10-K: Crawford & Company Reports Strong 2023 Results, Driven by Revenue Growth and Cost Management

Crawford & Company's 2023 annual report reveals a significant turnaround with increased revenue and a return to profitability, overcoming a net loss in the previous year.

Summary

• Crawford & Company reported total revenues before reimbursements of $1.267 billion for 2023, a 6.5% increase compared to 2022.
• The company achieved a net income attributable to shareholders of $30.6 million in 2023, a substantial improvement from a net loss of $18.3 million in 2022.
• This turnaround was driven by new client growth across multiple segments and pricing increases, partially offset by a weather-related reduction in the Platform Solutions segment.
• Foreign exchange rate changes negatively impacted revenue by $12.8 million, or 1.1%, in 2023.
• The company experienced a 5.0% decrease in overall cases received in 2023 compared to 2022, but this was offset by higher revenue per case and increased revenues not measured by cases.
• Operating earnings increased in North America Loss Adjusting, International Operations, and Broadspire segments, while decreasing in the Platform Solutions segment.
• Selling, general, and administrative expenses increased by $30.8 million, or 12.0%, in 2023, due to increased compensation, self-insurance costs, professional fees, and contingent earnout adjustments.
• The company recorded a non-cash goodwill impairment of $36.8 million in 2022, but there was no goodwill impairment in 2023.
• The company's U.S. qualified defined benefit pension plan was underfunded by $22.3 million at the end of 2023.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong revenue growth and a return to profitability, but also highlights some risks and challenges. The overall tone is optimistic, but with a realistic assessment of the business environment.

Positives

• The company experienced significant revenue growth across multiple segments.
• Crawford & Company returned to profitability in 2023 after a net loss in 2022.
• The company saw improved operating earnings in North America Loss Adjusting, International Operations, and Broadspire segments.
• The company has implemented a carbon reporting software package to assist with data capture, carbon benchmarking, and sustainability targets.
• The company's employee engagement survey showed positive results, with 87% of respondents considering their jobs meaningful and 86% favoring empowerment.

Negatives

• The Platform Solutions segment experienced a decrease in revenues and operating earnings.
• The company experienced a 5.0% decrease in overall cases received in 2023 compared to 2022.
• Foreign exchange rate changes negatively impacted revenue by $12.8 million, or 1.1%, in 2023.
• The company's U.S. qualified defined benefit pension plan was underfunded by $22.3 million at the end of 2023.

Risks

• The company depends on claim volumes, which are not subject to accurate forecasting and can materially affect financial results.
• The company derives a material portion of its revenues from a limited number of clients, and the loss of these clients could adversely affect financial results.
• The company manages a large amount of sensitive data, and unauthorized access or disclosure could result in material loss of business and legal liability.
• The company is subject to increasing cybersecurity attacks, and failure to effectively identify or recover from such attacks could materially affect business.
• The company's international operations are subject to political, legal, operational, and exchange rate risks.
• The company's U.S. qualified defined benefit pension plan is underfunded, and future funding requirements could restrict cash available for operations.
• The company has debt covenants in its credit facility, and failure to maintain compliance could result in all outstanding debt becoming immediately due and payable.
• The company operates in highly competitive markets and faces intense competition from both established entities and new entrants.
• The company may not be able to recruit, train, and retain qualified personnel, including enough qualified and experienced on-call claims adjusters, to respond to catastrophic events.

Future Outlook

The company anticipates its effective tax rate for financial reporting purposes in 2024 to be in the 33% to 35% range before considering any discrete items and assuming no material changes to tax law and policy in the material jurisdictions in which it operates.

Management Comments

• The company believes that its relentless focus on building management capability through leadership development programs has contributed to positive employee survey results.
• The company believes that offering holistic wellness programs is important in attracting and retaining employees.

Industry Context

The global claims management services market is highly competitive and comprised of a large number of companies that vary in size and that offer a varied scope of services. The demand from insurance companies and self-insured entities for services provided by independent claims service firms like Crawford is largely dependent on industry-wide claims volumes, which are affected by, among other things, the insurance underwriting cycle, weather-related events, general economic activity, supply chains, overall employment levels and workplace injury rates.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors.
• The document does mention that the company scored ten points higher than the industry benchmark in a survey question on senior leadership's support for diversity and inclusion.
• The document does not provide specific details on the performance of competitors or industry benchmarks for financial metrics such as revenue, profit, or EBITDA.

Legal Proceedings

• The company is from time to time named as a defendant in suits by insureds or claimants contesting decisions by the company or its clients with respect to the settlement of claims.
• The company's clients have in the past brought, and may in the future bring, claims for indemnification on the basis of alleged actions on the part of the company, its agents or its employees in rendering service to clients.
• The company is also subject to numerous federal, state, and foreign labor, employment, worker health and safety, antitrust and competition, environmental and consumer protection, import/export, anti-corruption, and other laws.
• From time to time, the company faces claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts with such employees or former employees.

Stakeholder Impact

• Shareholders will benefit from the company's return to profitability and increased revenue.
• Employees will benefit from the company's focus on employee development and wellness programs.
• Customers will benefit from the company's commitment to providing high-quality, competitively priced services.
• Suppliers and creditors will benefit from the company's improved financial stability.

Next Steps

• The company plans to leverage carbon analytics to help reduce greenhouse gas emissions, promote data-driven decisions, and deliver sustainable outcomes.
• The company will continue to work toward reducing its carbon footprint over time, emphasizing technology-based solutions, optimizing real estate space, monitoring the impact of its fleet usage, and minimizing work commute by promoting agile working programs.
• The company will continue to offer skill-based training and relevant certifications for all employees.

Key Dates

Keywords

claims management, loss adjusting, third party administration, insurance, risk management, catastrophe services, financial results, revenue growth, operating earnings, pension plan, cybersecurity, international operations