Crawford(CRD_B) - 2024 Q4 - Annual Report

Part I Business Crawford & Company, the world's largest independent claims management provider, generated $1.293 billion in 2024 revenue across four segments - Crawford & Company is the world's largest publicly listed independent provider of claims management and outsourcing solutions, operating in over 70 countries[15] 2024 Revenue Contribution by Segment | Segment | 2024 Revenue Contribution | Key Services | | :--- | :--- | :--- | | North America Loss Adjusting | 24.2% | Claims management for property and casualty losses in the U.S. and Canada. | | International Operations | 32.4% | Claims management for property and casualty markets in the U.K., Europe, Australia, Asia, and Latin America. | | Broadspire | 30.0% | Third-party administration for workers' compensation, auto, liability, and disability claims in the U.S. | | Platform Solutions | 13.4% | Services including Contractor Connection, Networks (Catastrophe operations), and Subrogation in the U.S. | - As of December 31, 2024, the company had approximately 10,040 employees. Women comprised 57% of the global workforce and 27% of the global senior management team[34] - The company emphasizes employee development, tracking approximately 50,500 training hours globally in 2024 through its proprietary learning platform, KMC OnDemand™[39] - While no single customer accounts for 10% or more of consolidated revenues, the Platform Solutions segment had three customers each representing over 10% of its revenue, and the International Operations segment had one such customer in 2023 and 2022[24] Risk Factors The company faces significant risks from unpredictable claim volumes, data security threats, international operations, an underfunded pension plan, and intense market competition - A significant portion of revenues depends on claim volumes, which are difficult to forecast due to factors like weather severity, insurance outsourcing trends, and economic conditions[47] - The company manages a large amount of sensitive consumer data, and a security breach could result in material loss of business, legal liability, and reputational harm[52][53] - The U.S. qualified defined benefit pension plan is underfunded by $19.0 million. Future funding requirements could restrict cash available for operations and investment[74] - The company's credit facility contains financial covenants, including a maximum leverage ratio and a minimum interest coverage ratio. Non-compliance could lead to the acceleration of outstanding debt[76][77] - The global claims management market is highly competitive. The company competes with numerous firms on price, quality, and scope of services, and faces pressure from clients handling claims in-house[81][82] - A principal shareholder, Jesse C. Crawford, beneficially owns approximately 68% of the voting Class B Common Stock, giving him control over matters submitted to shareholders, including the election of directors[80] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[90] Cybersecurity The company's global cybersecurity program, aligned with NIST and overseen by the Board, has prevented material incidents in the last three years - The company's cybersecurity program is aligned with the NIST Cybersecurity Framework and is integrated into its global Enterprise Risk Management (ERM) program[91][92] - Cybersecurity governance involves a CISO, a Cybersecurity and Privacy Council comprising senior management, and primary oversight from the Audit Committee of the Board of Directors[98][99] - The company has not experienced any material cybersecurity incidents in the last three fiscal years, and related expenses have been immaterial[97] Properties As of December 31, 2024, the company leased 202 office locations, which management deems sufficient for operations - The company leased 202 office locations as of December 31, 2024, and believes these facilities are sufficient for its operational needs[104] Legal Proceedings The company is involved in routine lawsuits related to claims administration, mostly covered by insurance, with adequate provisions made - The company is periodically named as a defendant in lawsuits related to its claims administration services. Most of these claims are covered by insurance, and adequate provisions for known risks have been made[105] Mine Safety Disclosures This item is not applicable to the company - Not applicable[107] Part II Market for Common Equity, Shareholder Matters, and Issuer Purchases The company's Class A and B common stocks trade on the NYSE, supported by a share repurchase program and benchmarked against market indices - The company's two classes of common stock, CRD-A and CRD-B, trade on the New York Stock Exchange (NYSE)[110] - A share repurchase program is authorized through December 31, 2025, with 1,089,809 shares remaining for repurchase at year-end 2024[112] Total Return to Shareholders (Indexed Returns, Base Period 2019 = 100) | Company / Index | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Crawford & Company (Class A) | 100.00 | 66.09 | 68.73 | 52.72 | 128.83 | 116.02 | | Crawford & Company (Class B) | 100.00 | 72.62 | 77.57 | 56.97 | 145.08 | 132.58 | | Russell 2000 Index | 100.00 | 119.96 | 137.74 | 109.58 | 128.14 | 142.92 | | S&P Property-Casualty Insurance Index | 100.00 | 106.33 | 124.95 | 148.53 | 164.49 | 219.73 | [RESERVED]](index=25&type=section&id=Item%206.%20%5BRESERVED%5D) This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) This section analyzes the company's financial performance, noting 2024 revenue growth to $1.293 billion but a net income decline, and discusses liquidity, capital, and critical accounting policies Results of Operations In 2024, consolidated revenues grew 2.0% to $1.293 billion, while net income decreased, with varied segment performance and no goodwill impairment Consolidated Financial Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues before reimbursements | $1.293 billion | $1.267 billion | 2.0% | | Net Income Attributable to Company | $26.6 million | $30.6 million | (13.1)% | Segment Revenue Performance (2024 vs. 2023) | Segment | 2024 Revenues (in thousands) | 2023 Revenues (in thousands) | % Change | | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $312,158 | $303,629 | 2.8% | | International Operations | $418,607 | $382,393 | 9.5% | | Broadspire | $388,074 | $355,650 | 9.1% | | Platform Solutions | $173,671 | $225,459 | (23.0)% | Segment Operating Earnings (2024 vs. 2023) | Segment | 2024 Operating Earnings (in thousands) | 2023 Operating Earnings (in thousands) | % Change | | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $18,173 | $23,185 | (21.6)% | | International Operations | $21,001 | $11,181 | 87.8% | | Broadspire | $52,429 | $41,873 | 25.2% | | Platform Solutions | $11,173 | $28,541 | (60.9)% | - In 2022, the company recognized a pretax non-cash goodwill impairment of $36.8 million related to the North America Loss Adjusting, International Operations, and Platform Solutions segments. No goodwill impairment was recorded in 2024 or 2023[138] Liquidity, Capital Resources, and Financial Condition The company maintains liquidity through operations and a $450 million credit facility, remains compliant with debt covenants, but manages an underfunded U.S. pension plan - The company's primary sources of liquidity are cash from operations and a $450 million revolving credit facility that matures in November 2026[257][259] Key Financial Covenants and Ratios (as of Dec 31, 2024) | Covenant/Ratio | Requirement | Actual Value | | :--- | :--- | :--- | | Consolidated Leverage Ratio | Not greater than 4.50 to 1.00 | 1.85 | | Consolidated Interest Coverage Ratio | Not less than 2.50 to 1.00 | 5.50 | - The frozen U.S. Qualified Pension Plan was underfunded by $19.0 million as of December 31, 2024. The company does not expect to make discretionary contributions to this plan in 2025[290] Cash Flow Summary (in millions) | Cash Flow Activity | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $51.6 | $103.8 | $27.6 | | Net cash used in investing activities | $(41.6) | $(36.6) | $(57.9) | | Net cash (used in) provided by financing activities | $(12.9) | $(54.7) | $25.9 | Critical Accounting Policies and Estimates This section details critical accounting policies and estimates, including revenue recognition, credit losses, goodwill impairment, pension plans, income taxes, and self-insured risks - For lifetime claim handling arrangements, deferred revenues were approximately $39.6 million as of December 31, 2024. A 1.0% change in the claim closing rate would impact annual revenues by approximately $0.5 million[302] - The allowance for expected credit losses was $8.1 million at year-end 2024. A 1.0% change in this allowance relative to gross billed receivables would have impacted 2024 pretax income by approximately $1.5 million[304] - Goodwill impairment testing is performed annually using a combination of income and market approaches. Key assumptions for the 2024 test included discount rates of 13.0% - 17.0% and a terminal growth rate of 2.0%[306][309] - Accounting for defined benefit pension plans is sensitive to assumptions. A 0.50% change in the expected return on plan assets would have impacted 2024 pretax income by approximately $2.1 million, while a 0.25% change in the discount rate would have impacted the projected benefit obligation by approximately $8.7 million[322] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from foreign currency fluctuations and interest rates, with hypothetical changes impacting pretax income and interest expense - A hypothetical 10.0% change in foreign currency exchange rates would have impacted 2024 consolidated pretax income by approximately $1.9 million[342] - A hypothetical 1.0% change in market interest rates would have changed pretax interest expense on floating-rate debt by $2.2 million in 2024[343] - A 0.25% change in the discount rate for the U.S. and U.K. defined benefit pension plans would have changed the projected benefit obligations by approximately $8.7 million at December 31, 2024[344] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements, including notes and the independent auditor's unqualified opinion for 2024 Consolidated Statements of Operations Highlights (in thousands) | Line Item | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,340,970 | $1,316,919 | $1,231,226 | | Income Before Income Taxes | $41,112 | $47,357 | $5,046 | | Net Income (Loss) Attributable to Shareholders | $26,596 | $30,609 | $(18,305) | | Diluted EPS (Class A) | $0.53 | $0.61 | $(0.37) | Consolidated Balance Sheets Highlights (in thousands) | Line Item | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $374,227 | $369,346 | | Goodwill | $76,368 | $76,724 | | Total Assets | $803,755 | $799,199 | | Total Current Liabilities | $299,727 | $299,292 | | Long-term debt and finance leases | $200,315 | $194,335 | | Total Shareholders' Investment | $155,551 | $139,831 | Changes in and Disagreements with Accountants This item is not applicable to the company - Not applicable[561] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[564] - Management determined that the company's internal control over financial reporting was effective as of December 31, 2024, based on the COSO framework[567] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the fourth quarter of 2024 - No directors or officers adopted or terminated any Rule 10b5-1 trading plans during the fourth quarter of 2024[570] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[571] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Registrant's 2025 Proxy Statement[582] Executive Compensation Information on executive compensation is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Registrant's 2025 Proxy Statement[584] Security Ownership and Related Shareholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Registrant's 2025 Proxy Statement[585] Certain Relationships, Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Registrant's 2025 Proxy Statement[586] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Required information is incorporated by reference from the Registrant's 2025 Proxy Statement[587] Part IV Exhibits, Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the report, including certifications - This item lists all financial statements, schedules, and exhibits filed with the report, including certifications by the CEO and CFO[590][591] Form 10-K Summary The company indicates that there is no Form 10-K summary - None[593]