Q3 2022 Crawford & Co Earnings Call
[music].
Yes.
Good morning, My name is colon and I'll be your conference facilitator today at this time I would like to welcome everyone to the Crawford <unk> Company third quarter 2022 earnings release conference call in conjunction with this call a supplementary.
Financial presentation is available on our website at Www dot.
Rocco Dot com under the Investor Relations section all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period and instructions will follow at that time should anyone need assistance at any time. During this call. Please press Star then zero and an operator goes <unk>.
As a reminder, ladies and gentlemen, this call is being recorded today Wednesday November nine 2022, I would now like to introduce can be Stevenson Crawford <unk> Company's General Counsel. Please go ahead.
Thank you.
Some of the matters discussed in this conference call and the supplementary financial presentation May include forward looking statements that involve risks and uncertainties.
These statements may relate to among other things the impact of COVID-19 are expected future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses expectations regarding our anticipated contributions to our underfunded defined benefit pension plans collectability of our billed and Unbilled accounts receivable.
Financial results from our recently completed acquisitions, our continued compliance with financial and other covenants contained in our financing agreements, our long term capital resources and liquidity requirements and our ability to pay dividends in the future.
Company's actual results achieved in future quarters could differ materially from the results that may have implied in 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 <unk>.
Can you reminded that operating results from 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 companys financial performance. Please refer to the company's Form 10-Q for the quarter ended September 32022 filed with the Securities and Exchange Commission, particularly the information under the headings risk factors and management's discussion and analysis of financial condition and results of operations.
As well as subsequent company filings with the SEC.
Presentation also includes certain non-GAAP financial measures as defined under SEC rules as required a reconcile its affiliation is provided for those measures to the most directly comparable GAAP measures I would now like to introduce Mr wrote Verma, Chief Executive Officer of Crawford <unk> Company.
Again the conference. Thank you Jamie good morning, and welcome to our third quarter 2022 earnings call. Joining me today is Bruce Swain, Our Chief Financial Officer, Joseph Blanco, Our President and Terry Stevens and our General counsel.
After our prepared remarks, we will open the call for your questions.
Before we begin I want to extend our thoughts to all those who have been impacted by hurricane Ian but.
Particularly those in Florida are still struggling as a result of this terrible devastation and actually facing a new risk from hurricane Nicole.
As our response continues we are tremendously proud of the entire corporate team, especially our adjusters on the ground who are working tirelessly to help restore communities and businesses that have been impacted by this terrible devastation.
Our third quarter results reflect continuing topline momentum driven by the strategic investments we have made across the business.
Revenues increased 2% or 6% on a constant currency basis compared to a strong prior year period, which included pronounced weather events in the U S.
Looking at our North America business, our efforts to increase penetration with the top five carrier clients continues to bear fruit.
This ongoing success is a testament to Crawford as technology and people focused strategy as our clients increasingly depend on crawford's deep bench of expertise and commitment to quality when assessing their outsourcing needs.
This has resulted and strengthen relationships and higher claims allocations for us.
Platform solutions experienced strong results delivering yet another quarter of double digit revenue growth. This was driven primarily by strength from our networks business and contributions from our practice acquisition.
Within North America loss, adjusting we are gaining traction in the marketplace as we bring more experts on board as well as expand our geographic footprint within our volume business across the U S.
This differentiated offering enables crawford to address the increasingly complex nature of claims.
As a result, we are becoming an even more valuable player to our clients.
Broad spar also continues to experience a steady recovery towards pre pandemic levels aided by increased economic activity and new client wins.
In our international segment, we have experienced ongoing margin pressure, which I will discuss more in greater detail.
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Overall, the investments we have made and continue to make are delivering results across the business.
We remain confident that we have the right strategy in place to support increased market share gains and improved profitability.
While top line growth has maintained its strong momentum there are clearly areas across our business that we know are ripe for improvement.
We have experienced attractive margins and continue to make growth investments across our north American businesses.
These investments include adding experts closing geographic market gaps investing in quality.
As these businesses scale, we expect to see further margin and profitability expansion.
Additionally, we are seeing improved efficiencies as our new hires ramp.
While the lack of U S. A U S based weather activity during majority of the third quarter pressured margins in our North American business, we anticipate improvements in the fourth quarter driven by activities related to hurricane Ian.
Our international segment continues to experience margin constraint constraints, particularly in the UK and Europe .
We are taking deliberate actions to address the challenges across these businesses.
These actions include adjusting prices and addressing pockets of low productivity our underperformance we've.
We've also made changes across the organization to optimize our cost structure in alignment with current market dynamics.
While it is early days, we are already seeing the benefit of these efforts in Latin America.
In addition to the above measures in the UK, we're addressing legacy client contract issues.
Finally, we are enhancing our product offering and improving quality and service with investments in Digitization.
Overall, we remain optimistic that our positive momentum in North America combined with expected improvement in our international business in 2023 will drive further growth and improve our overall margin profile.
As we look at capital allocation given the volatility in the market as well as geopolitical tensions we are focused on strengthening our financial position.
We were able to leverage our liquidity to fund working capital needs related to the storm activities in Australia as well as the U S.
We expect improved cash generation moving forward, which we will use to pay down debt and get our leverage ratio back closer to our target of two times EBITDA.
This gives us financial flexibility, which should which should position us well to weather any macroeconomic issues next year.
Overall Crawford is in a solid financial position and we feel confident in our ability to continue executing our growth strategy and drive margin improvement.
Lastly, I would like to highlight our recent announcement of the election of Cameron Brady to <unk> Board of directors.
He will serve on our audit committee.
Cameron brings over 25 years of global Finance operations and risk management experience to the board and we believe his fresh perspective will help to further support crawford's envisioned future.
With that I'd like to hand, the call over to Joseph who will discuss our business and results for third quarter. Thanks, Ross beginning with North America loss adjusting revenue growth in the third quarter was primarily driven by continued market recovery in Canada. The inclusion of the adjuster as well as increased activity related to hurricane Fiona that impacted <unk>.
Stern, Canada in September .
In the United States benign weather for most of the quarter resulted in lower claims volumes compared to a strong third quarter in 2021, which included impacts from Hurricane Ida.
We continue to make targeted investments in expertise and have added over 80 specialist loss adjusters, so far in 2022.
We are well ahead of our previously outlined three year goal of adding 200 specialist loss adjusters.
While this investment has created short term margin pressures the results are encouraging.
Our new hires enable us to provide improved service to our customers and round out expertise gaps, earning a greater number of loss allocations, even when weather activity is low.
As claims continue to increase in complexity Crawford's in a position of strength, resulting from our people focused strategy and the investments we've made to build our bench of experts for example, with.
We recently utilized the former NASA engineer to review of complex satellite claim.
This highlights the expanding breadth of our expertise and exemplifies how crawford is increasingly becoming the premier long term destination for talent.
We are growing at a steady pace ahead of the industry, resulting in increased market share, which we attribute largely to the hiring and onboarding of these experts.
In our international operations, we saw further recovery in our businesses in Latin America, along with weather driven revenue growth in Australia in Asia throughout the quarter.
This partially offset ongoing weakness related to certain business lines in the UK and Europe .
In Australia unprecedented flooding in Queensland, and New South Wales continued to drive increased claims activity.
As Rob discussed earlier, we have pockets of weakness in international operations, where we are taking corrective actions, which we anticipate will lead to improvement next year.
We are already experiencing recovery in Latin America, resulting from our cost efficiency initiatives, which drove the improved flow through from revenue increases across Chile, Brazil and Peru.
Margins in Asia are improving better than expected due to increased revenue related to a major flooding events across Malaysia, the Philippines as well as other non flood related growth.
We are pleased with this progress however margins remain below desired levels and this will remain an area of focus.
During the third quarter, our <unk> business continued to make a solid recovery towards pre pandemic levels of claims volumes.
Revenue growth during the quarter was driven by increased economic activity with favorable results across all claims services and medical management, resulting from new and existing client growth along with healthy pricing.
Platform solutions delivered another quarter of double digit revenue growth bolstered by increased activity in our networks business and the inclusion of practice.
Margins declined slightly in the quarter as we've continued to see some softness in contractor connection assignment volumes.
This weakness was related to benign claims environment in the third quarter, along with tougher year over year comparability due to hurricane Ida.
We remain confident in the medium term growth of this business. In fact, we have on boarded a new top five carrier and expect to see contributions in 2023.
Weakness in contractor connection was offset by positive contributions for our practice consulting business Cat and we go look throughout the quarter.
During the storm season, we deployed a record number of Adjustors, resulting from strengthened partnerships with two of the top five P&C carriers.
This stems from the solid execution, we have demonstrated over the past two years.
We are making solid progress executing on our long term strategy.
Our focus on quality expertise and digital is helping us process claims more swiftly and deliver outstanding customer service to our clients and their policyholders.
We are proud of the way in which technology played a pivotal role in our efforts to assist customers during the recent storm season.
As Rod mentioned, our response to Hurricane Ian beginning late in the third quarter has been impressive.
Our recent technology investments enabled us to reduce adjuster deployment time by approximately 85%.
This rapid deployment not only allows helped to arrive to policyholders faster. It also gives us first mover advantage in the market and allows us to capture market share.
These are just examples of the progress, we're making on our strategy execution and serve as a testament to our relentless pursuit for service excellence that is being supported by our key pillars.
Turning now to new business momentum as we entered the fourth quarter, we continued to deepen our relationships with our existing client base. In addition to attracting new business.
During the third quarter, we won approximately $25 million worth of new and enhanced business a strong sign that our focus on our re imagine claims ecosystem is continuing to resonate with our customers.
Our NPS remains healthy at 47, and we are actively looking for opportunities to improve our score.
Additionally, we retained 95, 5% of our broad spire business year to date, and we are increasing market share with key clients.
Overall, we remain committed to delivering service excellence as we closeout 2022.
We believe our commitment to environmental social and governance principles underpins our ability to execute on our long term strategy and fulfill our purpose to restored lives businesses and communities.
Our commitments to diversity equity and inclusion sustainable business practices and ethical behavior are reflected in our purpose and vision future and values.
Throughout the quarter, we made consistent progress on our <unk> and human capital initiatives.
To monitor employee satisfaction and engagement Crawford conducts employee pulse surveys twice a year.
More than 75% of our employees completed the most recent survey and the feedback continues to be positive.
The survey items also revealed the state of current employee sentiment around dei in which 88% of respondents indicated that they do not experience bias at work due to their personal identity.
This favorable response is 22% higher than the professional services industry norm.
Additionally, 82% of respondents endorsed senior leadership support of <unk> initiatives.
The outcome from the survey underscores the efficacy of our culture and people programs and creating an inclusive workplace. We will continue to focus on areas for improvement in the overall employee experience.
With that let me turn the call over to Bruce for a deeper look at our financial performance.
Thank you Joseph Companywide revenues before reimbursements in the 2022 third quarter were $294 9 million, 2% over the $288 5 million in the prior year's third quarter and our highest revenue since the 2017 fourth quarter.
Presented on a constant dollar basis to the prior year revenues before reimbursements totaled $306 million.
GAAP diluted EPS in the 2022 third quarter was a loss of <unk> 31 per share for both CRD, a and CRD b.
Compared to earnings of <unk> 20 for CRD, a and 21 for CRD B in the 2021 period.
On a non-GAAP basis third quarter 2022 diluted EPS was <unk> 16 for both CRD, a and CRD b compared with 24 cents for CRD, a and <unk> 25 cents for CRD B in the 2021 period.
The company's non-GAAP operating earnings totaled $14 2 million in the 2022 third quarter.
Four 8% of revenues decreasing from $20 8 million or seven 2% of revenues in the prior year period.
Consolidated adjusted EBITDA was $21 9 million in the 2022 third quarter were seven 4% of revenues compared to $29 5 million or 10, 2% of revenues in the 2021 quarter.
I will now review the third quarter performance of each of our segments.
North America loss, adjusting revenues totaled $66 8 million, including $1 9 million from the <unk> acquisition, increasing three 9% from $64 3 million reported in last year's quarter.
Foreign exchange rate impacts reduced revenues by 900000.
The segment reported operating earnings of $3 7 million in the 2022 third quarter were five 5% of revenues decreasing from $4 4 million or six 8% of revenues in the prior year quarter margins were pressured due to the ongoing investments in talent recruitment benign weather activity and.
The absence of <unk> benefits in 2022.
International operations revenues totaled $86 1 million in the 2022 third quarter, including $1 4 million from the boss Boon and van Dijk acquisitions, decreasing six 3% from $91 9 million reported in last year's quarter.
Foreign exchange rate impacts reduced revenues by $10 1 million in the 2022 quarter on a constant currency basis revenues were $96 2 million representing growth of four 7% over the 2021 quarter.
The segment reported an operating loss of $3 8 million in the 2022 third quarter compared to operating earnings of $1 9 million reported in last year's quarter.
The operating margin was negative four 5% in the 2022 quarter compared to two 1% in the 2021 quarter.
Weakness in certain U K and Europe business lines drove the earnings decline.
<unk> revenues were $78 4 million in the 2022 third quarter, increasing three 4% from $75 8 million in the 2021 period.
Brought by our operating earnings were $6 2 million during the 2022 third quarter decreasing from last year's third quarter operating earnings of $6 9 million.
The operating margin in this segment was seven 9% in the 2022 quarter compared to nine 2% in the 2021 period.
The decline in operating margin was due to higher compensation costs.
Our medical management business recovery continues to lag. However, we are encouraged by our client pipeline and recent wins.
Revenues for platform solutions were $63 7 million in the 2022 third quarter of 12, 7% from $56 5 million in the prior year quarter revenues from the practice consulting acquisition totaled $5 $4 million in the current quarter.
Operating earnings in platform solutions totaled $10 1 million or 15, 8% of revenues in the 2022 third quarter, increasing over operating earnings of $9 7 million or 17, 2% of revenues in the 2021 quarter.
The mix shift away from our higher margin contractor connection business towards our networks business, along with our continued investment in technology reduced margins in the quarter.
Unallocated corporate costs were $1 9 million in the 2022 third quarter compared to cost of $2 2 million in the same period of 2021.
This decrease was primarily due to a decrease in incentive compensation, partially offset by a reduction in <unk> benefits and an increase in self insurance costs.
During the 2022 third quarter the company recognized no pretax benefits from Qs as compared to $1 8 million in the 2021 quarter.
The company does not expect to recognize any further benefits from Qs going forward.
In the 2022 quarter the company recognized a $36 8 million noncash goodwill impairment.
This charge was partially offset by $15 9 million reduction in income tax expense for a net impact of $20 9 million or <unk> 43 per share.
Due to the non discreet income tax treatment of the goodwill impairment the income tax benefit of the impairment will normalize during the fourth quarter, resulting in a lower anticipated full year tax benefit of $3 4 million.
We recognized a pre tax contingent earn out expense totaling 887000 in the 2022 third quarter. This was a result of favorable changes to projections of certain acquired entities.
We did not repurchase any shares in the 2022 third quarter for the first nine months of 2022, the company repurchased approximately two 7 million shares of CRD, a and 963000 shares of CRD B at an average cost per share of $7 41 seven.
$7 32, respectively.
Total cost of share repurchases during 2022 was $26 7 million.
The company's cash and cash equivalent position at September 32022 totaled $33 1 million compared to $53 2 million as of December 31, 2021, we've.
We've made no discretionary contributions to our U S defined benefit pension plan for the third quarter of 2022.
Although the company has made these contributions for the last few years in the U S. We don't intend to make contributions in 2022.
The company's total debt outstanding as of September 32022 totaled $257 4 million compared with $175 million as of December 31, 2021, reflecting borrowings to fund negative free cash flow acquisitions dividends and share repurchases.
Net debt stood at $224 3 million as of September 32022, while our leverage ratio under our credit agreement closed at 284 times EBITDA.
<unk>, our pension liability was down to $10 2 million at the end of the third quarter, reflecting our funded ratio of 92, 8%.
As Robert mentioned previously we accessed our liquidity to fund working capital needs related to recent storm activities is work in progress and accounts receivable wind down we will use the cash flow to pay down debt in an effort to get our leverage ratio back closer to two times EBITDA.
Cash used by operations totaled $16 2 million during the first nine months of 2022, compared with 20 million provided in the 2021 period the.
The decrease in cash provided by operating activities was primarily resulting from $19 9 million related to the timing of payroll and related taxes and increased incentive compensation payments of $10 4 million in 2022.
We also saw an increase in the use of billed and Unbilled receivables of $6 5 million.
And $6 $1 million of prior year cash benefits received related to Qs that were not present in 2022. This was partially offset by a $9 million reduction in pension contributions.
Free cash flow was negative $41 1 million for the first nine months of 2022 compared with the prior year's negative 580000.
With that I would like to turn the call back to <unk> for concluding remarks.
Thank you Bruce as we enter fourth quarter, we continue to face an uncertain macroeconomic environment and inflationary pressures.
On the less we remain highly focused on accelerating our market leading position within the industry through innovation and best in class solutions, while continuing our pursuit of our purpose.
Crawford continued emphasis on our people purpose and strategy as well as our commitment to service excellence for our clients continue to be at the forefront of our priorities as we close out 2022.
Overall, we remain confident in our ability to capitalize on the many opportunities ahead of us as well as deliver superior results for our shareholders over the long term.
Thank you for your time today, Colin Please open the call for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question. Please press star followed by one on your telephone keypad, if you'd like to withdraw. Your question. Please press star followed by two if you're using a speaker phone. Please lift the handset before pressing any keys one.
For your first question.
Okay and your first question comes from Mark Hughes from Truth Mark. Please go ahead.
Yes, Thank you and good morning.
With interest rates being up in your funded ratio being up as well.
Are you able to do some sort of more comprehensive solution on the pension can you do a pension risk transfer or are there some limitation.
Hey, Mark this is Bruce that's actually something that we're evaluating as as a company.
We have over the past several years than doing kind of small annuity buyouts under the plan.
In fact I've.
<unk> done one for this year as well so we're kind of systematically taking the tail risk.
Down from the plan, but certainly with.
Yeah.
The funding level, where it is.
I think that that will have some opportunities in the future to evaluate a more permanent solution to the U S defined benefit plan.
Do you think contractor connection does it normally see an uptick in activity related to storms or is that not part of their focus.
Hi, Mark this is Ralph how are you.
I'm good thank you.
So contractor connection usually benefits more from what we call a severe convective storms than they do from just purely hurricane.
And the reason is that when you are having severe connect convective storms youre typically getting property damage, which is above the deductible and as directed by the insurer for repair.
And what we saw as an example that <unk>. So far is that a lot of damage is below the deductible.
So that is the reason why we haven't seen as much.
Contract to connection activity this year, because the overall frequency because of weather has been lower other than the impact of <unk> in the last month month, and a half or so.
Yes.
<unk> grown inspire you mentioned, you're returning to pre pandemic levels.
Further do you think you have to go to get back to.
Those kind of levels.
So I think if you look at purely on our claims volume and the revenue that we generate from the claim side, we're actually not just there but slightly ahead of where we were pre pandemic, mainly because of what we've done with with new client wins as well as volume growing.
Our challenge continues to be on the medical management side, which had dropped during the time of Covid and has still not recovered.
It remains a conundrum for us that.
What you should see.
In a coordinated manner with medical management to the claims volume that you have were not seeing that come back now there are various hypothesis that exists right. One hypothesis is that you still have individuals not going in for elective procedures because of fear of Covid you still have the hospitals being constrained from a staffing perspective, which is <unk>.
Pocketing elective procedures so.
But we do think that there isn't a structural change in the marketplace, where this business has gone away. So we still believe that it's a timing issue and this this part of the business should continue to come back over the coming months and quarters.
And then you mentioned the U K being a little bit more of a challenge.
What do you think the timing is on that and how much of the loss in the quarter is really the UK operation.
So <unk>.
You gave you have a couple of things going on we've had one or two problematic contracts that we've been working through we believe that we have successfully worked those contracts through so the bulk of that should be addressed. However, we do have a little bit of a tail risk that flows with it because we still have claims that we had taken and as part of the of those original contracts.
We still have to work through but we're not taking any more new claims as part of those contracts. So we believe that we should see a continuously improving position in UK.
As we as we head into the head into the new year.
And then you mentioned the increased penetration with a top five carrier relationship.
Can you expand on that a little bit of that.
More geography.
Driving that.
Yes, it's more wallet share.
We continued to perform for these top five carriers and we continue to deepen our relationships with these top five carriers. It gives us the ability to not just increase.
<unk> in businesses that we have right now, but also demonstrate our capability across other businesses, where we could be helping these carriers out and thats what were seeing right something which started off as an engagement <unk>.
And also adjusting maybe expanding to include contractor connection maybe expanding to include contents may be expanding to include subrogation. So we're just seeing an expansion of our relationship.
Our relationship across these across these customers and that's what we're attributing.
The growth with this customer base to be.
Appreciate your help thank you.
Thank you Mark.
Your next question comes from Kevin Steinke from Barrington Research Kevin. Please go ahead.
Hey, good morning, everyone.
Hi.
I wanted to start out by asking about the.
Four.
Profitability improvement initiatives that you've discussed.
The second quarter call, just maybe if you could update us on.
Progress with.
Each of those initiatives.
Sure. Kevin This is Robert how are you.
I'm great how are you.
Good Kevin.
The four things that we had talked about let me just go back and re frame. We had said that there are really three sort of issues that are driving right. One is that we're making deliberate investments in certain places where the margin is lower because we're making deliberate investments. So examples of those would be our north America loss adjusting business, where we are making investments both.
To bring on new experts as well as geographically expand our footprint within the U S.
Then have businesses, where we have we believe that there is a temporary pullback on profitability, mainly because of what's happening with weather and those business. Examples of those would be things like contractor connection.
And then we have businesses, where we need to do some active work.
International too.
To improve margins and get them back to where what we would call them as our target margins.
From that standpoint.
Had issues with some problematic contracts we've addressed that.
Already as I mentioned earlier to Mark we wanted to make sure that our pricing was in line with the quality and the type of service that we're providing we're actively addressing that so that's a work in progress.
We had also said that we were going to change our staffing levels to more clearly reflect the market dynamics that we that we see.
You have done a number of those changes as you can imagine.
Given the labor laws that we operate under particularly in the international market, sometimes those can take longer than than what you and I would like them to take.
So we believe that we are well on that journey places, where we've had already.
Already made impact are basically like Latin America, where we've made the changes that we wanted to make and we're seeing signs of recovery from a profitability standpoint already Australia has always been in a strong position for us and continues to remain extremely strong.
So I really Asia is something that is.
That still requires more work from a profitability standpoint, but is performing better than what we had originally expected it to perform so it's really the timing. It has mainly been on the U K and European businesses.
Okay great.
Helpful overview.
And when we kind of think about.
The timing of when we should start to see.
Some of the.
Benefits of those various initiatives.
Flowing through.
More materially.
Do you think.
Yes, yes, yes.
Perspective on timing, there I guess I'll just leave it open ended.
No.
I absolutely understand the question I would say that we should be able to signal you.
At the end of Q1, where things are heading in a more material impact flowing through the income statement you should see in Q2, that's our target.
Yes.
Okay great.
So.
You didn't.
You mentioned the potential for a recession or the more uncertain.
Economic environment currently.
Are you seeing anything in your.
Any of your businesses that would.
Kate.
They are being impacted by an economic slowdown or.
What's your overall view of.
The economy.
Potential impact going forward.
So Kevin if you look at our historical performance we typically.
If you think about our business and break it down into property side of the business and casualty side of the business. The property side of the business typically does not get impacted by a recession as you can imagine hail falling our wind blowing or rain coming down doesn't really look at what the economic environment and so I think we expect that that part of our business should continue to perform.
Just just the way overall property market and the weather performs I think 50% of our business is I would say is casualty based which does have a strong tie into economic activity. So far we have not seen any indicators in any of our markets related to a slowdown in economic activity. If anything we continue to see higher levels of.
Gnomic activity as a result of that we're seeing increase in claims volumes as we discussed and broad spire, which is which is the which is the strongest indicator of economic activity activity for us in our portfolio. So we don't see any of that yet, but theres clearly a lot of discussion a lot of talk about it.
Sure. If you saw the Wall Street Journal today, there were there were some large tech companies that were starting to do some retrenchment. So we're watching it carefully we want to make sure that our balance sheet is strong our financial health is strong our liquidity is strong as we enter into into 2023 and Thats. The reason, we you heard what the work that Bruce and team have been.
Doing and so strengthening their balance sheet.
Okay.
That's helpful.
Just wanted to circle back on.
One of the initiatives.
Mentioned there have discussed.
Yes.
Pricing and.
Wondering.
How are you feeling about traction.
And your ability to gain some pricing as youre kind of working on that initiative.
Yeah, we believe that we enjoy a very strong relationship with our with our partners whether on the carrier side on the corporate side or other risk bearing entities side and as a result of that we believe that when we have true transparent.
<unk>.
Relationship held conversations pockets, where we do believe that we have pricing issues. We can have that conversation pretty robustly. So we believe that pockets of our business or specific client situations, where we've got issues in the in the price adequacy of our business. We are addressing those and we're getting good support and traction from.
Our clients have.
Yet to hear or see that we've lost a client because of because of pricing, where we needed price. So we feel good about that and feel that that traction should continue.
Okay great.
Wanted to ask also about.
Your.
Efforts to add specialists adjusters and certainly you mentioned that you are actually ahead of schedule on.
Your goal of adding 200 or Youre ahead of pace I guess.
Is that can you first of all speak to what you think is driving your success in being able to add.
Those specialist and if you had the opportunity to would you look to add more than that 200 goal or is that kind of.
Number that you think is gives you the right amount of capacity.
For your businesses business overall.
Yes, Kevin if you look at our strategic pillars, one of our strategic pillar is to have expertise that is deep and eminent we believe that we are in the business of expertise or having the right expert based on our bench activity serving our clients is extremely important to us. So I don't think that 200 was a good target for us, but I don't have a problem if we exceed that target.
Because as long as we have the we have the right client base and we can keep our staff utilized and productive Theres. No reason why we shouldnt why we shouldn't have that our people are our largest assets and having the expertise just adds to that asset base that we have.
In terms of why we've been successful in doing that I would say three primary reasons. One is focus to make sure that we're focused on adding expertise second is having the relationships that we have in clients that allows us to demonstrate and execute on that expertise, which enables exports to come join us and frankly deepen their own expertise increased their own eminence and continue.
That development and third I would say the unique culture that we're building in the industry, which enables individuals to come in and really shine. We've always said that we are building a culture of growth.
Of a growth mindset and empowerment and as experts to join in and become part of the team. They feel that they can be at their best being part of our team. So that those are the three big reasons I believe that we're seeing the traction that we have.
Okay great.
Good.
Yes.
Financial housekeeping question here.
What should we expect.
Sure.
Tax rate in the fall.
Fourth quarter, roughly you talked about some of the puts and takes related to the.
Goodwill impairment Bruce.
So I don't know.
It's possible to provide any visibility there.
Yeah.
Our tax rate is going to be a little funny looking given how the goodwill impairment is is traded its not just treat it as.
A discrete item that just sits in the third quarter.
Tax impact is spread over over too so.
We're going to expect.
About $12 $5 million of tax expense to come in the fourth quarter related to that to that impairment and that's why we mentioned the overall full year benefit is.
$3 4 million on the on the impairment.
Normally but for the goodwill impairment if you strip all of that noise out we were kind of expecting or our rate to be in the 31% to 30 to.
Percent range, which I think is.
Right.
Kind of safe to assume for normal course business.
Okay, Great and then.
Lastly.
In terms of the.
$25 million of new ideas.
Enhanced business.
That you mentioned.
What number should we think of that is.
Mostly falling in broad spire.
I guess, that's how you can measure it most easily but.
Or is it a little bit more broad based.
Hey, Kevin This is Robert I would say, it's more broad based.
We've actually.
We've actually had good traction for our new business throughout this year and we expect that traction to continue so it's a much more broad based number than just broad spot, obviously youre absolutely right <unk> business has a lot more quantifiable, but we have our ways in which we estimate the contribution from other lines of business as well. So this is a this is a broad based number.
Okay, great. Thank you for taking the questions. Thank you Kevin.
Ladies and gentlemen, as a reminder, should you'd like to ask a question. Please press star followed by one.
Okay. There are no further questions at this time I'll turn it back for closing remarks.
Thank you so much Colin Thank you everybody I want to thank all of our employees all of our clients everybody who is working in Florida right now supporting.
Supporting the policyholders who have been impacted.
Our third quarter results reinforce our confidence in the future of the company and we look forward to closing out 2022 on a positive and impactful note as always we wish you all well, thank you and God bless.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Yeah.