if I heard you guys well. You were cutting it a little bit on the Contractor Connection discussion. So you said that there was 22% growth in assignments. I've missed out on the growth in revenues...

73%.

It was 73%, okay. I guess my point of view on that business and maybe, you could discuss it a little bit is that is maybe a little bit more of an annuity stream of business as opposed to somewhat more volatile stream of earnings coming from onetime events like Thai flooding, which may last a couple of quarters but is kind of an annuity stream of earnings. Is that correct?

Yes, absolutely correct. I mean, we have 2 real drivers of revenue within Contractor Connection. One is the traditional business, which feeds off of our property and casualty insurers that we work with, both on the U.S. P&C side as well as on the Contractor Connection side. And that's driven by events happening during the year, as well as events coming through from the insurance carriers under their SOAs. The second area is the newer area that we've got, which is the affinity businesses, where we're taking on, without the insurance part of it, clients who effectively wish to find a contractor through an accredited network. And that is non-weather dependent, the second part. The first part has both an element of weather dependency and volatility, as well as just an old business from an insurance carrier. So it becomes an annuity on that basis. We were flattening out, but that goes to the old strategy that we've got in place where, today, approximately 50% of our business is property and casualty driven and the other 50% is a mixture of the business process outsourcing and consultancy side. And that's where the Contractor Connection comes into the BPO side of it. And we're very excited about the future of that business and obviously some of the other businesses that we've got. And that's how you drive that non-reliance on the event-driven business.

And your next question comes from Adam Klauber with William Blair.

What I was asking, there's been a lot of news about mortgage insurance settlements. Have you been able to participate in that business at all?

Yes, we have.

And are we seeing that on the revenue or is that more in the future?

That's more in the future.

Well, there were some in '13.

Yes, yes.

And there's some ongoing now, and then there's some cases in the future that are in our backlog. So all of the cases that are stemming out of the financial crisis is a market that we're active in, and we have a lot of opportunity in that we're diligently pursuing.

Okay, okay. And then as far as the Gulf, if I remember, it was a couple of months ago, there was a decision, I mean, a 1- or 2-court decisions that allowed court cases to continue. How does that impact your business?

Well, ultimately, I mean, we rely on the claims administration committee to give us the work orders to process the claims. And that is normally a 90-day assignment. So our transparency on this, because we're not decision-makers, is to provide the administration in the way that we are instructed by our principal. And that's -- if you like, there's the volatility we have in that part of the business, we sit back as a vendor to that facility.

Okay, okay. And then on Broadspire, how are sales of new medical management contracts going?

We're in good shape on this. Our overall sales budget was exceeded in the first quarter. Our sales team have done an excellent job on that. We're moving into the second quarter and we have every expectation that we will exceed budget both on the workers' comp side and the medical management side. We've just announced a couple of weeks ago, a new partnership with a company called Systema and they're giving us a better front end to deal with the self-fulfillment of claims linked into both the workers' comp and the medical management side.

Okay. And again, particularly on the medical management, if I understand, you've had definitely some wins there. Is that revenue beginning to ramp up, is there more of a ramp-up in those newer contracts?

The answer to that is, I think you're going to see that coming in through in the second and third quarters.

[Operator Instructions] And you have a question from Kevin Leary [ph].

Question on EMEA/AP. First off, it's helpful that the company moved the outsourced services expense to direct comp and benefits. I think it's easier for us to think about the actual fulfillment expense that way. But my question is with respect to the relationship between changes in revenue and direct comp and benefits. So if I look at EMEA/AP, revenue was down about 8% in the quarter and direct comp and benefits were down about 1%, which would kind of suggest that the costs there are more fixed in nature or that at least the company made the decision not to cut costs. So question is are those costs more fixed than perhaps, I had previously expected or was there a conscious decision to say, this was just one season in Australia and the U.K. and we just made the decision to sustain those fixed costs because it's a onetime blip?

Well, I mean, okay, it's a good question. Firstly, the costs in most of the EMEA/AP operation are fixed at this moment. And one of the things that we have to watch very carefully is how the weather, which is a predominant part of the EMEA/AP business, both in the GTS area, which is the higher value complex claims, which is where we have a lot of intellectual products, okay, and then the volume claims moves. And as that weather pattern moves, I mean, we're moving, there's always a lag behind, so it tends to be the movement. I mean, we have a reduction program in place at this moment in EMEA/AP based on really, what's happened in the first quarter. But that business is -- the majority of it is P&C business, and that creates the time lag in moving the mix of business. The other area we have to be very careful about as well is we are investing in very high-end individuals in the Crawford specialty markets. And again, that's in, as I said earlier, that's in the marine, aviation, offshore energy and forensic accounting business. And that is a business that has higher margins, it has less claims because they're more of a complex nature, but it is a very profitable area we are looking to expand significantly in. So the mix is, if it's weather driven, if you design your operation to have a certain number of people, releasing them is one, very expensive because a lot of the socialist roles in a number of countries, and that's where we're trying to change the model more from fixed to variable. So that becomes quite difficult in a number of countries but also is to have the right quality of individuals. If you do not have the quality of product, you'll lose a lot of business pretty quickly. And we're very focused on a quality product to our clients. So I'm not sure, does that really sort of lay the table a little bit for you there?

Yes, it is helpful, actually. And you mentioned mix. Can you just give us at a very high level, the mix between TPA or the international Broadspire business and P&C in that segment?

Well, that's not a figure we give out at the moment. EMEA/AP and Broadspire revenue are consolidated together, and that may change in the future.

And there are no further questions at this time. Mr. Bowman, you may go ahead with your closing remarks.

Thank you. Thank you, everyone, for your time. Thank you for your questions this afternoon. I apologize for the slight delay, technical issue. And I look forward to talking to you all in the near future. Thanks and have a great rest of the day and rest of the week.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6:00 p.m. today through 11:59 p.m. on June 5, 2014. The conference ID number for the replay is 34060431. The number to dial for the replay is 1 (855) 859-2056 or (404) 537-3406. Thank you. You may now disconnect.