UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-K

 

☒		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2023
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number 1-10356

CRAWFORD & COMPANY

(Exact name of Registrant as specified in its charter)

 

Georgia (State or other jurisdiction of incorporation or organization)		58-0506554 (I.R.S. Employer Identification Number)
5335 Triangle Parkway, Peachtree Corners, Georgia (Address of principal executive offices)		30092 (Zip Code)

 

Registrant's telephone number, including area code

(404) 300-1000

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock — $1.00 Par Value	CRD-A	New York Stock Exchange
Class B Common Stock — $1.00 Par Value	CRD-B	New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐		Accelerated filer ☒		Non-accelerated filer ☐		Smaller reporting company ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Yes ☐ No ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐

The aggregate market value of the Registrant's voting and non-voting common stock held by non-affiliates of the Registrant was $226,618,324 as of June 30, 2023, based upon the closing prices of such stock as reported on the NYSE on such date. For purposes hereof, beneficial ownership is determined under rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934, and excludes voting and non-voting common stock beneficially owned by the directors and executive officers of the Registrant, some of whom may not be deemed to be affiliates upon judicial determination.

The number of shares outstanding of each class of the Registrant's common stock, as of February 26, 2024, was:

Class A Common Stock — $1.00 Par Value — 29,627,537 Shares

Class B Common Stock — $1.00 Par Value — 19,554,538 Shares

Documents incorporated by reference:

 

---

CRAWFORD & COMPANY

FORM 10-K

For The Year Ended December 31, 2023

Table of Contents

 

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	13
Item 1C.	Cybersecurity	13
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities	16
Item 6.	Reserved	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 8.	Financial Statements and Supplementary Data	56
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	106
Item 9A.	Controls and Procedures	106
Item 9B.	Other Information	107
Item 9C.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	107
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	109
Item 11.	Executive Compensation	109
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	109
Item 13.	Certain Relationships and Related Transactions, and Director Independence	109
Item 14.	Principal Accountant Fees and Services	109
PART IV
Item 15.	Exhibits, Financial Statement Schedules	110
Item 16.	Form 10-K Summary	111
	Signatures	112

 

---

We use the terms "Crawford", "the Company", "the Registrant", "we", "us" and "our" to refer to the business of Crawford & Company, its subsidiaries, and variable interest entities.

Cautionary Statement Concerning Forward-Looking Statements

This report contains and incorporates by reference forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Statements contained or incorporated by reference in this report that are not statements of historical fact are forward-looking statements made pursuant to the "safe harbor" provisions thereof. These statements may relate to, among other things, our 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 recent acquisitions, our continued compliance with the financial and other covenants contained in our financing agreements, and our other long-term capital resource and liquidity requirements. These statements may also relate to our business strategies, goals and expectations concerning our market position, future operations, margins, case volumes, profitability, contingencies, liquidity position, and capital resources. The words "anticipate", "believe", "could", "would", "should", "estimate", "expect", "intend", "may", "plan", "goal", "strategy", "predict", "project", "will" and similar terms and phrases, or the negatives thereof, identify forward-looking statements in this report and in the statements incorporated by reference in this report. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors" and elsewhere in this report and those described from time to time in our other reports filed with the Securities and Exchange Commission.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could prove to be incorrect. Our operations and the forward-looking statements related to our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially adversely affect our financial condition and results of operations, and whether the forward-looking statements ultimately prove to be correct. As a result, undue reliance should not be placed on any forward-looking statements. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements. Forward-looking statements speak only as of the date they are made and we undertake no obligation to publicly update any of these forward-looking statements in light of new information or future events.

---

PART I

ITEM 1. BUSINESS

Headquartered in Atlanta, Georgia, and founded in 1941, the Company is the world's largest publicly listed independent provider of claims management and outsourcing solutions to carriers, brokers and corporations with an expansive global network serving clients in more than 70 countries. For the year ended December 31, 2023, the Company reported total revenues before reimbursements of $1.267 billion.

Shares of the Company's two classes of common stock are traded on the New York Stock Exchange ("NYSE") under the symbols CRD-A and CRD-B. The Company's two classes of stock are substantially identical, except with respect to voting rights for the Class B Common Stock (CRD-B), and protections for the non-voting Class A Common Stock (CRD-A). More information is available on the Company's website www.crawco.com. The information contained on, or hyperlinked from, the Company's website is not a part of, and is not incorporated by reference into, this report.

DESCRIPTION OF SERVICES

We deliver services to our clients through a geographic reporting structure consisting of four operating segments as follows:

A significant portion of our revenues is derived from international operations. For a discussion of certain risks attendant to international operations, see Item 1A, "Risk Factors."

NORTH AMERICA LOSS ADJUSTING. The North America Loss Adjusting segment accounted for 23.9% of our revenues before reimbursements in 2023. North America Loss Adjusting provides claims management and adjusting services to insurance carriers and self-insured entities in the U.S. and Canada related to property and casualty losses caused by physical damage to commercial and residential real property, certain types of personal property and marine losses. North America Loss Adjusting revenues are substantially derived from the insurance carrier market in the U.S. and Canada. Insurance companies customarily manage their own claims administration and adjusting functions, but often rely upon third-parties for certain services which we provide, primarily with respect to field investigation and the evaluation and resolution of property and casualty insurance claims. This is comprised of the Loss Adjusting operations in the U.S. and Canada, including Global Technical Services, field operations and edjuster. Global Technical Services provides claims management services to insurance companies and self-insured entities related to large, complex losses with technical adjusting and industry experts servicing a broad range of industries, including commercial property, forensic accounting, forensic engineering, transportation, retail, building and construction, cyber and energy. The Canadian operations include all operations within that country, including third party administration and Contractor Connection.

---

Claims management and adjusting services offered by our North America Loss Adjusting segment are provided to clients pursuant to a variety of different referral assignments which generally are classified by the underlying insured risk categories used by insurance companies. These major risk categories are:

edjuster is a technology-enabled, end-to-end contents services provider and platform that provides technology driven contents claims handling solutions, including field inventory services, desk valuation services, and contents valuation solutions for insurer clients.

INTERNATIONAL OPERATIONS. The International Operations segment accounted for 30.2% of our revenues before reimbursements in 2023. International Operations provides claims management and adjusting services to insurance carriers and self-insured entities from the global property and casualty insurance company markets in the U.K, Europe, Australia, Asia and Latin America. International Operations revenues are substantially derived from the global insurance carrier market. Insurance companies customarily manage their own claims administration and adjusting functions, but often rely upon third-parties for certain services which we provide, primarily with respect to field investigation and the evaluation and resolution of property and casualty insurance claims.

The operations in each country include Loss Adjusting, Global Technical Services, third party administration, and, where applicable, Contractor Connection services. This segment also includes Legal Services, which provides legal services related to handling claims in certain regions.

BROADSPIRE. Our Broadspire segment is a leading third party administrator that provides services to the U.S. casualty and disability insurance and self-insured markets. This segment accounted for 28.1% of our revenues before reimbursements in 2023. Through the Broadspire segment, we provide a complete range of claims and risk management services and technology solutions to corporations in the self-insured or commercially-insured marketplace inclusive of brokers and insurance companies. In addition to desktop claim adjusting and the evaluation of claims, Broadspire also offers initial loss reporting services for claimants; loss mitigation services, such as medical bill review, medical case management and vocational rehabilitation; risk management information services; and administration of loss funds established to pay claims. Broadspire services are provided through two major service lines:

 

---

PLATFORM SOLUTIONS. The Platform Solutions segment accounted for 17.8% of our revenues before reimbursements in 2023. Platform Solutions provides services to the property and casualty insurance company and consumer markets in the U.S. through service lines known as Contractor Connection, Networks and Subrogation.

CUSTOMER CONCENTRATION

From time to time, we derive a material portion of our revenues from a limited number of clients. No single customer accounts for 10% or more of our consolidated revenues for the years ended December 31, 2023, 2022, or 2021. However, for each of the years ended December 31, 2023, 2022 and 2021, three customers in our Platform Solutions segment each represented in excess of 10% of its revenue. For each of the years ended December 31, 2023 and 2022, our International Operations segment derived in excess of 10% of its revenue from one customer.

In the event we are not able to retain these significant relationships, or replace any lost revenues from such relationships, revenues and operating earnings within these segments could be materially adversely affected.

INTELLECTUAL PROPERTY AND TRADEMARKS

Our intellectual property portfolio is an important asset which we seek to expand and protect globally through a combination of trademarks, trade names, copyrights and trade secrets. We own a number of active trademark applications and registrations which expire at various times. As the laws of many countries do not protect intellectual property to the same extent as the laws of the U.S., we cannot ensure that we will be able to adequately protect our intellectual property assets outside of the U.S. The failure to protect our intellectual property assets could have a material adverse effect on our business; however, the loss of any single patent, trademark or service mark, taken alone, would not have a material adverse effect on any of our segments or on the Company as a whole.

SERVICE DELIVERY

Our claims management services are offered primarily through a global network serving clients in more than 70 countries. Contractor Connection services are offered by providing high-quality outsourced contractor management to national, regional and international clients. Catastrophe services are offered through a network of adjusters who are available to respond to natural and man-made catastrophic events and other staffing needs. WeGoLook services are offered through a mobile platform of independent contractors.

COMPETITION

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 us 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. Demand is also impacted by decisions insurance companies and self-insured entities make with respect to the level of claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. In addition, our ability to retain clients and maintain or increase case referrals is also dependent in part on our ability to continue to provide high-quality, competitively priced services and effective sales efforts.

---

We compete with a substantial number of smaller local and regional claims management services firms. Many of these smaller firms have rate structures that are lower than ours or may, in certain markets, have local knowledge which provides a competitive advantage. We do not believe these smaller firms offer the broad spectrum of claims management services in the range of locations we provide and, although such firms may secure business which has a local or regional source, we believe our quality product offerings, broader scope of services, and geographically dispersed offices provide us with an overall competitive advantage in securing business from both U.S. and international clients. There are also national and global independent companies, some of which are larger than us, that provide a similar broad spectrum of claims management services and who directly compete with us.

GLOBAL CORPORATE CITIZENSHIP

We have implemented a carbon reporting software package to assist with data capture, carbon benchmarking, and sustainability targets. In addition, we conducted a sustainability survey which sought feedback from our global workforce risk areas that are of highest importance to them to guide future initiatives. We also plan to leverage the carbon analytics to help reduce greenhouse gas emissions, promote data-driven decisions, and deliver sustainable outcomes that will generate value for our stakeholders. As we continue to work toward reducing our carbon footprint over time, we are emphasizing technology-based solutions, optimizing real estate space, monitoring the impact of our fleet usage, and minimizing work commute by promoting agile working programs.

We support diversity and inclusion initiatives. Our Women Leadership Exploration and Development program, which is in its seventh year, develops the Company's women professionals and the Multicultural Leadership Program is offered to employees from underrepresented groups in the U.S. Both of these programs offer opportunities for skill building, networking, and leadership exposure.

Our continued commitment to diversity and inclusion was measured through our annual, global Employee Pulse survey conducted in September 2023. In the survey question on senior leadership's support for diversity and inclusion, we scored ten points higher than the industry benchmark. At the overall Company level, 90% of the respondents agreed that they do not face any bias due to their personal identity and 82% favored that the organization is committed to the fair treatment of its employees.

HUMAN CAPITAL

Human Capital is a key component to our success. Our culture is reflected in our RESTORE values of Respect, Empowerment, Sustainability, Training, One Crawford, Recognition and Entrepreneurial Spirit.

As of December 31, 2023, we had approximately 10,200 employees operating in 70 countries. Of our global employees, 94% are full-time. Approximately 81% of our workforce is concentrated in the U.S., Canada, U.K., Australia, and the Philippines. Women comprised 57% of our global workforce, 28% of our country-president roles, 25% of our global senior management team and 51% of our people management roles. With respect to our employees in the U.S., the percentage of our employees that identified as Black, Hispanic/Latino, and Asian were 16%, 10% and 4%, respectively.

Employee Engagement

In September 2023, we conducted our annual Employee Pulse survey for all our global workforce to measure their sentiment on our employee experience and culture. Our overall response rate was 73%. Three of the top scoring questions related to the category, “the way we manage” and showed an increase year-over-year. Respondents agreed that managers support their work efforts, hold them accountable for reaching their performance goals, and have a sincere interest in their wellbeing. We believe that our relentless focus on building management capability through leadership development programs has contributed to these results. Interestingly, the category that saw the most positive movement in the past five years is "the way we work together." The highest improvement since 2022 is on the survey question about employees' having regular opportunities to connect with those outside their area of work.

In addition, 87% of the respondents consider that they are doing something meaningful in their jobs and understand how their work aligns with our business strategy. Finally, the survey question on empowerment, a core Company value, received an 86% favorability score by the respondents.

---

Employee Wellness

We believe that offering holistic wellness programs is important in attracting and retaining employees. We provide a variety of comprehensive benefit programs that are designed to support the physical, mental, and financial well-being of our people. Examples of such programs include group healthcare and telemedicine programs; formal wellness programs with fitness challenges and incentives for prioritizing physical exercise and accessing preventive care services; company-paid flu shots; employee assistance programs; company-sponsored retirement savings plans; financial education webinars; tuition assistance; and programs that support work-life balance such as remote work arrangements, flextime, paid-time off, and paid parental leave.

We are committed to helping our employees and their dependents maintain health and wellness by offering a range of benefits. In 2023, we continued to offer all employees a free subscription to the mental wellbeing platform, Headspace. The platform provides a library of articles and exercises on mental health, mindfulness, meditation, and good sleep habits. For U.S. employees, we also offered wellness programs through Virgin Pulse Health, which promotes healthy life choices, and Hinge Health, a solution for chronic joint and muscle pain.

Employee Development

Training is not only a core value, but also a key component of our history and heritage. Employee development continued to be a strategic priority in 2023 with the Company offering skill-based training and relevant certifications for all employees. In the U.S., we conducted three sessions of the Residential Property Loss Adjusting course, four sessions of the Commercial Property Loss Adjusting course, three sessions of the Basic Casualty course, and six sessions of the Xactimate course to build skills that increase adjuster performance and success in the field. Through these classes, adjusters were not only exposed to the technical aspect of claims handling but also trained on critical success behaviors such as empathy and customer service – attributes we consider to be core and crucial for becoming a world-class claims professional. Our employees in the U.S. completed 145 designation courses offered by The Institutes, an educational provider for risk management and insurance courses. They achieved 34 designations including Associate in Claims (AIC), Associate in Management (AIM), Associate in Risk Management (ARM), Chartered Property Casualty Underwriter (CPCU) and more. Also, 539 individual courses were completed for Property Technical Certification ("PTC") and 43 PTC certifications were earned. We also trained approximately 2,900 catastrophe adjusters.

In 2023, our managers continued with a global management development program called the Manager Acceleration Program (MAP). The goal of this program is to enhance manager effectiveness by building and refining skills which enable managers to motivate, empower, and lead teams. In this journey, managers experience a blend of courses through online, self-paced and virtual instructor-led environments. The program is delivered by internal training facilitators in partnership with premier educational providers such as LinkedIn Learning and Franklin Covey.

Our focus on leadership development brought 38 individuals together from around the world for the Crawford Emerging Leaders Program, a week-long immersion program which builds leadership and business acumen skills, offers visibility to the Company's global senior management, provides experience working on business-critical projects and enables networking with colleagues from across the globe.

Our proprietary learning platform, KMC OnDemand™ ("KMC") is our source for online training for technical and professional development courses globally. In 2023, Company learners spent approximately 26,000 hours on KMC. We trained over 6,800 unique learners. A wide spectrum of courses on loss adjusting, liability, and workers compensation are also offered to our clients and adjusters across the industry. KMC has a robust catalog of courses that are Continuing Education ("CE") accredited in the U.S. and Canada and we processed 1,930 CE requests this year. In addition, LinkedIn Learning remains a popular learning platform for our employees to build professional skills and stay connected with the latest in leadership, technology, AI, cybersecurity, and a myriad of other business-related topics. In 2023, we added learning paths and curricula for our employees leveraging the platform. We specifically created paths on advanced topics for our managers to cover unique and challenging topics for leading and managing others. Employees worldwide spent 7,980 hours completing approximately 7,600 courses and 143,000 videos on the LinkedIn Learning platform.

AVAILABLE INFORMATION

The Company is required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission ("SEC").

---

The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 are available free of charge on our website, www.crawco.com through the "SEC/Edgar Filings" link located under the "Investors" tab, as soon as reasonably practicable after these reports are electronically filed or furnished to the SEC. The information contained on, or hyperlinked from, our website is not a part of, nor is it incorporated by reference into, this Annual Report on Form 10-K. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Copies of the Company's Annual Report will also be made available, free of charge, upon written request to Corporate Secretary, Legal Department, Crawford & Company, 5335 Triangle Parkway, Peachtree Corners, Georgia, 30092.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below, together with the other information contained or incorporated by reference in this Annual Report on Form 10-K and in our other filings with the SEC from time to time when evaluating our business and prospects. Any of the events discussed in the risk factors below may occur, and our business, results of operations or financial condition could be materially adversely affected. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also materially adversely affect our financial condition or results of operations.

MARKET CONDITIONS

We depend on claim volumes for a significant portion of our revenues. Claim volumes are not subject to accurate forecasting, and a decline in claim volumes may materially adversely affect our financial condition and results of operations.

Because we depend on claim volume for revenue streams, a reduction in claim referrals for any reason may materially adversely impact our results of operations and financial condition. We are unable to predict claim volumes for several reasons, including the following:

If our claim volume referrals decline for any of the foregoing, or any other reason, our revenues may decline, which could materially adversely affect our financial condition and results of operations.

In recent periods, we have derived a material amount of our revenues from a limited number of clients. If we are not able to retain these clients or replace these revenues, our financial condition and results of operations could be materially adversely affected.

From time to time, we derive a material portion of our revenues from a limited number of clients. No single customer accounts for 10% or more of our consolidated revenues for the years ended December 31, 2023, 2022, or 2021. However, for each of the years ended December 31, 2023, 2022, and 2021, three customers in our Platform Solutions segment each represented in excess of 10% of its revenue. For each of the years ended December 31, 2023 and 2022, our International Operations segment derived in excess of 10% of its revenue from one customer.

In the event we are not able to retain these significant relationships, or replace any lost revenues from such relationships, revenues and operating earnings within these segments could be materially adversely affected.

---

TECHNOLOGY AND DATA SECURITY

We manage a large amount of highly sensitive and confidential consumer information including personally identifiable information, medical/health information and financial information. Unauthorized access to, alteration or disclosure of this data, whether as a result of criminal conduct, advances in computer hacking or otherwise, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

We manage a large amount of highly sensitive and confidential consumer information including personally identifiable information, medical/health information and financial information. A security or privacy incident impacting data processed or stored in our own facilities or data maintained, processed or stored by our service providers, including cloud service providers, could compromise the confidentiality, integrity or availability of this information. Unauthorized access to or disclosure of sensitive and confidential information stored by us or our service providers may occur through break-ins, breaches of a secure network by an unauthorized party, systems and technology failures, failed internet processes, theft or misuse or other misconduct. It is also possible that unauthorized access to or disclosure of such sensitive and confidential information may be obtained through accidental or malicious failure to follow security policies or controls by us or our employees or our service providers. If there were an inadvertent disclosure of confidential consumer information, or if a third party were to gain unauthorized access to the confidential information, our operations could be disrupted, our reputation could be damaged and we could be subject to claims or other liabilities, regulatory investigations, or fines. These incidents, if successful, could also materially disrupt operational systems and result in loss of intellectual property, trade secrets, other proprietary or competitively sensitive information. In addition, such perceived or actual unauthorized disclosure of the information we collect or breach of our security could damage our reputation, result in the loss of customers and harm our business.

We are subject to increased frequency and complexity of cybersecurity attacks. Our failure to effectively identify such attacks or quickly recover from such attacks could materially adversely affect our business, results of operations, and financial condition.

Malicious technology-related events, such as cyberattacks, computer hacking, computer viruses, ransomware, worms and other destructive or disruptive software and other attempts to gain access to confidential or personal data, denial of service attacks and other malicious activities are becoming increasingly diverse and sophisticated and the incidence of these events is on the rise worldwide and highlights the need for continual and effective cybersecurity awareness and education. Our business, which involves the collection, use, transmission and other processing of data, may make us and our clients and business partners attractive targets of hackers, denial of service attacks, malicious code, phishing attacks, ransomware attacks, and other threat actors, including malicious insiders (such as employees and prior employees), which may result in security incidents, including the unauthorized access, misuse, loss, corruption, inaccessibility, or destruction of this data (including personal, confidential and sensitive data), unavailability of services, or other adverse events.

Separately, in the event of a cyberattack we may not be able to consistently maintain active communications between our various global operations and with our clients due to disruptions in telecommunication networks and power supplies, Any significant failure in our ability to communicate could result in a disruption in business, which could hinder our performance and our ability to complete projects on time. Significant failure of our equipment or systems, or any major disruption to basic infrastructure like power and telecommunications in the locations in which we operate, resulting from a cybersecurity incident, could impede our ability to provide services to our clients, have a negative impact on our reputation, cause us to lose clients, and adversely affect our results of operations.

In the past three years, we have faced cyberattacks, and we expect to continue to face cyberattacks in the future. Some of these attacks have been successful, although none have been material. We have made investments in our information security policies, procedures and technical controls and routinely engage a third party to assess the maturity of our information security program against the National Institute of Standards and Technology ("NIST") Cybersecurity Framework. However, we may not be able to prevent a cybersecurity breach of our systems or third party systems due to the increasing sophistication and frequency of such attacks. All employees receive security awareness training including communication of processes for reporting a potential security incident. We have a robust Cyber Incident Response Plan in place which provides a documented framework for handling high severity security and privacy incidents and facilitates coordination across multiple parts of the Company and with external expertise when necessary. Additionally, we have existing procedures to determine the potential materiality of a cybersecurity incident. These procedures include reporting protocols to and oversight from our Board of Directors. We also have disclosure controls and insider trading restrictions that would apply in the event of a material cybersecurity incident, and we routinely perform simulations and drills at both a technical and management level. Notwithstanding these measures, we cannot provide any assurance that we will always be able to prevent or mitigate a cybersecurity attack. These types of cybersecurity attacks and incidents can give rise to a variety of losses and costs, including legal exposure and regulatory fines, damages to reputation, and others.

---

Increasing regulatory focus on privacy issues and expanding laws could impact our business models and expose us to increased liability.

U.S. privacy and data security laws apply to our various businesses. We also do business globally in countries that have stringent data protection laws that may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. Furthermore, data privacy advocate groups are evolving industry standards regarding data privacy. Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. In the U.S. and globally, new and evolving laws continue to be implemented with an increasing focus on individual rights and an increasing number of jurisdictions have omnibus consumer privacy laws. These requirements and industry standards, among others, may force us to bear the burden of more onerous obligations in our customer contracts and we continue to see an increased level of scrutiny from customers on data protection, governance, and security.

Any perception of our practices, products or services as a violation of individual privacy rights may subject us to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt our business and expose us to increased liability. Additionally, we collect, process and store information at the direction of and on behalf of our customers and if our customers fail to comply with their own contractual obligations or applicable laws, it could result in litigation or reputational harm to us.

Transferring personal information across international borders is increasingly complex and subject to a growing body of enforcement decisions. The increased focus on cross-border data transfers in various countries, in addition to new data protection and privacy laws, means our clients are also more attune to data sharing and requiring data transfer impact assessments for countries which are not deemed to provide an adequate level of protection as the data-originating country. These requirements are often complex, conflicting, unclear or ever changing, all of which can make compliance challenging and may result in an increase in the obligations required to provide our services in the EU or in sanctions and fines for non-compliance. Several other countries, including Brazil, China, Canada and Australia, have also established specific legal requirements for cross-border transfers of personal information. These ongoing developments in the EU and elsewhere could increase our operating costs in these jurisdictions and impact the way we operationalize our business models, with effects on results of operations and financial condition.

We may not be able to develop or acquire necessary IT resources to support and grow our business, and disruptive technologies could impact the volume and pricing of our products. Our failure to address these risks could materially adversely affect our business, results of operations, and financial condition.

We have made substantial investments in software and related technologies that are critical to the core operations of our business. These IT resources will require future maintenance and enhancements, potentially at substantial costs. Additionally, these IT resources may become obsolete in the future and require replacement, potentially at substantial costs. We may not be able to develop or acquire replacement resources or identify new technology resources necessary to support and grow our business.

In addition, we could face changes in our markets due to disruptive technologies that could impact the volume and pricing of our products or introduce changes to the insurance claims management processes which could negatively impact our volume of case referrals. Our failure to address these risks, or to do so in a timely manner or at a cost considered reasonable by us, could materially adversely affect our business, results of operations, and financial condition.

If we do not protect our proprietary information and technology resources and prevent third parties from making unauthorized use of our proprietary information, intellectual property, and technology, our financial results could be harmed.

We rely on a combination of trademark, trade name, copyright and trade secret laws to protect our proprietary information, intellectual property, and technology. However, all of these measures afford only limited protection and may be challenged, invalidated or circumvented by third parties. Third parties may copy aspects of our processes, products or materials, or otherwise obtain and use our proprietary information without authorization. Unauthorized copying or use of our intellectual property or proprietary information could materially adversely affect our financial condition and results of operations. Third parties may also develop similar or superior technology independently, including by designing around any of our proprietary technology. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we may be subject to unauthorized use of our intellectual property in those countries. Any legal action that we may bring to protect intellectual property and proprietary information could be unsuccessful, expensive and may distract management from day-to-day operations.

---

We currently operate on multiple proprietary and commercial software platforms to support our service offerings and internal corporate systems. The failure or obsolescence of any of these platforms, if not remediated or replaced, could materially adversely affect our business, results of operations, and financial condition.

We currently utilize multiple software platforms to support our service offerings. We believe certain of these software platforms distinguish our service offerings from our competitors. The failure of one or more of our software platforms to function properly, or the failure of these platforms to remain competitive, could materially adversely affect our business, results of operations, and financial condition. In addition, the cost to replace such systems may not generate a commensurate benefit.

BUSINESS AND OPERATIONS

A significant portion of our operations are international. These international operations subject us to political, legal, operational, exchange rate and other risks not generally present in U.S. operations, which could materially negatively affect those operations or our business.

Our international operations subject us to political, legal, operational, financial, exchange rate and other risks that we do not face in our domestic operations. Many of these operations are substantially smaller than our U.S. operations and as such are at risk of generating operating losses due to lack of scale. We face, among other risks, the risk of discriminatory regulation; nationalization or expropriation of assets; changes in both domestic and foreign laws regarding taxation, trade and investment abroad; pandemics such as coronavirus; potential loss of proprietary information due to piracy, misappropriation or laws that may be less protective of our intellectual property rights; or price controls and exchange controls or other restrictions that could prevent us from transferring funds from these operations out of the countries in which they were earned or converting local currencies we hold into U.S. dollars or other currencies.

Although we do not have direct exposure from the conflicts in Russia/Ukraine and Israel, we are aware of their potential negative impact to adjacent economies which could lower claim activity across our network of offices and increase our exposure to cyberattacks.

International operations also subject us to numerous additional laws and regulations that are in addition to, or may be different from, those affecting U.S. businesses, such as those related to labor, employment, worker health and safety, antitrust and competition, trade restriction, environmental protection, consumer protection, import/export and anti-corruption, including but not limited to the Foreign Corrupt Practices Act ("FCPA"). Although we have put into place policies and procedures aimed at ensuring legal and regulatory compliance, our employees, subcontractors, and agents could inadvertently or intentionally take actions that violate any of these requirements. Violations of these regulations could impact our ability to conduct business, or subject us to criminal or civil enforcement actions, any of which could have a material adverse effect on our business, financial condition or results of operations.

We currently, and from time to time in the future may, outsource a portion of our internal business functions to third-party providers. Outsourcing these functions has significant risks, and our failure to manage these risks successfully could materially and adversely affect our business, results of operations, and financial condition.

We currently, and from time to time in the future may, outsource significant portions of our internal business functions to third-party providers. Third-party providers may not comply on a timely basis with all of our requirements, or may not provide us with an acceptable level of service. Our dependency on third-party providers also increases our cybersecurity and data privacy risks, as well as IT general control risks. In addition, our reliance on third-party providers could have significant negative consequences, including significant disruptions in our operations and significantly increased costs to undertake our operations, either of which could damage our relationships with our customers. As a result of our outsourcing activities, it may also be more difficult for us to recruit and retain qualified employees for our business needs at any time. Our failure to successfully outsource any material portion of our business functions could materially and adversely affect our business, results of operations, and financial condition.

---

Natural or manmade disasters or other acts of violence may affect the markets in which we operate, our clients and our service delivery.

Our business may be negatively affected by instability, disruption or destruction in the many geographic regions where we operate. Natural or manmade disasters, including storm, flood, fire, earthquake, pandemics and other regional or global health crises, as well as war, terrorism, riot, civil insurrection or social unrest, may cause damage to our facilities or disrupt our services. This includes our shared services centers which exist in international geographies. Specifically, we continue to increase employees and processes performed by our Global Business Service Center located in the Philippines. Our crisis management procedures, business continuity plans and disaster recovery capabilities may not be effective at preventing or mitigating the effects of such disasters, particularly in the case of a catastrophic event. These events may pose significant security risks to our employees, the facilities where they work, our operations, electricity and other utilities, communications, travel and network services and the disruption of any or all of them could materially adversely affect our financial results.

 

We are, and may become, party to lawsuits or other claims or investigations that could adversely impact our business.

In the normal course of the claims administration services business, we are from time to time named as a defendant in suits by insureds or claimants contesting decisions by us or our clients with respect to the settlement of claims. Additionally, our clients have in the past brought, and may, in the future bring, claims for indemnification on the basis of alleged actions on our part or on the part of our agents or our employees in rendering services to clients. There can be no assurance that additional lawsuits will not be filed against us. There also can be no assurance that any such lawsuits will not have a disruptive impact upon the operation of our business, that the defense of the lawsuits will not consume the time and attention of our senior management and financial resources or that the resolution of any such litigation will not have a material adverse effect on our business, financial condition and results of operations.

We are 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, we face claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts with such employees or former employees. Such claims, investigations, and any litigation involving the Company could divert management's time and attention from business operations and could potentially result in substantial costs of defense, settlement or other disposition, which could have a material adverse effect on our results of operations and financial condition.

The costs of compliance with sustainability or other environmental, social responsibility or governance laws, regulations, or policies, including investor and client-driven policies and standards, could adversely affect our business.

As a non–manufacturing service business, we have to date been less impacted by laws and regulations related to sustainability concerns. However, we could incur costs related to specific requirements by our customers or shareholders in climate, social responsibility, governance, or other areas. Increasingly our customers and shareholders expect that we meet social responsibility, sustainability or other business policies or standards, which may be more restrictive than current laws and regulations, before they commence or continue doing business with us. Our compliance with these policies and related requirements could be costly, and our failure to comply could adversely affect our business relationships or reputation.

If internal control deficiencies or material weaknesses were to arise, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and financial results.

As of December 31, 2022, we identified a material weakness in internal control over financial reporting in our United Kingdom information technology general controls. Although such material weakness was remediated in 2023, if we identify one or more material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities laws regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot be certain that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.

---

LIQUIDITY AND CAPITAL

Our U.S. qualified defined benefit pension plan (the "U.S. Qualified Plan") is underfunded. Future funding requirements, including those imposed by any further regulatory changes, could restrict cash available for our operating, financing, and investing requirements.

At the end of the most recent measurement period for our U.S. Qualified Plan, the projected benefit obligation was underfunded by $22.3 million. In 2021 we made voluntary contributions to this plan, but we did not do so in 2022 or 2023, and do not expect to make any discretionary contributions to the U.S. Qualified Plan in the next fiscal year. Volatility in the capital markets, mortality changes and future legislation may have a negative impact on our pension plan, which may further increase the underfunded portion and our attendant funding obligations. Any future contributions to our underfunded defined benefit pension plan could reduce our liquidity, restrict available cash for our operating, financing, and investing needs and may materially adversely affect our financial condition and our ability to deploy capital to other opportunities. Any decision to terminate the plan and settle the defined-benefit pension obligation would result in a non-cash charge within the Consolidated Statements of Operations related to unrecognized actuarial losses in accumulated other comprehensive income, which totals $190.3 million as of December 31, 2023.

While we do not anticipate any contribution in 2024, we intend to comply with any future funding requirements through the use of cash from operations. However, there can be no assurance that we will generate enough cash to do so. Our inability to fund these obligations through cash from operations could require us to seek funding from other sources, including through additional borrowings under our Credit Facility (defined below), if available, proceeds from debt or equity financings, or asset sales. There can be no assurance that we would be able to obtain any such external funding in amounts, at times and on terms that we deem commercially reasonable, in order for us to meet these obligations. Furthermore, any of the foregoing could materially increase our outstanding debt or debt service requirements, or dilute the value of the holdings of our current shareholders, as the case may be. Our inability to comply with any funding obligations in a timely manner could materially adversely affect our financial condition.

We have debt covenants in our credit facility that require us to maintain compliance with certain financial ratios and other requirements. If we are not able to maintain compliance with these requirements, all of our outstanding debt could become immediately due and payable.

We are party to a credit facility, effective as of November 5, 2021, with Bank of America, N.A., Wells Fargo Bank, N.A., Truist Bank, and the other lenders a party thereto, (the "Credit Facility"). The Credit Facility consists of a $450 million revolving credit facility, with a letter of credit sub-commitment of $125 million. The available borrowing capacity under the Credit Facility totaled $232.1 million on December 31, 2023. The Credit Facility contains various representations, warranties and covenants, including covenants limiting liens, indebtedness, guarantees, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, restrictions on dividends and distributions, and other fundamental changes in our business. Additionally, the Credit Facility contains covenants requiring us to remain in compliance with a maximum leverage ratio and a minimum interest coverage ratio.

If we do not maintain compliance with the covenant requirements, we may be in default under the Credit Facility. In such an event, the lenders under the Credit Facility would generally have the right to declare all then-outstanding amounts thereunder immediately due and payable. If we could not obtain a required waiver on satisfactory terms, we could be required to renegotiate the terms of the Credit Facility or immediately repay this indebtedness. Any such renegotiation could result in less favorable terms, including additional fees, higher interest rates and accelerated payments, and would necessitate significant time and attention of management, which could divert their focus from business operations. Any required payment may necessitate the sale of assets or other uses of resources that we do not believe would be in our best interests. While we do not presently expect to be in violation of any of these requirements, no assurances can be given that we will be able to continue to comply with them in the future. Any failure to continue to comply with such requirements could materially adversely affect our borrowing ability and access to liquidity, and thus our overall financial condition, as well as our ability to operate our business.

---

In recent periods we have incurred impairment charges that reduced the carrying value of our intangible assets and goodwill; in the future we may be required to incur additional impairment charges on a portion of or all of the carrying value of our intangible assets and goodwill, which may adversely affect our financial condition and results of operations.

Each year, and more frequently on an interim basis if appropriate, we are required by ASC Topic 350, "Intangibles--Goodwill and Other," to assess the carrying value of our indefinite lived intangible assets and goodwill to determine whether the carrying value of those assets is impaired. Such assessment and determination involves significant judgments to estimate the fair value of our reporting units, including estimating future cash flows, near term and long term revenue growth, and determining appropriate discount rates, among other assumptions. We intend to continue to monitor the performance of our reporting units and, should actual operating earnings consistently fall below forecasted operating earnings, we will perform an interim goodwill impairment analysis. Any such charges could materially adversely affect our financial results in the periods in which they are recorded.

Control by a principal shareholder could adversely affect the Company and our other shareholders.

As of December 31, 2023, Jesse C. Crawford, a member of our Board of Directors, and the father of Jesse C. Crawford, Jr., who is also a member and Chair of the Board of Directors, beneficially owned approximately 66% of our outstanding voting Class B Common Stock. As a result, he has the ability to control substantially all matters submitted to our shareholders for approval, including the election and removal of directors. He also has the ability to control our management and affairs. As of December 31, 2023, Mr. Crawford also beneficially owned approximately 36% of our outstanding non-voting Class A Common Stock. This concentration of ownership of our stock may delay or prevent a change in control; impede a merger, consolidation, takeover, or other business combination involving us; discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us; reduce the liquidity, and thus the trading price, of our stock; or result in other actions that may be opposed by, or not be in the best interests of, the Company and our other shareholders.

COMPETITION AND EMPLOYEES

We operate in highly competitive markets and face intense competition from both established entities and new entrants into those markets. Potential consolidation in our industry can also create stronger competition. Our failure to compete effectively may adversely affect us.

Our ability to retain clients and maintain and increase case referrals is also dependent in part on our ability to continue to provide high-quality, competitively priced services and effective sales efforts.

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 us 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, overall employment levels, and workplace injury rates. We are also impacted by decisions insurance companies and self-insured entities make with respect to the level of claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters.

We also face competition from potential new entrants into the global claims management services market, in addition to traditional competitors. Potential consolidation in our industry can also create stronger competition. Our inability to react to such competition could negatively impact our volume of case referrals and results of operations.

We may not be able to recruit, train, and retain qualified personnel, including retaining enough qualified and experienced on-call claims adjusters, to respond to catastrophic events that may, singularly or in combination, significantly increase our clients' needs for claims adjusters.

Our catastrophe-related work and revenues can fluctuate dramatically based on the frequency and severity of natural and man-made disasters. When such events happen, our clients usually require a sudden and substantial increase in the need for catastrophic claims services, which can strain our capacity. Our internal resources are sometimes not sufficient to meet these sudden and substantial increases in demand. When these situations occur, we must retain outside adjusters (temporary employees and contractors) to increase our capacity. There can be no assurance that we will be able to retain such outside adjusters with the requisite qualifications, at the times needed or on terms that we believe are economically reasonable. Insurance companies and other loss adjusting firms also aggressively compete for the same pool of outside adjusters, who often command high prices for their services at such times of peak demand. Such competition could reduce availability, increase our costs and reduce our revenues. Our failure to timely, efficiently, and competently provide these services to our clients could result in reduced revenues, loss of customer goodwill and a negative impact on our results of operations.

---

Our business would be harmed if we are unable to attract and retain skilled employees, or if our labor costs increase in response to competition for qualified employees.

Many of our employees possess skills and expertise that are important to maintain our competitiveness and to operate our business efficiently. We compete with other employers when just we hire new employees, but also for the retention of our existing employees. Such competition could reduce availability, increase our costs and reduce our revenues. Such competition may require us to increase wages and benefits to recruit and retain qualified employees. Furthermore, even with increases in wages and benefits, employment shortages may nonetheless result from such competition. If we are not successful in attracting and retaining sufficient skilled employees on terms acceptable to us, our business could be materially and adversely affected.

We face challenges caused by our aging workforce and we may not be able to recruit, train, and retain adequate replacements for our qualified and skilled employees.

Many of the employees in our industry, including those that we employ directly, are approaching retirement age. As these experienced employees retire, we may have difficulty recruiting new employees with comparable qualifications and experience, and we may be unable to transfer our employees’ institutional knowledge successfully to new qualified employees. Any such failures would be exacerbated at times of peak demand and could cause us to rely more heavily on outside resources. Our failure to recruit and train new employees and to ensure they obtain the adequate qualifications and experience could result in reduced revenues, loss of customer goodwill and a material negative impact on our results of operations.

We are subject to inflation risks which could increase our wages, benefits, and other costs which may result in decreased profitability.

We are impacted by inflationary increases in wages, benefits and other costs. In all countries in which we operate, wage and benefit inflation, whether driven by competition for talent, or ordinary course pay increases and other inflationary pressure, may increase our cost of providing services and reduce our profitability. Furthermore, as a result of our global operations, wage increases in emerging markets may increase at a faster rate than wages in the U.S. and other developed markets, which increases our exposure to inflation risks. If we are not able to pass increased wage and other costs resulting from inflation onto our clients or charge premium prices when justified by market demand, our profitability may decline.

 

The risks described above are not the only ones we face, but are the ones currently deemed the most material by us based on available information. New risks may emerge from time to time, and it is not possible for management to predict all such risks, nor can we assess the impact of known risks on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Cybersecurity Risk Management and Strategy

We recognize the importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our client's and our data. We have a global cybersecurity and privacy program to help effectively assess, identify, and manage cybersecurity threat risks. We have developed a list of cybersecurity risks from known threats and our own history to help identify what is most meaningful and potentially impactful to the Company. The cybersecurity and privacy initiatives to address the risks are complex, strategic, and ever evolving. Threats and risks are identified from threat intelligence sources that include our vendors, industry, and government organizations. We continuously monitor and scan the cyber landscape to review evolving threats and risks that may impact us. Information from these various sources are reviewed by our cybersecurity and risk teams to evaluate risks in line with the NIST Cybersecurity Framework. Threat intelligence from other financial institutions and industry consortiums that serve financial institutions, such as the Financial Services Information Sharing and Analysis Center, provides key information on how risks are affecting our industry, with ability to preemptively mitigate emerging threats, as discussed above in Part I, Item 1A of this Form 10-K under the heading Technology and Data Security.

---

We score cybersecurity risks based on the likelihood and impact on our operations. Such cybersecurity risks are integrated and evaluated as part of the global Enterprise Risk Management (“ERM”) program, which is managed by the ERM Director. The Governance Committee of the Board of Directors maintains oversight of the ERM program and the Audit Committee maintains oversight of the cybersecurity program to ensure risks to the Company are managed within our risk appetite.

Our ERM program considers cybersecurity threat risks alongside other company risks as part of our overall risk assessment process when identifying and assessing material risks. Our ERM team collaborates with internal subject matter specialists, as necessary, to gather insights and report on the most significant risks. We employ a range of tools and services, including regular network and endpoint monitoring, vulnerability assessments, penetration testing, and tabletop exercises to identify threats and improve our incident response plan.

We identify and assess cybersecurity incidents based on multiple factors including information from previous events and incidents. The Cybersecurity Incident Response Team (“CSIRT”) categorizes events into four levels of severity with defined requirements to assess criticality. The CSIRT informs both our leadership as well as our SEC Cybersecurity Rules Disclosure Committee (“SCRDC”), Cybersecurity and Privacy Council and the Audit Committee of the Board on matters related to cybersecurity risks that are deemed to materially affect the Company.

We perform ongoing cybersecurity awareness training for our employees that reinforces our Global Information Security policies, standards and practices. In addition, employees receive periodic newsletters emphasizing awareness of new cybersecurity threats (e.g., phishing attempts, smishing, pretexting, and deep fakes). This training is mandatory for all employees globally and is supplemented with periodic phishing tests. Additionally, we perform an annual external evaluation of our cybersecurity program using the NIST Cybersecurity Framework.

We regularly engage with consultants to review our cybersecurity program to help identify areas for continued focus, improvement and compliance. Our processes also address cybersecurity risks associated with third-party service providers, including those with access to our non-public or restricted data, including client data. Third-party risks are also included within our ERM program and are actively reported to the Audit and Governance Committees. Our Third-Party Risk Management Program comprises a defined process to identify, assess, and mitigate risks by our third-party suppliers and service providers, specifically including cybersecurity and privacy risks.

We are also in the process of simplifying our technology landscape and implementing several new cybersecurity technologies that will help improve the management of cybersecurity risks and threats. In the last three fiscal years, we have not experienced any material cybersecurity incidents and the expenses we have incurred from cybersecurity incidents were immaterial (including no related penalties and settlements).

Cybersecurity Governance

Our global cybersecurity and privacy program is managed by our Chief Information Security Officer (“CISO”), Vice-President of Global IT Security, Global Chief Privacy Officer (“CPO”), and Chief Information Officer (“CIO”). We have also established a Cybersecurity and Privacy Council, which is comprised of our senior management team, including our CEO. The Cybersecurity and Privacy Council meets on a quarterly basis with the CISO, CPO and CIO to keep our CFO, General Counsel and other executive leadership informed of cybersecurity activities and new risks and requirements. The objective of this council is to review, discuss, and manage cybersecurity and privacy risks and threats, prioritize risks, monitor risk mitigation progress, advise and update on the evolving legal landscape, as well as provide visibility into ongoing activities and programs.

The Board of Directors provides oversight and has designated primary responsibility to the Audit Committee who oversees our information security programs including cybersecurity and is actively involved in monitoring the progress of key cybersecurity initiatives. The CISO manages the cybersecurity program in collaboration with the CIO, CPO, and our business leaders. The CISO provides updates to the Audit Committee quarterly, including progress on the cybersecurity initiatives, risk trends and scores, and any cybersecurity incidents. Executive leadership and the Board of Directors are regularly informed and updated on any potentially material incidents.

We also created a SCRDC composed of members from cybersecurity, privacy, legal, audit, and finance teams. This committee's objective is to review and discuss the nature of cybersecurity and privacy incidents and determine impact and materiality.

---

Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our CISO, CPO, CIO, and VP of Global IT Security. Our security, privacy, and IT leaders have extensive relevant work experience in various roles which includes developing cybersecurity strategy, implementing effective information and cybersecurity programs, and implementing cybersecurity and privacy solutions. These leaders have relevant degrees and certifications, including Certified Information Systems Auditor, Certified Information Systems Security Professional, Fellow of Information Privacy, and Certified Information Privacy Professional.

As described above, we have experienced professionals in the key roles of the CISO, CPO, CIO, and VP of Global IT Security. The cybersecurity and privacy offices are responsible for incident reporting and management, which includes cybersecurity threats. The Incident Response team, comprising key cross-functional professionals and stakeholders globally, meets weekly and as needed to identify, respond, contain, and coordinate events where activities threaten the security, confidentiality, integrity, and availability of our information, including client information and information systems.

Once an event materially impacts systems or data, these cross-functional professionals and stakeholders evaluate the incident using key factors (e.g., type and scope of information impacted, systems impacted, reputational impact) and promptly inform senior leadership, the Audit Committee and the Board of Directors. Further, we may consult outside counsel or external advisors given the circumstances and situation (e.g., client, controls, location, or regulatory landscape).

ITEM 2. PROPERTIES

As of December 31, 2023, we leased 206 office locations under various leases with varying terms. For additional information on our significant operating leases and subleases, see Note 6 "Lease Commitments" of our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Other office locations are occupied under various short-term rental arrangements. We generally believe that our office locations are sufficient for our operations and that, if it were necessary to obtain different or additional office locations, such locations would be available at times, and on commercially reasonable terms, as would be necessary for the conduct of our business. No assurances can be given, however, that we would be able to obtain such office locations as and when needed, or on terms we considered to be reasonable, if at all. We continue to evaluate our current and projected space requirements and may determine from time to time that certain of our leased properties are no longer necessary for our operations. There is no assurance that we will be able to terminate or sublease such excess locations or that we will not incur costs with such dispositions. Such costs are not material to our results of operations in a given period.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of the claims administration services business, we are from time to time named as a defendant in suits by insureds or claimants contesting decisions by us or our clients with respect to the settlement or administration of claims. Additionally, our 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, our agents or our employees in rendering service to clients. The majority of these claims are of the type covered by insurance maintained by us; however, we are responsible for the deductibles and self-insured retentions under our various insurance coverages. In our opinion, adequate provisions have been provided for such known risks. No assurances can be provided, however, that the result of any such action, claim or proceeding, now known or occurring in the future, will not result in a material adverse effect on our business, financial condition or results of operations.

We are 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, we face claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts with such employees or former employees.

ITEM 4. MINE SAFETY DISCLOSURES ITEM 5.

Not applicable.

---

PART II

MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Shares of the Company's two classes of common stock are traded on the NYSE under the symbols CRD-A and CRD-B. The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, voting as a class.

The number of record holders of each class of the Company's common stock as of December 31, 2023 was as follows: CRD-A — 3,035 and CRD-B — 332.

Effective November 4, 2021, the Company’s Board of Directors authorized the repurchase of up to 2,000,000 shares of CRD-A or CRD-B (or a combination of the two) through December 31, 2023 (the “2021 Repurchase Authorization”). On February 10, 2022, the Company’s Board of Directors added 5,000,000 shares to this authorization. The Company's Board of Directors subsequently amended this authorization to allow for repurchases through December 31, 2024. At December 31, 2023, the Company had remaining authorization to repurchase 1,499,419 shares under the 2021 Repurchase Authorization.

The following graph and table show the value as of December 31, 2023 of a $100 investment in the Company's Class A and Class B common stock as of December 31, 2018 as compared to a similar investment in each of (i) the S&P 500 Index, and (ii) the S&P 500 Property-Casualty Insurance Index, in each case on a total return basis assuming the reinvestment of all dividends. The stock price performance represents past results and is not necessarily indicative of future performance.

 

 

 

 

TOTAL RETURN TO SHAREHOLDERS
(Includes reinvestment of dividends)
		Base				INDEXED RETURNS
		Period				YEARS ENDED DECEMBER 31,
Company / Index		2018				2019				2020				2021				2022				2023
Crawford & Company (Class A)			100.00				132.56				87.61				91.11				69.89				170.78
Crawford & Company (Class B)			100.00				115.15				83.62				89.32				65.60				167.05
S&P 500 Index			100.00				131.49				155.68				200.38				164.09				207.23
S&P Property-Casualty Insurance Index			100.00				125.87				133.84				157.27				186.95				207.05

 

---

 

The foregoing graph and table are not, and shall not be deemed to be, filed as part of the Company's Annual Report on Form 10-K. Such graph and table do not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing of the Company under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent specifically incorporated by reference therein by the Company.

ITEM 6. [RESERVED]

 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the Company, our operations, and our business environment. This MD&A is provided as a supplement to — and should be read in conjunction with — our audited consolidated financial statements and the accompanying notes thereto contained in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. As described in Note 1, "Significant Accounting and Reporting Policies," of those accompanying audited consolidated financial statements, financial results from our operations outside of the U.S., Canada, the Caribbean, and certain subsidiaries in the Philippines, are reported and consolidated on a two-month delayed basis in accordance with the provisions of ASC 810, "Consolidation," in order to provide sufficient time for accumulation of their results. Accordingly, the Company's December 31, 2023, 2022, and 2021 consolidated financial statements include the financial position of such operations as of October 31, 2023 and 2022, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31, 2023, 2022 and 2021, respectively.

Business Overview

Based in Atlanta, Georgia, Crawford & Company (www.crawco.com) is the world's largest publicly listed independent provider of claims management and outsourcing solutions to carriers, brokers and corporations with an expansive global network serving clients in more than 70 countries.

 

We have a geographic reporting structure consisting of North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions. Our reportable segments are comprised of the following:

As discussed in more detail in subsequent sections of this MD&A, our four reportable segments represent components of our Company for which separate financial information is available, and which is evaluated regularly by our chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing operating performance.

Insurance companies rely on us for certain services such as field investigation and the evaluation of property and casualty insurance claims. Self-insured entities typically rely on us for a broader range of services. In addition to field investigation and claims evaluation, we may also provide initial loss reporting services for their claimants, loss mitigation services such as medical bill review, medical case management and vocational rehabilitation, risk management information services, and loss fund administration to pay their claims. Our Contractor Connection service line provides a managed contractor network to insurance carriers and consumer markets.

---

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 us 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, overall employment levels and workplace injury rates. Demand is also impacted by decisions insurance companies and self-insured entities make with respect to the level of claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. In addition, our ability to retain clients and maintain or increase case referrals is also dependent in part on our ability to continue to provide high-quality, competitively priced services and effective sales efforts.

We typically earn our revenues on an individual fee-per-claim basis for claims management services that we provide to insurance companies and self-insured entities. Accordingly, the volume of claim referrals to us is a key driver of our revenues. We cannot predict the future trend of case volumes for a number of reasons, including the frequency and severity of weather-related cases and the occurrence of natural and man-made disasters, which are a significant source of cases for us and are not subject to accurate forecasting.

Results of Operations

Executive Summary

Consolidated revenues before reimbursements were $1.267 billion in 2023, an increase of 6.5% compared with $1.189 billion in 2022. Net income attributable to the Company was $30.6 million in 2023, compared with a net loss of $(18.3) million in 2022.

We recorded a non-cash goodwill impairment of $36.8 million, or $33.3 million after tax, during 2022. There was no goodwill impairment in 2023. We also recorded income tax reserves of $11.8 million on certain international tax assets during 2022.

Consolidated revenues before reimbursements increased $77.6 million, or 6.5%, in 2023, compared with 2022. This increase was due to new client growth in North America Loss Adjusting, International Operations, and Broadspire and pricing increases in all of our operating segments. This was partially offset by a weather-related reduction in our Platforms Solutions segment. Changes in foreign exchange rates decreased our consolidated revenues before reimbursements by $12.8 million, or 1.1%, for 2023 as compared with the prior year.

 

		In thousands (except percentages)
		Based on actual exchange rates												Based on exchange rates for December 31, 2022
Year Ended December 31,		2023				2022				Variance				2023				Variance
Revenues:
North America Loss Adjusting		$	303,629			$	274,755				10.5	%		$	307,161				11.8	%
International Operations			382,393				357,452				7.0	%			391,645				9.6	%
Broadspire			355,650				313,564				13.4	%			355,650				13.4	%
Platform Solutions			225,459				243,711				(7.5	)%			225,459				(7.5	)%
Total revenues before reimbursements			1,267,131				1,189,482				6.5	%			1,279,915				7.6	%
Reimbursements			49,788				41,744				19.3	%			50,777				21.6	%
Total Revenues		$	1,316,919			$	1,231,226				7.0	%		$	1,330,692				8.1	%

Excluding foreign currency impacts, consolidated revenues before reimbursements increased $90.4 million, or 7.6%, for 2023. Revenues from the North America Loss Adjusting segment increased in 2023 due to an increase in new business and weather-related activity in the U.S. Revenues from the International Operations segment increased due to increases in the U.K., Europe and Latin America. Revenues from the Broadspire segment increased due to increases in Claims and Medical Management. Revenues from the Platform Solutions segment decreased due to a reduction in our Networks service line. There was a net $1.5 million, or 0.1% increase in total company revenues in 2023 as a result of acquisitions. See Note 3, “Business Acquisitions and Dispositions” of our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion about this activity.

---

Overall, there was a decrease in cases received of (5.0)% in 2023 compared with 2022, due to a reduction of approximately 73,200 high-frequency, low-severity cases in our four operating segments that were present in 2022 that generated minimal revenues in the 2022 period. There were 17,000 cases received in our International Operations segment in 2022 as a result of a weather-related catastrophe in Australia for which revenues were recognized across several quarters as services were performed. Also, there was a $23.9 million increase in revenues in our Broadspire segment within the Medical Management and Claims Management service lines during 2023 with no cases received. In addition, our Platforms Solution segment had a decrease in revenues of $16.2 million in 2023, compared to 2022, not measured by cases where we provided dedicated employees to clients in our Networks service line. Accordingly, the overall increase in revenues in 2023 does not necessarily correlate to the change in case volumes.

Cases received are presented below by segment:

 

Year Ended December 31,		2023				2022				Variance
North America Loss Adjusting			277,212				294,997				(6.0	)%
International Operations			486,237				536,106				(9.3	)%
Broadspire			542,832				540,893				0.4	%
Platform Solutions			453,000				479,598				(5.5	)%
Total Crawford Cases Received			1,759,281				1,851,594				(5.0	)%

 

Segment operating earnings (a measure of segment operating performance used by our management that is defined and discussed in more detail below) increased in our North America Loss Adjusting, International Operations, and Broadspire operating segments, partially offset by a decrease in our Platform Solutions operating segment.

Although operating earnings is the primary financial performance measure used by our senior management and CODM to evaluate the financial performance of our operating segments and make resource allocation and certain compensation decisions, we believe that a non-GAAP discussion and analysis of segment gross profit is also helpful in understanding the results of our segment operations excluding indirect centralized administrative support costs. Our discussion and analysis of segment gross profit includes the revenues and direct expenses of each segment.

In the North America Loss Adjusting segment, operating earnings increased from $19.1 million, or 7.0% of revenues before reimbursements in 2022, to $23.2 million, or 7.6% of revenues before reimbursements in 2023, primarily due to a $28.9 million increase in revenues. Excluding indirect support costs, gross profit increased from $51.8 million, or 18.9% of revenues before reimbursements in 2022, to $62.2 million, or 20.5% of revenues before reimbursements in 2023.

In the International Operations segment, operating earnings increased from a $(12.9) million loss, or (3.6)% of revenues before reimbursements in 2022, to earnings of $11.2 million, or 2.9% of revenues before reimbursements in 2023, primarily due to a $24.9 million increase in revenues and cost reductions in certain international operations. Excluding indirect support costs, gross profit increased from $41.1 million or 11.5% of revenues before reimbursements in 2022, to $60.4 million, or 15.8% of revenues before reimbursements in 2023.

In the Broadspire segment, operating earnings increased from $27.0 million, or 8.6% of revenues before reimbursements in 2022, to $41.9 million, or 11.8% of revenues before reimbursements in 2023, primarily due to a $42.1 million increase in revenues. Excluding indirect support costs, gross profit increased from $69.9 million, or 22.3% of revenues before reimbursements in 2022, to $88.6 million, or 24.9% of revenues before reimbursements in 2023.

In the Platform Solutions segment, operating earnings decreased from $35.7 million, or 14.7% of revenues before reimbursements in 2022, to $28.5 million, or 12.7% of revenues before reimbursements in 2023, primarily due to a ($18.3) million decrease in revenues. Excluding indirect support costs, gross profit decreased from $56.3 million, or 23.1% of revenues before reimbursements in 2022, to $51.6 million, or 22.9% of revenues before reimbursements in 2023.

Cost of services provided, before reimbursements, increased $24.9 million, or 2.8% for 2023 compared with 2022. This increase was primarily due to an increase in compensation expense, including incentive compensation and the impact of wage inflation, and an increase in other operating costs in each of our operating segments resulting from the $77.6 million increase in revenues, partially offset by the change in foreign exchange rates.

Selling, general, and administrative ("SG&A") expenses increased $30.8 million, or 12.0%, in 2023, as compared with 2022. This increase was due to an increase in compensation expense, including incentive compensation, an increase in self-insurance costs, professional fees and contingent earnout adjustments, and the 2022 gain on the sale of our Canadian head office building described below.

---

Contingent earnout expense represents the fair value adjustment of earnout liabilities arising from recent acquisitions. This expense totaled $4.0 million for 2023, compared to $2.9 million for 2022. The fair value adjustment is based on changes to projections of acquired entities over the respective earnout periods, which span multiple years.

Non-service pension cost totaled $8.6 million for 2023, compared to a credit of ($1.6) million for 2022, primarily due to higher interest cost in 2023 compared to 2022 given changes in market rates. Non-service pension costs represents the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan is frozen and the U.K. plans are closed to new participants. The service cost component of the U.K. plans remains in compensation expense.

We sold our Canadian head office building in Kitchener, Ontario Canada in the first quarter of 2022 for $3.1 million and recognized a pretax gain on disposal of $1.8 million. This gain is recorded as a credit within Unallocated Corporate and Shared Costs and is included in “Selling, general, and administrative expenses” on the Company's Condensed Consolidated Statements of Operations.

We recognized a pretax non-cash goodwill impairment in the 2022 third quarter totaling $36.8 million related to the North America Loss Adjusting ($3.4 million), International Operations ($22.7 million), and Platform Solutions ($10.7 million) reportable segments. There was no goodwill impairment in 2023 or 2021.

We also recorded income tax reserves of $11.8 million on certain international tax assets during 2022, primarily related to previously benefited tax losses in certain international jurisdictions. These tax assets currently do not expire and are available for future use depending on the profitability of those jurisdictions.

We received a $5.9 million benefit in 2021 from the Canadian Emergency Wage Subsidy ("CEWS"). The Canadian government enacted the CEWS in 2020 to provide a wage subsidy to employers that suffered reductions in revenue resulting from the COVID-19 pandemic. We met the eligibility criteria to receive the wage subsidy in 2021 due to the negative economic impact of COVID-19 in that country. This subsidy was recorded as a credit within Direct Compensation, Fringe Benefits and Non-Employee Labor and was included in "Costs of services provided, before reimbursements” or “Selling, general, and administrative expenses” on our Consolidated Statements of Operations for 2021, depending on classification of the employees. There was no benefit in 2022 or 2023 and there are no future benefits available under this subsidy.

On April 1, 2022, we purchased assets associated with R.P. van Dijk B.V. ("Van Dijk"), a bodily injury loss adjusting company based in the Netherlands. The purchase price included an initial cash consideration of $4.3 million, and an earn-out potential up to $2.2 million payable over the next two years based on the achievement of revenue performance goals and other nonfinancial milestones over two one-year periods, beginning April 2022. This acquisition expands our network in the Netherlands and strengthens its bodily injury loss adjusting service offering by adding a highly qualified team of adjusters experienced in managing complex loss events resulting in injury or death, as well as handling medical liability claims.

 

On October 4, 2021, we acquired BosBoon Expertise Group B.V. ("BosBoon"), a Netherlands-based specialist loss adjusting company. BosBoon offers a specialist range of loss adjusting services which was added to the existing Crawford Global Technical Services proposition in the Netherlands. The purchase price included an initial cash consideration of $2.1 million, net of a working capital adjustment, and a maximum $1.9 million payable over the next two years based on achieving certain financial and nonfinancial goals, as defined in the purchase agreement.

On October 1, 2021, we acquired the assets of Praxis Consulting ("Praxis"), an established subrogation claims service provider in the U.S. This acquisition allows us to expand our footprint in the U.S. subrogation claims market. The purchase price included an initial cash consideration of $21.5 million, a working capital adjustment payment of $0.7 million, a deferred payment of $20.0 million in February 2022, and a maximum $10.0 million payable over the next two years based on achieving certain revenue performance goals, as defined in the purchase agreement.

On August 23, 2021, we acquired 100% of edjuster Inc. in Canada and its U.S. subsidiary (collectively "edjuster"). edjuster is a technology-enabled, end-to-end contents services provider and platform. This acquisition enables us to expand our capability in the North American claims contents services market. The purchase price included an initial cash payment of $20.9 million, working capital adjustment payable of $0.4 million, and an earn-out potential up to $13.3 million based on the achievement of certain performance goals over two one-year periods through 2024.

---

On November 1, 2020, we acquired 100% of HBA Group in Australia. The HBA Group is a legal services provider that complements our TPA business in Australia. The purchase price included an initial cash payment of $4.0 million, net of working capital adjustment, and a maximum $3.2 million payable over the next four years based on achieving certain revenue and EBITDA performance goals as set forth in the purchase agreement. The financial results of certain of the Company’s international subsidiaries, including HBA Group, are included in our consolidated financial statements on a two-month delayed basis. Accordingly, the acquisition of HBA was reported as of January 1, 2021.

These acquisitions were funded primarily through additional borrowings under our credit facility. See Note 3, “Business Acquisitions and Dispositions” of our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion about these transactions.

Segment Operating Earnings

We believe that a discussion and analysis of the segment operating earnings of our four operating segments is helpful in understanding the results of our operations. Operating earnings is our segment measure of profitability presented in conformity with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 280 "Segment Reporting." Operating earnings is the primary financial performance measure used by our senior management and CODM to evaluate the financial performance of our operating segments and make resource allocation and certain compensation decisions.

We believe operating earnings is a measure that is useful to others in that it allows them to evaluate segment operating performance using the same criteria used by our senior management and CODM. Segment operating earnings represent segment earnings, including the direct and indirect costs of certain administrative functions required to operate our business, but excludes unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, goodwill impairment, non-service pension costs and credits, contingent earnout adjustments, income taxes, reserves on certain income tax assets, and net income or loss attributable to noncontrolling interests.

Administrative functions such as finance, human resources, information technology, quality and compliance, exist in both a centralized shared-service arrangement and within certain operations. Each of these functions are managed by centralized management and we allocate the costs of those services to the segments as indirect costs based on usage.

In addition, we believe that a non-GAAP discussion and analysis of segment gross profit is helpful in understanding the results of our segment operations, excluding indirect centralized administrative support costs. Our discussion and analysis of segment gross profit includes the revenues and direct expenses of each segment. Segment gross profit is defined as revenues, less direct costs, which exclude indirect centralized administrative support costs allocated to the business.

Income taxes, net corporate interest expense, stock option expense, contingent earnout adjustments, amortization of customer-relationship intangible assets, and non-service pension costs and credits are recurring components of our net income, but they are not considered part of our segment operating earnings because they are managed on a corporate-wide basis. Income taxes are calculated for the Company on a consolidated basis based on statutory rates in effect in the various jurisdictions in which we provide services, and vary significantly by jurisdiction. Net corporate interest expense results from capital structure decisions made by senior management and the Board of Directors, affecting the Company as a whole. Stock option expense represents the non-cash costs generally related to stock options and employee stock purchase plan expenses which are not allocated to our operating segments. Contingent earnout adjustments represent fair value adjustments of earnout liabilities arising from recent acquisitions. Amortization expense is a non-cash expense for finite-lived customer-relationship and trade name intangible assets acquired in business combinations. Non-service pension costs and credits represent the U.S. and U.K. non-service defined benefit pension costs and credits, which are non-operating in nature as the U.S. plan is frozen and the U.K. plans are closed to new participants. The service cost component of the U.K. plans remains in compensation expense. The exclusion of this measurement is intended to exclude market volatility related to an expense that is non-operating in nature and not related to business performance. None of these costs relate directly to the performance of our services or operating activities and, therefore, are excluded from segment operating earnings in order to better assess the results of each segment's operating activities on a consistent basis.

Goodwill impairments and reserves on certain income tax assets arise from time to time due to various factors, but are not allocated to any particular segment since they historically have not regularly impacted our performance and are not expected to impact our future performance on a regular basis.

Unallocated corporate and shared costs and credits include expenses and credits related to our chief executive officer and Board of Directors, certain provisions for bad debt allowances or subsequent recoveries such as those related to bankrupt clients, certain unallocated professional fees, certain payroll tax and benefits, and certain self-insurance costs and recoveries that are not allocated to our individual operating segments.

---

Additional discussion and analysis of our income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, goodwill impairment, non-service pension costs and credits, reserves on certain income tax assets, and unallocated corporate and shared costs follows the discussion and analysis of the results of operations of our four operating segments.

Segment Revenues

In the normal course of business, our operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by our clients. Under GAAP, these out-of-pocket expenses and associated reimbursements are required to be included when reporting expenses and revenues, respectively, in our consolidated results of operations as we are considered the principal in these transactions. In the discussion and analysis of results of operations which follows, we do not include a gross up of expenses and revenues for these pass-through reimbursed expenses. The amounts of reimbursed expenses and related revenues offset each other in our results of operations with no impact to our net income or operating earnings. A reconciliation of revenues before reimbursements to consolidated revenues determined in accordance with GAAP is self-evident from the face of the accompanying statements of operations. Unless noted in the following discussion and analysis, revenue amounts exclude reimbursements for out-of-pocket expenses.

Our segment results are impacted by changes in foreign exchange rates. We believe that a non-GAAP discussion and analysis of segment revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate, is helpful in understanding the results of our segment operations.

Segment Expenses

Our discussion and analysis of segment operating expenses is comprised of two components: "Direct Compensation, Fringe Benefits & Non-Employee Labor" and "Expenses Other Than Direct Compensation, Fringe Benefits & Non-Employee Labor."

"Direct Compensation, Fringe Benefits & Non-Employee Labor" includes direct compensation, payroll taxes, and benefits provided to the employees of each segment, as well as payments to outsourced service providers that augment our staff in each segment. As a service company, these costs represent our most significant and variable operating expenses.

Costs of administrative functions, including direct compensation, payroll taxes, and benefits, are managed centrally and considered indirect costs. The allocated centralized indirect administrative support costs of our shared-services infrastructure are allocated to each segment based on usage and reflected within "Expenses Other Than Direct Compensation, Fringe Benefits & Non-Employee Labor" of each segment.

In addition to allocated corporate and shared costs, "Expenses Other Than Direct Compensation, Fringe Benefits & Non-Employee Labor" includes travel and entertainment, office rent and occupancy costs, automobile expenses, office operating expenses, data processing costs, cost of risk, professional fees, and amortization and depreciation expense other than amortization of customer-relationship intangible assets.

Unless noted in the following discussion and analysis, revenue amounts exclude reimbursements for out-of-pocket expenses and expense amounts exclude reimbursed out-of-pocket expenses.

---

Operating results for our segments reconciled to income before income taxes and net income (loss) attributable to shareholders of the Company are as shown in the following table.

														% Change from Prior Year
Year Ended December 31,		2023				2022				2021				2023				2022
		(In thousands, except percentages)
Revenues:
North America Loss Adjusting		$	303,629			$	274,755			$	243,789				10.5	%			12.7	%
International Operations			382,393				357,452				357,909				7.0	%			(0.1	)%
Broadspire			355,650				313,564				301,035				13.4	%			4.2	%
Platform Solutions			225,459				243,711				199,299				(7.5	)%			22.3	%
Total Revenues before reimbursements			1,267,131				1,189,482				1,102,032				6.5	%			7.9	%
Reimbursements			49,788				41,744				37,199				19.3	%			12.2	%
Total Revenues		$	1,316,919			$	1,231,226			$	1,139,231				7.0	%			8.1	%
Direct Compensation, Fringe Benefits & Non-Employee Labor:
North America Loss Adjusting		$	214,642			$	198,445			$	176,538				8.2	%			12.4	%
% of related revenues before reimbursements			70.7	%			72.2	%			72.4	%
International Operations			256,560				254,617				249,060				0.8	%			2.2	%
% of related revenues before reimbursements			67.1	%			71.2	%			69.6	%
Broadspire			217,253				198,473				187,458				9.5	%			5.9	%
% of related revenues before reimbursements			61.1	%			63.3	%			62.3	%
Platform Solutions			147,801				163,449				131,736				(9.6	)%			24.1	%
% of related revenues before reimbursements			65.6	%			67.1	%			66.1	%
Total		$	836,256			$	814,984			$	744,792				2.6	%			9.4	%
% of Revenues before reimbursements			66.0	%			68.5	%			67.6	%
Expenses Other than Direct Compensation, Fringe Benefits & Non-Employee Labor:
North America Loss Adjusting		$	65,802			$	57,202			$	52,236				15.0	%			9.5	%
% of related revenues before reimbursements			21.7	%			20.8	%			21.4	%
International Operations			114,652				115,781				103,931				(1.0	)%			11.4	%
% of related revenues before reimbursements			30.0	%			32.4	%			29.0	%
Broadspire			96,524				88,070				88,794				9.6	%			(0.8	)%
% of related revenues before reimbursements			27.1	%			28.1	%			29.5	%
Platform Solutions			49,117				44,516				35,515				10.3	%			25.3	%
% of related revenues before reimbursements			21.8	%			18.3	%			17.8	%
Total before reimbursements		$	326,095			$	305,569			$	280,476				6.7	%			8.9	%
% of Revenues before reimbursements			25.7	%			25.7	%			25.5	%
Reimbursements			49,788				41,744				37,199				19.3	%			12.2	%
Total		$	375,883			$	347,313			$	317,675
% of Revenues			28.5	%			28.2	%			27.9	%
Segment Operating Earnings (Loss):
North America Loss Adjusting		$	23,185			$	19,108			$	15,015				21.3	%			27.3	%
% of related revenues before reimbursements			7.6	%			7.0	%			6.2	%
International Operations			11,181				(12,946	)			4,918				186.4	%			(363.2	)%
% of related revenues before reimbursements			2.9	%			(3.6	)%			1.4	%
Broadspire			41,873				27,021				24,783				55.0	%			9.0	%
% of related revenues before reimbursements			11.8	%			8.6	%			8.2	%
Platform Solutions			28,541				35,746				32,048				(20.2	)%			11.5	%
% of related revenues before reimbursements			12.7	%			14.7	%			16.1	%
(Deduct) Add:
Unallocated corporate and shared costs and credits, net			(19,419	)			(7,050	)			(17,984	)			175.4	%			(60.8	)%
Net corporate interest expense			(17,036	)			(10,311	)			(6,559	)			65.2	%			57.2	%
Stock option expense			(552	)			(548	)			(1,053	)			0.7	%			(48.0	)%
Amortization of customer-relationship intangible assets			(7,790	)			(7,836	)			(11,029	)			(0.6	)%			(29.0	)%
Goodwill impairment			—				(36,808	)			—			nm				nm
Non-service pension (costs) credits			(8,601	)			1,591				3,725				(640.6	)%			(57.3	)%
Contingent earnout adjustments			(4,025	)			(2,921	)			—				37.8	%		nm
Income Before Income Taxes			47,357				5,046				43,864				838.5	%			(88.5	)%
Income taxes			(17,097	)			(23,578	)			(13,316	)			(27.5	)%			77.1	%
Net Income (Loss)			30,260				(18,532	)			30,548				263.3	%			(160.7	)%
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests			349				227				144				53.7	%			57.6	%
Net Income (Loss) Attributable to Shareholders of Crawford & Company		$	30,609			$	(18,305	)		$	30,692				267.2	%			(159.6	)%

 

nm = not meaningful

---

YEAR ENDED DECEMBER 31, 2023 COMPARED WITH YEAR ENDED DECEMBER 31, 2022

NORTH AMERICA LOSS ADJUSTING SEGMENT

Operating Earnings

Operating earnings in our North America Loss Adjusting segment totaled $23.2 million or 7.6% of revenues before reimbursements, in 2023, compared with 2022 operating earnings of $19.1 million, or 7.0% of revenues before reimbursements. The increase in operating earnings in 2023 was primarily due to an increase in revenues in the U.S. and improved staff utilization.

Excluding centralized indirect support costs, gross profit increased from $51.8 million, or 18.9% of revenues before reimbursements in 2022, to $62.2 million, or 20.5% of revenues before reimbursements in 2023, due primarily to an increase in revenues in the U.S. and improved staff utilization.

Operating results for our North America Loss Adjusting segment, including gross profit, are as shown in the following table:

		In thousands (except percentages)
		Based on actual exchange rates												Based on exchange rates for December 31, 2022
Year Ended December 31,		2023				2022				Variance				2023				Variance
Revenues		$	303,629			$	274,755				10.5	%		$	307,205				11.8	%
Direct expenses			241,475				222,938				8.3	%			244,495				9.7	%
Gross profit			62,154				51,817				19.9	%			62,710				21.0	%
Indirect expenses			38,969				32,709				19.1	%			39,524				20.8	%
Total North America Loss Adjusting Operating Earnings		$	23,185			$	19,108				21.3	%		$	23,186				21.3	%
Gross profit margin			20.5	%			18.9	%			1.6	%			20.4	%			1.5	%
Operating margin			7.6	%			7.0	%			0.6	%			7.5	%			0.5	%

 

Revenues before Reimbursements

North America Loss Adjusting revenues are primarily derived from the property and casualty insurance company markets in the U.S. and Canada. Revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:

 

		In thousands (except percentages)
		Based on actual exchange rates												Based on exchange rates for December 31, 2022
Year Ended December 31,		2023				2022				Variance				2023				Variance
U.S.		$	207,255			$	176,989				17.1	%		$	207,255				17.1	%
Canada			96,374				97,766				(1.4	)%			99,950				2.2	%
Total North America Loss Adjusting Revenues before Reimbursements		$	303,629			$	274,755				10.5	%		$	307,205				11.8	%

Revenues before reimbursements from our North America Loss Adjusting segment totaled $303.6 million in 2023, compared with $274.8 million in the 2022 period. This increase was due to increased business in the U.S. from both new and existing clients and pricing increases. The change in exchange rates decreased our North America Loss Adjusting segment revenues by (1.3)%, or $(3.6) million, for 2023 as compared with 2022. Absent foreign exchange rate fluctuations, North America Loss Adjusting segment revenues would have been $307.2 million for 2023. There was a decrease in segment unit volume, measured principally by cases received, of (6.0)% for 2023, compared with 2022, due to a change in the mix of services provided and reduction in high-frequency, low-severity cases that were present in the prior year. There was also a $2.3 million increase in revenues within our U.S. and Canada service lines related to income earned which offsets the costs of managing the funds maintained to administer claims for certain of our customers, for which no cases are received, or 0.8% of the increase in revenues. Changes in product mix and in the rates charged for those services accounted for a 7.4% revenue increase for the year ended 2023 compared with 2022.

The increase in revenues in the U.S. for 2023 was due to an increase in both Field Operations and Global Technical Services, as a result of an increase in expert adjusting staff, increased business from new and existing clients, and pricing increases. There was a decrease in revenues in Canada in 2023, compared with 2022, due to the change in exchange rates.

---

Revenue variance components for our North America Loss Adjusting segment for the year ended December 31, 2023 are summarized as follows:

 

2023 Period compared to 2022 Period Ending:		December 31
Decrease in cases received			(6.0	)%
Decrease due to foreign currency exchange rates			(1.3	)%
High-frequency, low-severity cases received in 2022 with minimal 2022 revenues			9.6	%
Revenue increase with no cases received			0.8	%
Change in product mix and rates			7.4	%
Increase in Revenues before Reimbursements			10.5	%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our North America Loss Adjusting segment, which are included in total Company revenues, were $9.8 million in 2023 compared with $8.4 million in 2022. The increase in reimbursed expenses was primarily due to the increase in revenues in 2023.

Case Volume Analysis

North America Loss Adjusting segment unit volumes by geographic region, measured by cases received, for 2023 and 2022 were as follows:

 

Year Ended December 31,		2023				2022				Variance
U.S.			145,957				136,804				6.7	%
Canada			131,255				158,193				(17.0	)%
Total North America Loss Adjusting Cases Received			277,212				294,997				(6.0	)%

Overall, there was a decrease in cases of (6.0)% in 2023, compared with the 2022 period. The increase in U.S. case volumes in 2023 was due to an increase from both new and existing clients. There was a decrease in cases in Canada due to a change in the mix of services provided, resulting from fewer high-frequency, low-severity Contractor Connection and automobile cases in 2023. There were approximately 23,000 high-frequency, low-severity Contractor Connection and automobile cases received in Canada in 2022, and 5,200 high-frequency, low-severity cases received in the U.S. for which minimal revenues were recognized. Excluding these cases, North America Loss Adjusting cases would have increased by 10,400, or 3.9% in 2023 compared to 2022.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our North America Loss Adjusting segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. North America Loss Adjusting direct compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 70.7% for 2023 and 72.2% for 2022. The dollar amount of these expenses increased from $198.4 million in 2022 to $214.6 million in 2023. The increase in amounts was due to an increase in employees required to handle the increased revenues and the impact of wage inflation. The decrease in the percentage of revenues before reimbursements is due to improved staff utilization.

There was an average of 2,055 FTEs in 2023 compared with an average of 2,022 FTEs in 2022.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

North America Loss Adjusting segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased from $57.2 million in 2022 to $65.8 million in 2023, and increased as a percent of segment revenues before reimbursements from 20.8% in 2022 to 21.7% in 2023. The increase in costs and the increase in the percent of revenues before reimbursements was due to the increased revenues and an increase in technology investments.

 

---

INTERNATIONAL OPERATIONS SEGMENT

Operating Earnings (Loss)

Our International Operations segment reported operating earnings of $11.2 million, or 2.9% of revenues before reimbursements in 2023, as compared to an operating loss of $(12.9) million, or (3.6)% of revenues before reimbursements in 2022. This increase in operating earnings was due to increased revenues in the U.K., Europe, Asia and Latin America, and cost reductions in various international operations. The 2022 period included $4.1 million of severance expense for cost reduction actions in certain international operations.

Excluding centralized indirect support costs, gross profit increased from $41.1 million, or 11.5% of revenues before reimbursements in 2022, to $60.4 million, or 15.8% of revenues before reimbursements in 2023. This increase was due to increased revenues and cost reductions in various operations.

Operating results for our International Operations segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
		Based on actual exchange rates						Based on exchange rates for December 31, 2022
Year Ended December 31,		2023		2022		Variance		2023		Variance
Revenues		$382,393		$357,452		7.0%		$391,645		9.6%
Direct expenses		322,025		316,371		1.8%		329,190		4.1%
Gross profit		60,368		41,081		46.9%		62,455		52.0%
Indirect expenses		49,187		54,027		(9.0)%		50,374		(6.8)%
Total International Operations Operating Earnings (Loss)		$11,181		$(12,946)		186.4%		$12,081		193.3%
Gross profit margin		15.8%		11.5%		4.3%		15.9%		4.4%
Operating margin		2.9%		(3.6)%		6.5%		3.1%		6.7%

Revenues before Reimbursements

International Operations segment revenues are primarily derived from the global property and casualty insurance company markets in the U.K, Europe, Australia, Asia and Latin America. Revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:

 

		In thousands (except percentages)
		Based on actual exchange rates												Based on exchange rates for December 31, 2022
Year Ended December 31,		2023				2022				Variance				2023				Variance
UK		$	143,353			$	121,814				17.7	%		$	145,852				19.7	%
Europe			92,130				89,777				2.6	%			93,685				4.4	%
Australia			89,479				94,692				(5.5	)%			94,408				(0.3	)%
Asia			23,289				21,652				7.6	%			23,733				9.6	%
Latin America			34,142				29,517				15.7	%			33,967				15.1	%
Total International Operations Revenues before Reimbursements		$	382,393			$	357,452				7.0	%		$	391,645				9.6	%

 

---

Revenues before reimbursements from our International Operations segment totaled $382.4 million in 2023, compared with $357.5 million in 2022. This increase was primarily due to increases in the U.K., Europe, Asia, and Latin America, partially offset by a reduction in weather-related activity in Australia. The change in exchange rates decreased our International Operations segment revenues by approximately (2.6)%, or $(9.2) million, for 2023 as compared with 2022. Absent foreign exchange rate fluctuations, International Operations segment revenues would have been $391.6 million for 2023. There was a $1.5 million increase, or 0.4% increase in International Operations revenues in the year as a result of the Van Dijk acquisition in Europe. There was a decrease in segment unit volume, measured principally by cases received, of (9.3)% for 2023, compared with the 2022 period. There were 17,000 cases received in Australia in the 2022 period as a result of a weather-related catastrophe for which revenues were recognized across several quarters as services were performed. In addition, cases declined (5.6)% due to a decrease of (30,000) high-frequency, low-severity cases received in Europe in 2022 for which only minimal revenues were recognized. There was a change in the U.K. operating model for certain clients where we are now acting as a principal instead of an agent, which represented an $8.4 million increase in revenues, or 2.3% of the increase for 2023. Changes in product mix and in the rates charged for those services accounted for an 7.4% revenue increase for 2023 compared with the same period in 2022, primarily due to an increase in cases with higher average fees in Latin America.

Based on constant foreign exchange rates, the increase in revenues in the U.K. for 2023 was due to an increase in case volumes, higher average fee per case from both new and existing clients, and a change in operating model for certain clients. There was an increase in revenues in Europe in 2023, compared with 2022, due to increases in the Netherlands, including the benefit of the Van Dijk acquisition, partially offset by a decrease in high-frequency, low-severity cases in Scandinavia. There was a decrease in revenues in Australia due to the weather-related case activity from the 2022 flooding catastrophe. There was an increase in revenues in Asia in 2023, compared with 2022, due to an increase in high-frequency, low-severity case activity in Singapore. The increase in revenues in Latin America in 2023 was due to an increase in cases with higher average fees in Chile, partially offset by a decrease in high-frequency, low-severity cases in Colombia.

Revenue variance components for our International Operations segment, for the year ended December 31, 2023 are summarized as follows:

 

2023 Period compared to 2022 Period Ending:		December 31
Decrease in cases received		(9.3)%
Decrease due to foreign currency exchange rates		(2.6)%
Australia 2022 catastrophe cases		3.2%
High-frequency, low-severity cases received in Europe in 2022 with minimal 2022 revenues		5.6%
UK change in operating model		2.3%
Change in product mix and rates		7.4%
Impact of acquisition revenues		0.4%
Increase in Revenues before Reimbursements		7.0%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our International Operations segment which are included in total Company revenue increased to $33.8 million in 2023 from $29.0 million in 2022. The increase in reimbursed expenses was primarily due to the increase in revenues in the current year.

Case Volume Analysis

International Operations unit volumes, as measured by cases received, by region for 2023 and 2022 were as follows:

 

Year Ended December 31,		2023				2022				Variance
UK			159,384				155,994				2.2	%
Europe			177,315				212,083				(16.4	)%
Australia			35,362				67,494				(47.6	)%
Asia			25,973				20,622				25.9	%
Latin America			88,203				79,913				10.4	%
Total International Operations Cases Received			486,237				536,106				(9.3	)%

 

---

Overall, there was a decrease in cases received of (9.3)% for 2023, compared with the 2022 period. There was an increase in cases in the U.K., due to new business from both new and existing clients, partially offset by a reduction in high-frequency, low-severity third party administration cases. Cases declined in Europe due to a change in the mix of services provided between periods, including a reduction of 30,000 high-frequency, low-severity cases in Scandinavia from a client in 2022 that only generated minimal revenues. There was a decrease in 17,000 weather-related cases in Australia related to flooding catastrophe in 2022 referenced above. There was an increase in cases received in Asia due to an increase in high-frequency, low-severity activity in Singapore. Latin America experienced an increase in cases in Chile and Brazil, partially offset by a reduction in Colombia.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our International Operations segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of International Operations segment revenues before reimbursements, decreased from 71.2% in 2022 to 67.1% in 2023. The total dollar amount of these expenses increased from $254.6 million in 2022 to $256.6 million in 2023. These expenses include $4.1 million of severance expense in 2022 for cost reduction actions in certain international operations. 2023 costs were impacted by wage inflation and the Van Dijk acquisition, which added 14 employees and corresponding compensation expense. The decrease in the percentage of revenues before reimbursements is due to increased revenues and cost reductions initiatives referenced above.

There was an average of 3,631 FTEs in this segment in 2023, a decrease from an average of 3,676 FTEs in the 2022 period.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased in the International Operations segment from $115.8 million in 2022 to $114.7 million in 2023, and decreased as a percent of revenues before reimbursements from 32.4% in 2022 to 30.0% in the 2023 period. The decrease in both the expenses and the expenses as a percent of revenues before reimbursements were due to cost reductions in certain international operations, a decrease in administrative support costs, and an increase in revenues.

BROADSPIRE SEGMENT

Operating Earnings

Our Broadspire segment reported operating earnings of $41.9 million, or 11.8% of revenues before reimbursements in 2023, as compared to $27.0 million, or 8.6% of revenues before reimbursements in 2022. This increase was due to an increase in revenues resulting from new client programs, increased medical management referrals, and pricing improvements.

Excluding centralized indirect support costs, gross profit increased from $69.9 million, or 22.3% of revenues before reimbursements in 2022, to $88.6 million, or 24.9% of revenues before reimbursements in 2023, due to the increased revenues and a favorable revenue mix shift with growth in higher margin Medical Management services.

Operating results for our Broadspire segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
Year Ended December 31,		2023				2022				Variance
Revenues		$	355,650			$	313,564				13.4	%
Direct expenses			267,017				243,640				9.6	%
Gross profit			88,633				69,924				26.8	%
Indirect expenses			46,760				42,903				9.0	%
Total Broadspire Operating Earnings		$	41,873			$	27,021				55.0	%
Gross profit margin			24.9	%			22.3	%			2.6	%
Operating margin			11.8	%			8.6	%			3.2	%

 

---

Revenues before Reimbursements

Broadspire revenues are derived primarily from the casualty and disability insurance and self-insured markets in the U.S. Revenues before reimbursements by service line were as follows:

 

		In thousands (except percentages)
Year Ended December 31,		2023				2022				Variance
Claims Management		$	182,840			$	160,039				14.2	%
Medical Management			172,810				153,525				12.6	%
Total Broadspire Revenues before Reimbursements		$	355,650			$	313,564				13.4	%

Revenues before reimbursements from Broadspire totaled $355.7 million in 2023, compared with $313.6 million in 2022. This increase was primarily due to an increase in new client growth, pricing increases, and an increase in average fees across both service lines. Revenues were positively impacted by a slight increase in unit volumes, measured principally by cases received, of 0.4% for 2023 compared with 2022. There was a $9.3 million increase in revenues within our Medical Management service line for which no cases are received, or 3.0% of the increase in revenues. There was also a $14.6 million increase in revenues within our Claims Management service line related to income earned which offsets the costs of managing the funds maintained to administer claims for our customers, for which no cases are received, or 4.6% of the increase in revenues. This incremental income does not have a similar increase in operating cost associated with it. Changes in product mix and in the rates charged for those services accounted for a 5.4% revenue increase for 2023 as compared with 2022, due to an increase in volume and revenue for all other Medical Management service lines.

Revenue variance components for our Broadspire segment for the year ended December 31, 2023 are summarized as follows:

 

2023 Period compared to 2022 Period Ending:		December 31
Increase in cases received		0.4%
Increase in medical management revenues with no cases received		3.0%
Increase in claims management revenues with no cases received		4.6%
Change in product mix and rates		5.4%
Increase in Revenues before Reimbursements		13.4%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Broadspire segment which are included in total Company revenue increased to $3.3 million in 2023 from $3.1 million in 2022. The increase in reimbursed expenses in the 2023 period was primarily due to the increased revenues in the current year.

Case Volume Analysis

Broadspire unit volumes by service line, as measured by cases received, for 2023 and 2022 were as follows:

 

Year Ended December 31,		2023				2022				Variance
Claims Management			397,010				409,712				(3.1	)%
Medical Management			145,822				131,181				11.2	%
Total Broadspire Cases Received			542,832				540,893				0.4	%

Overall case volumes were 0.4% higher in 2023 compared with 2022, due to an increase in Medical Management referrals. There was a decrease in Claims Management cases due to a reduction in both casualty and A&H cases, partially offset with growth in Disability case volumes. The resulting change in the mix of cases received resulted in an increase in revenues and the average fee per case.

---

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Broadspire segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of Broadspire segment revenues before reimbursements, decreased from 63.3% in 2022 to 61.1% in 2023. The total dollar amount of these expenses increased from $198.5 million in 2022 to $217.3 million in 2023. The increase in the amounts was due to the increased revenues, an increase in average full-time equivalent employees in support of client requirements, and the impact of wage inflation. The decrease in the expense as a percent of revenues before reimbursements was due to revenues increasing at a higher rate than the increase in expenses.

There was an average of 2,610 FTEs in this segment in 2023, an increase from an average of 2,503 FTEs in the 2022 period.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased in the Broadspire segment from $88.1 million in 2022 to $96.5 million in 2023, but decreased as a percent of revenues before reimbursements from 28.1% in 2022 to 27.1% in the 2023 period. The increase in the expense was due to the higher revenues. The decrease in the percent of revenues before reimbursements is due to the higher revenues and improved operating leverage.

PLATFORM SOLUTIONS SEGMENT

Operating Earnings

Our Platform Solutions segment recorded operating earnings of $28.5 million in 2023, or 12.7% of revenues before reimbursements, compared with operating earnings of $35.7 million in 2022, or 14.7% of revenues before reimbursements. The decrease in operating margin in 2023 was due to a decrease in revenues in our Networks service line.

Excluding indirect support costs, gross profit decreased from $56.3 million, or 23.1% of revenues before reimbursements in 2022, to $51.6 million, or 22.9% of revenues before reimbursements in 2023, as a result of the revenue decrease in our Networks service line.

Operating results for our Platform Solutions segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
Year Ended December 31,		2023				2022				Variance
Revenues		$	225,459			$	243,711				(7.5	)%
Direct expenses			173,874				187,420				(7.2	)%
Gross profit			51,585				56,291				(8.4	)%
Indirect expenses			23,044				20,545				12.2	%
Total Platform Solutions Operating Earnings		$	28,541			$	35,746				(20.2	)%
Gross profit margin			22.9	%			23.1	%			(0.2	)%
Operating margin			12.7	%			14.7	%			(2.0	)%

Revenues before Reimbursements

Platform Solutions segment revenues are primarily derived from the property and casualty insurance company and consumer markets in the U.S. Revenues before reimbursements by service line were as follows:

 

		In thousands (except percentages)
Year Ended December 31,		2023				2022				Variance
Contractor Connection		$	74,627			$	66,236				12.7	%
Networks			123,859				156,159				(20.7	)%
Subrogation			26,973				21,316				26.5	%
Total Platform Solutions Revenues before Reimbursements		$	225,459			$	243,711				(7.5	)%

 

---

Revenues before reimbursements from our Platform Solutions segment totaled $225.5 million in 2023, compared with $243.7 million in 2022. This decrease was primarily due to a decrease in our Networks service line due to a reduction in utilization with existing clients, partially offset by increases in pricing and the average fee per case from Contractor Connection and Subrogation. There was a decrease in segment unit volume, measured principally by cases received, of (5.5)% for 2023, compared with the 2022 period. There was a decrease in high-frequency, low-severity consumer market cases in our Networks service line of (15,000) cases, or a (3.1)% decrease in Platform Solutions cases received, related to client projects in 2022. Revenues in our Platform Solutions segment include revenues from existing clients where we provide staff augmentation, which resulted in $(16.2) million reduction of revenues in 2023, or a (6.6)% decrease in Platform Solutions revenues. The revenues generated from these clients consist of us providing dedicated employees which is not measured by cases, and accordingly there is no decrease in cases received to match the decrease in revenues. Changes in product mix and in the rates charged for those services accounted for a 1.5% revenue increase during 2023, compared with 2022.

The reduction in revenues in our Networks service line was due to a reduction where we provide staff augmentation for our clients and a reduction in case volumes. The increase in Contractor Connection was due to an increase in pricing as well as increases in the average case values and severity of cases received. There was an increase in revenues in our Subrogation service line, in spite of a reduction in cases received, due to a special project in 2022 that had a lower average fee per case.

 

Revenue variance components for our Platform Solutions segment for the year ended December 31, 2023 are summarized as follows:

 

2023 Period compared to 2022 Period Ending:		December 31
Decrease in cases received		(5.5)%
Reduction in high-frequency, low-severity Networks cases received in 2022 with minimal revenues		3.1%
Reduction in revenues from staff augmentation with no cases received		(6.6)%
Change in product mix and rates		1.5%
Decrease in Revenues before Reimbursements		(7.5)%

 

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Platform Solutions segment were $2.7 million and $1.2 million for 2023 and 2022, respectively. The increase was due to additional use of third parties in our Networks service line in the 2023 period.

Case Volume Analysis

Platform Solutions unit volumes by service line, as measured by cases received, for 2023 and 2022 were as follows:

 

Year Ended December 31,		2023				2022				Variance
Contractor Connection			143,854				154,574				(6.9	)%
Networks			274,118				289,205				(5.2	)%
Subrogation			35,028				35,819				(2.2	)%
Total Platform Solutions Cases Received			453,000				479,598				(5.5	)%

Overall case volumes were (5.5)% lower in 2023 compared with 2022, due to a decrease in each of our service lines. This decrease was primarily from a decrease in high-frequency, low-severity cases in our Networks service line of 15,000 cases, or a 3.1% decrease in cases from 2022. A portion of the decrease in revenues in our Networks service line is the result of revenues generated from existing clients which consists of us providing dedicated employees which is not measured by cases, and accordingly there is no decrease in cases received to match the decrease in revenues. The decrease in cases in the Contractor Connection service line was due to carrier clients experiencing decreased program utilization. The decrease in cases in our Subrogation service line was due to a special project in 2022 that did not contribute new cases in 2023.

---

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Platform Solutions segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Platform Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of the related revenues before reimbursements, was 65.6% in 2023 and 67.1% in 2022. The amount of these expenses decreased from $163.4 million in 2022 to $147.8 million in 2023. The decrease in costs was due to the lower revenues in the current year and reduction of employees in our Networks Service line. The decrease as a percentage of revenues before reimbursements in the current year was due to the reduction in revenues in our Networks service line which is more labor intensive than our other Platform Solutions service lines.

Average FTEs in this segment totaled 1,314 in 2023, compared to an average of 1,336 FTEs in 2022.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

Platform Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased as a percent of segment revenues before reimbursements from $44.5 million, or 18.3% of revenues before reimbursements in 2022, to $49.1 million, or 21.8% of revenues before reimbursements in 2023. The increase in overall expenses was primarily due to the increase in technology investments. The increase as a percent of revenues before reimbursements is due to the lower revenues and increased technology investments.

 

YEAR ENDED DECEMBER 31, 2022 COMPARED WITH YEAR ENDED DECEMBER 31, 2021

NORTH AMERICA LOSS ADJUSTING SEGMENT

Operating Earnings

Operating earnings in our North America Loss Adjusting segment totaled $19.1 million or 7.0% of revenues before reimbursements, in 2022, compared with 2021 operating earnings of $15.0 million, or 6.2% of revenues before reimbursements. The increase in operating earnings in 2022 was primarily due to a $31.0 million increase in revenues. There was a $2.6 million expense benefit in 2021 as a result of CEWS, compared to no benefit in 2022.

Excluding centralized indirect support costs, gross profit increased from $46.7 million, or 19.2% of revenues before reimbursements in 2021, to $51.8 million, or 18.9% of revenues before reimbursements in 2022, due primarily to an increase in revenues, partially offset by the absence of the CEWS benefit.

Operating results for our North America Loss Adjusting segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
		Based on actual exchange rates						Based on exchange rates for December 31, 2021
Year Ended December 31,		2022		2021		Variance		2022		Variance
Revenues		$274,755		$243,789		12.7%		$278,399		14.2%
Direct expenses		222,938		197,054		13.1%		225,958		14.7%
Gross profit		51,817		46,735		10.9%		52,441		12.2%
Indirect expenses		32,709		31,720		3.1%		33,266		4.9%
Total North America Loss Adjusting Operating Earnings		$19,108		$15,015		27.3%		$19,175		27.7%
Gross profit margin		18.9%		19.2%		(0.3)%		18.8%		(0.4)%
Operating margin		7.0%		6.2%		0.8%		6.9%		0.7%

 

---

Revenues before Reimbursements

North America Loss Adjusting revenues are primarily derived from the property and casualty insurance company markets in the U.S. and Canada. Revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:

 

		In thousands (except percentages)
		Based on actual exchange rates												Based on exchange rates for December 31, 2021
Year Ended December 31,		2022				2021				Variance				2022				Variance
U.S.		$	176,989			$	158,451				11.7	%		$	176,989				11.7	%
Canada			97,766				85,338				14.6	%			101,410				18.8	%
Total North America Loss Adjusting Revenues before Reimbursements		$	274,755			$	243,789				12.7	%		$	278,399				14.2	%

Revenues before reimbursements from our North America Loss Adjusting segment totaled $274.8 million in 2022, compared with $243.8 million in the 2021 period. This increase was due to an increase in the U.S. and Canada from both new and existing clients and the recent acquisition. The change in exchange rates decreased our North America Loss Adjusting segment revenues by 1.5%, or $3.6 million, for 2022 as compared with the 2021 period. Absent foreign exchange rate fluctuations, North America Loss Adjusting segment revenues would have been $278.4 million for 2022. There was a $9.2 million increase, or 3.8% increase in North America Loss Adjusting revenues in 2022 as a result of the edjuster, Inc. acquisition. There was an increase in segment unit volume, measured principally by cases received, of 6.0% (1.8% excluding edjuster cases) for 2022, compared with the 2021 period. Changes in product mix and in the rates charged for those services accounted for an 8.6% revenue increase for 2022 compared with 2021.

The increase in revenues in the U.S. for 2022 was due to an increase in Global Technical Services revenues and a change in the mix of services provided, due to a lower proportion of high-frequency, low-severity cases in 2022. Based on constant foreign exchange rates, there was an increase in revenues in Canada in 2022, compared with 2021, primarily due to the edjuster, Inc. acquisition and the recovery from the negative economic impacts of COVID-19 that were present in 2021.

Revenue variance components for our North America Loss Adjusting segment for the year ended December 31, 2022 are summarized as follows:

 

2022 Period compared to 2021 Period Ending:		December 31
Increase in cases received, net of acquired cases		1.8%
Decrease due to foreign currency exchange rates		(1.5)%
Change in product mix and rates		8.6%
Increase from acquisition revenues		3.8%
Increase in Revenues before Reimbursements		12.7%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our North America Loss Adjusting segment, which are included in total Company revenues, were $8.4 million in 2022 compared with $8.3 million in 2021. The increase in reimbursed expenses was less than the overall increase in revenues due to a decreased use of third parties in Canada in 2022.

Case Volume Analysis

North America Loss Adjusting segment unit volumes by geographic region, measured by cases received, for 2022 and 2021 were as follows:

 

Year Ended December 31,		2022				2021				Variance
U.S.			136,804				150,959				(9.4	)%
Canada			158,193				127,214				24.4	%
Total North America Loss Adjusting Cases Received			294,997				278,173				6.0	%

 

---

Overall, there was an increase in cases of 6.0% in 2022, compared with 2021. The decrease in U.S. case volumes in 2022 was due to a change in the mix of services provided, resulting from a lower proportion of high-frequency, low-severity cases. There was an increase in cases in Canada in 2022 due to an increase in weather-related activity and the recovery from the impact of the pandemic which was present in 2021. The acquisition of edjuster in the third quarter of 2021 resulted in an increase of 11,640 cases, or 4.2% of the increase in cases received for 2022, compared with 2021.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our North America Loss Adjusting segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. North America Loss Adjusting direct compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, decreased from 72.4% in 2021 to 72.2% in 2022. The dollar amount of these expenses increased from $176.5 million in 2021 to $198.4 million in 2022. The increase in amounts was due to the increased revenues and an additional 205 employees from the recent acquisition. The percentage of revenues before reimbursements was largely consistent between periods, due to increased staff utilization, partially offset by the $2.6 million expense benefit in 2021 as a result of CEWS, compared with no benefit in 2022.

There was an average of 2,022 FTEs in 2022 compared with an average of 1,795 FTEs in 2021.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

North America Loss Adjusting segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased from $52.2 million in 2021 to $57.2 million in 2022, but decreased as a percent of segment revenues before reimbursements from 21.4% in 2021 to 20.8% in 2022. The increase in costs was due to the increased revenues, technology investments and an increase in the allowance for estimated credit losses in 2022. The decrease in the percent of revenues was primarily due to the increased revenues.

INTERNATIONAL OPERATIONS SEGMENT

Operating (Loss) Earnings

Our International Operations segment reported an operating loss of $(12.9) million, or (3.6)% of revenues before reimbursements in 2022, as compared to operating earnings of $4.9 million, or 1.4% of revenues before reimbursements in 2021. This decrease in operating earnings was due to lower profitability in certain international operations, primarily in the U.K. and our Legal Services service line, an increase in compensation expense, and an increase in administrative support costs.

Excluding centralized indirect support costs, gross profit decreased from $50.3 million, or 14.1% of revenues before reimbursements in 2021, to $41.1 million, or 11.5% of revenues before reimbursements in 2022. This decrease was primarily due to lower profitability in certain international operations and an increase in compensation expense. The increase in compensation expense includes $4.1 million of severance expense for cost reduction actions in certain international operations.

Operating results for our International Operations segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
		Based on actual exchange rates						Based on exchange rates for December 31, 2021
Year Ended December 31,		2022		2021		Variance		2022		Variance
Revenues		$357,452		$357,909		(0.1)%		$388,427		8.5%
Direct expenses		316,371		307,591		2.9%		344,332		11.9%
Gross profit		41,081		50,318		(18.4)%		44,095		(12.4)%
Indirect expenses		54,027		45,400		19.0%		59,144		30.3%
Total International Operations Operating (Loss) Earnings		$(12,946)		$4,918		(363.2)%		$(15,049)		(406.0)%
Gross profit margin		11.5%		14.1%		(2.6)%		11.4%		(2.7)%
Operating margin		(3.6)%		1.4%		(5.0)%		(3.9)%		(5.3)%

 

---

Revenues before Reimbursements

International Operations segment revenues are primarily derived from the global property and casualty insurance company markets in the U.K, Europe, Australia, Asia and Latin America. Revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:

 

		In thousands (except percentages)
		Based on actual exchange rates												Based on exchange rates for December 31, 2021
Year Ended December 31,		2022				2021				Variance				2022				Variance
UK		$	121,814			$	134,116				(9.2	)%		$	132,371				(1.3	)%
Europe			89,777				88,985				0.9	%			98,925				11.2	%
Australia			94,692				85,780				10.4	%			101,687				18.5	%
Asia			21,652				18,870				14.7	%			22,824				21.0	%
Latin America			29,517				30,158				(2.1	)%			32,620				8.2	%
Total International Operations Revenues before Reimbursements		$	357,452			$	357,909				(0.1	)%		$	388,427				8.5	%

Revenues before reimbursements from our International Operations segment totaled $357.5 million in 2022, compared with $357.9 million in 2021. This slight decrease was due to the change in foreign exchange rates. Excluding foreign exchange impacts, International Operations revenues increased due to an increase in weather-related activity in Australia and Asia, and increases in Europe and Latin America, partially offset by reductions in the U.K. and our Legal Services service line. The change in exchange rates decreased our International Operations segment revenues by approximately 8.6%, or $31.0 million, for 2022 as compared with 2021. Absent foreign exchange rate fluctuations, International Operations segment revenues would have been $388.4 million for 2022. There was a $4.8 million increase, or 1.3% increase in International Operations revenues in 2022 as a result of the BosBoon and Van Dijk acquisitions in Europe. There was an increase in segment unit volume, measured principally by cases received, of 18.2% (17.8% excluding acquired cases) for 2022, compared with 2021. 8.1% of this increase was due to an increase of 36,800 high-frequency, low-severity cases received in Latin America for which only minimal revenues are recognized. Changes in product mix and in the rates charged for those services accounted for a 2.5% revenue decrease for 2022 compared with 2021, due to an increase in high-frequency, low severity cases in Latin America, Europe and Asia.

Based on constant foreign exchange rates, the decrease in revenues in the U.K. for 2022 was due to a change in the mix of services provided and a reduction in our Legal Services service line. There was an increase in revenues in Europe in 2022, compared with 2021, due to an increase in high-frequency, low-severity case volume increases in Scandinavia, and the BosBoon and Van Dijk acquisitions. There was an increase in revenues in Australia in 2022 due to an increase in weather-related case activity. There was an increase in revenues in Asia in 2022, compared with 2021, due to an increase in high-frequency, low-severity weather-related case activity in the Philippines and Malaysia. There was an increase in revenues in Latin America in 2022 due to an increase in high-frequency, low-severity cases and a change in the mix of services provided.

Revenue variance components for our International Operations segment for the year ended December 31, 2022 are summarized as follows:

 

2022 Period compared to 2021 Period Ending:		December 31
Increase in cases received, net of acquired cases		17.8%
Decrease due to foreign currency exchange rates		(8.6)%
High-frequency, low-severity cases received in Latin America in 2022 with minimal 2022 revenues		(8.1)%
Change in product mix and rates		(2.5)%
Increase from acquisition revenues		1.3%
Decrease in Revenues before Reimbursements		(0.1)%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our International Operations segment, which are included in total Company revenue, increased to $29.0 million in 2022 from $22.9 million in 2021. The increase in reimbursed expenses were due to an increased use of third parties in 2022, primarily related to handling cases received from the catastrophe in Australia.

---

Case Volume Analysis

International Operations unit volumes, as measured by cases received, by region for 2022 and 2021 were as follows:

 

Year Ended December 31,		2022				2021				Variance
UK			155,994				142,678				9.3	%
Europe			212,083				202,956				4.5	%
Australia			67,494				51,940				29.9	%
Asia			20,622				14,377				43.4	%
Latin America			79,913				41,543				92.4	%
Total International Operations Cases Received			536,106				453,494				18.2	%

Overall, there was an increase in cases received of 18.2% for 2022, compared with 2021. 8.1% of the increase was due to an increase of 36,800 high-frequency, low-severity cases received in Latin America for which only minimal revenues are recognized. There was an increase of 17,400 cases in Australia, or 3.8% of the increase in International Operations cases received, due to flooding catastrophe in that country. The increase in cases received in Asia was due to an increase in high-frequency, low-severity weather-related activity in the Philippines and Malaysia. There was an increase in Europe in 2022, compared with 2021, due to an increase in high-frequency, low-severity case volume increases in Scandinavia, and the BosBoon and Van Dijk acquisitions, which accounted for 2,000 cases, or 0.4%. The increase in cases received in the U.K. in 2022 was due to an increase in high-frequency, low-severity third party administration cases.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our International Operations segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of International Operations segment revenues before reimbursements, increased from 69.6% in 2021 to 71.2% in 2022. The total dollar amount of these expenses increased from $249.1 million in 2021 to $254.6 million in 2022. The increase in compensation expense includes $4.1 million of severance expense for cost reduction actions in certain international operations, as well as an increase in employees, including 30 from the BosBoon and Van Dijk acquisitions. The increase in the percentage of revenues before reimbursements is because compensation expense increased higher than revenues in certain international operations, including the severance expense referenced above, and higher compensation expense in our Legal Services business.

There was an average of 3,676 FTEs in this segment in 2022, an increase from an average of 3,524 FTEs in the 2021 period.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased in the International Operations segment from $103.9 million in 2021 to $115.8 million in 2022, and increased as a percent of revenues before reimbursements from 29.0% in 2021 to 32.4% in the 2022 period. The increase in both the expenses and the expenses as a percent of revenues before reimbursements were due to technology investments and an increase in administrative support costs.

BROADSPIRE SEGMENT

Operating Earnings

Our Broadspire segment reported operating earnings of $27.0 million, or 8.6% of revenues before reimbursements in 2022, as compared to $24.8 million, or 8.2% of revenues before reimbursements in 2021. This increase was due to a $12.5 million increase in revenues.

Excluding centralized indirect support costs, gross profit increased from $64.7 million, or 21.5% of revenues before reimbursements in 2021, to $69.9 million, or 22.3% of revenues before reimbursements in 2022, due to the increased revenues.

---

Operating results for our Broadspire segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
Year Ended December 31,		2022				2021				Variance
Revenues		$	313,564			$	301,035				4.2	%
Direct expenses			243,640				236,298				3.1	%
Gross profit			69,924				64,737				8.0	%
Indirect expenses			42,903				39,954				7.4	%
Total Broadspire Operating Earnings		$	27,021			$	24,783				9.0	%
Gross profit margin			22.3	%			21.5	%			0.8	%
Operating margin			8.6	%			8.2	%			0.4	%

Revenues before Reimbursements

Broadspire revenues are derived from the casualty and disability insurance and self-insured markets in the U.S. Revenues before reimbursements by major region were as follows:

 

		In thousands (except percentages)
Year Ended December 31,		2022				2021				Variance
Claims Management		$	160,039			$	151,342				5.7	%
Medical Management			153,525				149,693				2.6	%
Total Broadspire Revenues before Reimbursements		$	313,564			$	301,035				4.2	%

Revenues before reimbursements from our Broadspire totaled $313.6 million in 2022, compared with $301.0 million in 2021. This increase was primarily due to an increase in new client growth across both service lines, and general recovery from pandemic-impacted activity in 2021. Revenues were positively impacted by an increase in unit volumes, measured principally by cases received, of 10.2% for 2022 compared with 2021. Changes in product mix and in the rates charged for those services accounted for a (6.0)% revenue decrease for 2022 as compared with 2021, due to an increase in Disability and A&H claims which have a lower average fee per claim.

Revenue variance components for our Broadspire segment for the year ended December 31, 2022 are summarized as follows:

 

2022 Period compared to 2021 Period Ending:		December 31
Increase in cases received		10.2%
Change in product mix and rates		(6.0)%
Increase in Revenues before Reimbursements		4.2%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Broadspire segment which are included in total Company revenue increased to $3.1 million in 2022 from $2.7 million in 2021. The increase in reimbursed expenses in the 2022 period was due to the increased revenues and employee travel related to servicing cases from clients.

Case Volume Analysis

Broadspire unit volumes by service line, as measured by cases received, for 2022 and 2021 were as follows:

 

Year Ended December 31,		2022				2021				Variance
Claims Management			409,712				357,056				14.7	%
Medical Management			131,181				133,597				(1.8	)%
Total Broadspire Cases Received			540,893				490,653				10.2	%

Overall case volumes were 10.2% higher in 2022 compared with 2021 due to an increase in Disability and A&H cases volumes in our Claims Management service line of 31,350 cases, representing an increase in Broadspire cases received of 6.4%, and an increase in new clients. The decline for Medical Management cases received was due to fewer utilization review and physician consultant cases that were not fully offset with an increase in case management cases that typically result in higher average revenue per case. In addition, 2021 was negatively impacted by the pandemic. Broadspire unit volumes are sensitive to overall employment levels and workplace reported injuries.

---

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Broadspire segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of Broadspire segment revenues before reimbursements, increased from 62.3% in 2021 to 63.3% in 2022. The total dollar amount of these expenses increased from $187.5 million in 2021 to $198.5 million in 2022. The increase in the amounts was due to increased revenues and an increase in average full-time equivalent employees. The increase in expense as a percent of revenues before reimbursements was due to an increase in compensation, advance hiring for new business, and additional staffing in support of client requirements.

There was an average of 2,503 FTEs in this segment in 2022, an increase from an average of 2,266 FTEs in the 2021 period.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased in the Broadspire segment from $88.8 million in 2021 to $88.1 million in 2022, and decreased as a percent of revenues before reimbursements from 29.5% in 2021 to 28.1% in 2022. The decrease in the overall expense and as a percent of revenues is due to lower software amortization costs and other administrative expenses, partially offset by an increase in travel costs which were lower in 2021 due to the pandemic.

PLATFORM SOLUTIONS SEGMENT

Operating Earnings

Our Platform Solutions segment recorded operating earnings of $35.7 million in 2022, or 14.7% of revenues before reimbursements, compared with operating earnings of $32.0 million in 2021, or 16.1% of revenues before reimbursements. The increase in operating earnings in 2022 was due to a $44.4 million increase in revenues, including $17.0 million from the Praxis Consulting acquisition.

Excluding indirect support costs, gross profit increased from $48.0 million, or 24.1% of revenues before reimbursements in 2021, to $56.3 million, or 23.1% of revenues before reimbursements in 2022, as a result of the revenue increase in our Networks service line and the Praxis Consulting acquisition.

Operating results for our Platform Solutions segment, including gross profit, are as shown in the following table:

 

		In thousands (except percentages)
Year Ended December 31,		2022		2021		Variance
Revenues		$243,711		$199,299		22.3%
Direct expenses		187,420		151,304		23.9%
Gross profit		56,291		47,995		17.3%
Indirect expenses		20,545		15,947		28.8%
Total Platform Solutions Operating Earnings		$35,746		$32,048		11.5%
Gross profit margin		23.1%		24.1%		(1.0)%
Operating margin		14.7%		16.1%		(1.4)%

Revenues before Reimbursements

Platform Solutions segment revenues are primarily derived from the property and casualty insurance company markets in the U.S. Revenues before reimbursements by service line were as follows:

 

		In thousands (except percentages)
Year Ended December 31,		2022				2021				Variance
Contractor Connection		$	66,236			$	70,249				(5.7	)%
Networks			156,159				124,728				25.2	%
Subrogation			21,316				4,322				393.2	%
Total Platform Solutions Revenues before Reimbursements		$	243,711			$	199,299				22.3	%

 

---

Revenues before reimbursements from our Platform Solutions segment totaled $243.7 million in 2022, compared with $199.3 million in 2021. This increase was primarily due to an increase in case volumes in our Networks service line due to new client growth and increased utilization with existing clients, and a $17.0 million increase, or 8.5% increase in Platform Solutions revenues, as a result of the Praxis acquisition. There was an increase in segment unit volume, measured principally by cases received, of 11.3% for 2022, 6.7% of which was from the Praxis acquisition, compared with 2021. There was an increase in high-frequency, low-severity consumer market cases in our WeGoLook service line of 51,200 cases, or an 11.9% increase in Platform Solutions cases received, in 2022. Revenues in our Platform Solutions segment include revenues from an existing client where we provide staff augmentation for our clients, which resulted in $27.6 million of increased revenues in 2022, or a 13.8% increase in Platform Solutions revenue. The revenues generated from these clients consist of us providing dedicated employees which is not measured by cases, and accordingly there is no increase in cases received to match the increase in revenues. Excluding cases from the Praxis acquisition and the WeGoLook cases, changes in product mix and in the rates charged for those services accounted for a 7.3% revenue increase during 2022, compared with 2021.

The increase in revenues for 2022 was due to an increase in our Networks service line, and revenues from the Praxis acquisition. The decrease in Contractor Connection was due to a reduction in industry claim volumes in the current year.

Revenue variance components for our Platform Solutions segment for the year ended December 31, 2022 are summarized as follows:

 

2022 Period compared to 2021 Period Ending:		December 31
Increase in cases received, net of acquired cases		4.6%
High-frequency, low-severity Networks cases received in 2022 with minimal revenues		(11.9)%
Revenues from staff augmentation for which no cases are received		13.8%
Change in product mix and rates		7.3%
Increase from acquisition revenues		8.5%
Increase in Revenues before Reimbursements		22.3%

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Platform Solutions segment were $1.2 million and $3.1 million for 2022 and 2021, respectively. The decrease was due to a reduced use of third parties in our Networks service line in 2022.

Case Volume Analysis

Platform Solutions unit volumes by service line, as measured by cases received, for 2022 and 2021 were as follows:

 

Year Ended December 31,		2022				2021				Variance
Contractor Connection			154,574				172,970				(10.6	)%
Networks			289,205				250,598				15.4	%
Subrogation			35,819				7,162				400.1	%
Total Platform Solutions Cases Received			479,598				430,730				11.3	%

Overall case volumes were 11.3% higher in 2022 compared with 2021, due to an increase in our Networks service line and the Praxis acquisition in our Subrogation service line. Excluding acquisition-related subrogation cases, the increase in cases received was 4.6% during 2022 as compared with 2021. This increase was primarily from high-frequency, low-severity consumer market cases in our WeGoLook service line of 51,200 cases, or 11.9% of the increase in cases from 2021. A portion of the increase in revenues in our Networks service line is the result of revenues generated from existing clients which consists of us providing dedicated employees which is not measured by cases, and accordingly there is no increase in cases received to match the increase in revenues. The decrease in cases in the Contractor Connection service line was due to carrier clients experiencing reduced claims activity.

---

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Platform Solutions segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Platform Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of the related revenues before reimbursements, was 67.1% in 2022 and 66.1% in 2021. The amount of these expenses increased from $131.7 million in 2021 to $163.4 million in 2022. The increase in costs was due to the higher revenues in the current year and increased employees to support client growth in our Networks Service line, and 110 employees from the Praxis acquisition. The increase as a percentage of revenues before reimbursements in 2022 was due to the change in product mix and higher compensation expense and non-employee labor to support the new client growth.

Average FTEs in this segment totaled 1,336 in 2022, compared to an average of 1,080 FTEs in 2021.

Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor

Platform Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased as a percent of segment revenues before reimbursements from $35.5 million, or 17.8% of revenues before reimbursements in 2021, to $44.5 million, or 18.3% of revenues before reimbursements in 2022. The increase in overall expenses was due to the increased revenues and the Praxis acquisition. The increase as a percent of revenues before reimbursements is due to technology investments and an increase in travel and entertainment expenses.

EXPENSES AND CREDITS EXCLUDED FROM SEGMENT OPERATING EARNINGS

Income Taxes

Our consolidated effective income tax rate for financial reporting purposes may change periodically due to changes in enacted tax rates, changes in tax law, fluctuations in the mix of income earned from our various domestic and international operations, which are subject to income taxes at different rates, our ability to utilize loss and tax credit carryforwards, and amounts related to uncertain income tax positions. Income tax provisions totaled $17.1 million, $23.6 million, and $13.3 million for 2023, 2022, and 2021, respectively. Our effective tax rate for financial reporting purposes was 36.1%, 467.2%, and 30.4% for 2023, 2022, and 2021, respectively. The Company's effective income tax rate in 2023 was impacted by changes in domestic tax guidance and changes in valuation allowances in certain jurisdictions. The Company's effective income tax rate in 2022 was impacted by the goodwill impairment and change in valuation allowances for certain foreign jurisdictions, primarily the U.K. The Company's effective income tax rate in 2021 was impacted by enacted foreign tax rate changes, change in valuation allowances for certain jurisdictions, and deferred taxes attributable to certain undistributed foreign earnings that are no longer permanently reinvested. Based on our 2024 operating plans, we anticipate our 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 we operate.

We recorded a non-cash goodwill impairment of $36.8 million, or $33.3 million after tax, during 2022. We also recorded income tax reserves of $11.8 million on certain international tax assets during 2022, primarily related to previously benefited tax losses in certain international jurisdictions. These tax assets currently do not expire and are available for future use depending on the profitability of those jurisdictions.

Net Corporate Interest Expense

Net corporate interest expense consists of interest expense that we incur on our short- and long-term borrowings, partially offset by interest income we earn on available cash balances and short-term investments. These amounts vary based on interest rates, borrowings outstanding, and the amounts of invested cash. Corporate interest expense totaled $19.8 million, $11.0 million, and $7.0 million for 2023, 2022, and 2021, respectively. Corporate interest income totaled $2.8 million, $0.7 million, and $0.4 million in 2023, 2022, and 2021, respectively. We pay interest on borrowings under our Credit Facility based on variable rates. Our level of interest expense is dependent on the future direction of interest rates as well as the level of outstanding borrowings relative to prior periods. The weighted average interest rates under our Credit Facility were 6.6%, 3.3%, and 2.2% for the years ending December 31, 2023, 2022, and 2021, respectively.

---

Stock Option Expense

Stock option expense, a component of stock-based compensation, is comprised of non-cash expenses related to stock options granted under our various stock option and employee stock purchase plans. Stock option expense is not allocated to our operating segments. Stock option expense of $0.6 million, $0.5 million and $1.1 million was recognized during 2023, 2022, and 2021, respectively. Other stock-based compensation expense related to our Executive Stock Bonus Plan and our Omnibus Stock and Incentive Plan (pursuant to which we have authority to grant performance shares and restricted shares) is charged to our operating segments and included in the determination of segment operating earnings or loss.

Amortization of Customer-Relationship Intangible Assets

Amortization of customer-relationship intangible assets represents the non-cash amortization expense for finite-lived customer-relationship and trade name intangible assets. Amortization expense associated with these intangible assets totaled $7.8 million, $7.8 million, and $11.0 million in 2023, 2022, and 2021, respectively. The decrease in 2022 is due to the amortization period of a significant intangible asset ended in the fourth quarter of 2021. This amortization is included in "Selling, general and administrative expenses" in our Consolidated Statements of Operations.

Unallocated Corporate and Shared Costs, Net

Certain unallocated costs and credits are excluded from the determination of segment operating earnings. These unallocated corporate and shared costs and credits represent expenses for our Chief Executive Officer and our Board of Directors, certain adjustments to our self-insured liabilities, certain unallocated legal and professional fees, and certain adjustments and recoveries to our allowances for estimated credit losses. From time to time, we evaluate which corporate costs and credits are appropriately allocated to one or more of our operating segments. If changes are made to our allocation methodology, prior period allocations are revised to conform to our then-current allocation methodology.

Unallocated corporate and shared costs and credits were $19.4 million, $7.1 million, and $18.0 million in 2023, 2022, and 2021, respectively. The increase for 2023 was due to a $3.7 million increase in self-insurance costs, $1.8 million gain on sale of our Canadian head office building in 2022, $1.5 million increase in professional fees, $1.4 million increase in compensation, $1.2 million for certain non-recurring fair value adjustments, $1.6 million increase in unallocated payroll tax, benefits and insurance costs, and $1.1 million increase in other unallocated costs.

The decrease for 2022 compared to 2021 was due to a $1.8 million gain on sale of our Canadian head office building in Kitchener Ontario, a $1.8 million reduction in self-insurance expense, a $4.2 million reduction in incentive compensation, and a $4.2 million decrease in professional fees and other unallocated costs, partially offset by the absence of a $3.2 million CEWS benefit which was present in 2021.

Contingent Earnout Adjustments

Contingent earnout expense represents the fair value adjustment of earnout liabilities arising from recent acquisitions. This expense totaled $4.0 million and $2.9 million for 2023 and 2022, respectively. The fair value adjustment is based on changes to projections of acquired entities over the respective earnout periods, which span multiple years.

 

Non-Service Pension Cost and Credits

Non-service pension cost totaled $8.6 million for 2023, a credit of $(1.6) million in 2022, and credit of $(3.7) million in 2021. The increase in 2023 was primarily due to higher interest costs in 2023 compared to 2022 given changes in market rates. Non-service pension costs represents the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan is frozen and the U.K. plans are closed to new participants. The service cost component of the U.K. plans remains in compensation expense.

 

Goodwill Impairment

We recognized a pretax non-cash goodwill impairment in 2022 totaling $36.8 million, which was partially offset by a $3.5 million reduction in income tax expense. This impairment consisted of $3.4 million related to our North America Loss Adjusting reportable segment, $22.7 million related to our International Operations reportable segment, and $10.7 million related to our Platform Solutions reportable segment. There was no goodwill impairment in 2023 or 2021.

---

See the "Critical Accounting Policies" in Item 7 and Note 4, "Goodwill and Intangible Assets" of our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion about goodwill impairments.

Liquidity, Capital Resources, and Financial Condition

We fund our working capital requirements, capital expenditures, share repurchases, and acquisitions from net cash provided by operating activities and borrowings under bank credit facilities.

On November 5, 2021, the Company and certain of its subsidiaries (Crawford & Company Risk Services Investments Limited (the "UK Borrower"), Crawford & Company (Canada) Inc. (the "Canadian Borrower") and Crawford & Company (Australia) Pty. Ltd, (the "Australian Borrower"), collectively known with the Company, as the "Borrowers") entered into a Credit Facility (the " Credit Facility"), which replaced our prior credit agreement, dated as of December 8, 2011, as subsequently amended.

The Credit Facility consists of a $450.0 million revolving credit facility, with a letter of credit sub-commitment of $125.0 million. The Credit Facility contains sublimits of $250.0 million for borrowings by the UK Borrower, $125.0 million for borrowings by the Canadian Borrower, and $75.0 million for borrowings by the Australian Borrower. The Credit Facility matures, and all amounts outstanding thereunder, will be due and payable on November 5, 2026.

Borrowings under the Credit Facility may be made in U.S. dollars, Euros, the currencies of Canada, Japan, Australia or United Kingdom and, subject to the terms of the Credit Facility, other currencies. Borrowings under the Credit Facility bear interest, at the option of the applicable Borrower, based on the Base Rate (as defined below) or Term SOFR or an alternative reference rate, in each case plus an applicable interest margin based on our leverage ratio (as defined below), provided that borrowings in foreign currencies will be at an alternative reference rate. On May 19, 2023, we amended the Credit Agreement. Pursuant to the amendment, London Interbank Offered Rate ("LIBOR") has been replaced with Term Secured Overnight Financing Rate ("Term SOFR") as the U.S. dollar reference rate. The Credit Facility, as amended, defines Term SOFR based on the published forward-looking SOFR rate administered by the CME Group or any acceptable successor. The Credit Facility defines alternative reference rates for non-U.S. Dollar currencies as Alternative Currency Term Rates or Alternative Currency Daily Rates. The interest margin for Term SOFR Rate or alternative reference rate loans ranges from 1.00% to 1.625% and for Base Rate loans ranges from 0.00% to 0.625%. Base Rate is defined as the highest of (a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate” and (c) the Term SOFR plus 1.00%, subject to interest rate floors, with a minimum rate of zero. The weighted average interest rates under our Credit Facility were 6.6%, 3.3%, and 2.2% for the years ending December 31, 2023, 2022, and 2021, respectively.

At December 31, 2023, a total of $209.1 million of short-term and long-term debt was outstanding, and there was an undrawn amount of $8.9 million under the letter of credit sub-commitments of the Credit Facility. These letter of credit commitments were for our own obligations. Including the amounts committed under the letter of credit sub-commitments, the available balance under the Credit Facility totaled $232.1 million at December 31, 2023.

The obligations of the Borrowers under the Credit Facility are guaranteed by each existing of our material domestic subsidiaries, certain other domestic subsidiaries, and certain existing material foreign subsidiaries that are disregarded entities for U.S. income tax purposes (each such foreign subsidiary, a "Disregarded Foreign Subsidiary"), and such obligations are required to be guaranteed by each subsequently acquired or formed material domestic subsidiary and Disregarded Foreign Subsidiary (each, a "Guarantor"), and the obligations of the Borrowers other than us ("Foreign Borrowers") for which we are not the primary obligor are also guaranteed by us. In addition, (i) the Borrowers’ obligations under the Credit Facility are secured by a first priority lien (subject to liens permitted by the Credit Facility) on substantially all of the personal property of us and the Guarantors as set forth in the Security and Pledge Agreement and (ii) the obligations of the Foreign Borrowers are secured by a first priority lien on 100% of the capital stock of the Foreign Borrowers.

The representations, covenants and events of default in the Credit Facility are customary for financing transactions of this nature, including required compliance with a minimum fixed charge coverage ratio and a maximum interest coverage ratio (each as defined below).

We have two principal financial covenants in our Credit Facility. The consolidated leverage ratio, defined as the ratio of (i) consolidated total funded debt minus unrestricted cash to (ii) consolidated EBITDA, must not be greater 4.50 to 1.00 at the end of each fiscal quarter. Also, the consolidated interest coverage ratio, defined as the ratio of (a) consolidated EBITDA to (b) consolidated interest expense, must not be less than 2.50 to 1.00 for the four-quarter period ending at the end of each fiscal quarter.

---

At December 31, 2023, we were in compliance with the financial covenants under the Credit Facility. Our leverage ratio was 1.60 and 2.16 as of December 31, 2023 and December 31, 2022, respectively, and our interest coverage ratio was 5.99 and 9.70 as of December 31, 2023 and December 31, 2022, respectively. If we do not meet the covenant requirements in the future, we would be in default under the Credit Facility. Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Credit Facility and ancillary documents.

We are not aware of any additional restrictions placed on us, or being considered to be placed on us, related to our ability to access capital, such as borrowings under the Credit Facility. We do not rely on repurchase agreements or the commercial paper market to meet our short-term or long-term funding needs. For additional information on the key covenants contained in our Credit Facility, see "Other Matters Concerning Liquidity and Capital Resources" below.

We continue the ongoing monitoring of our customers' ability to pay us for the services that we provide to them. Based on historical results, we currently believe there is a low likelihood that write-offs of our existing accounts receivable will have a material impact on our financial results. However, if one or more of our key customers files bankruptcy or otherwise becomes unable to make required payments to us, or if overall economic conditions deteriorate, we may need to make material provisions in the future to increase our allowance for accounts receivable.

The operations of our North America Loss Adjusting and International Operations reporting segments expose us to foreign currency exchange rate changes that can impact translations of foreign-denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies, as well as the risk of changes in tax rates or tariffs on earnings or services provided outside the U.S. Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results. Increases in the value of the U.S. dollar compared with the other functional currencies in certain of the locations in which we do business negatively impacted our revenues and operating earnings in 2023 and 2022, but a weaker U.S. dollar positively impacted revenues and operating earnings in 2021. We cannot predict the impact that foreign currency exchange rates may have on our future revenues or operating earnings.

At December 31, 2023, our working capital balance (current assets less current liabilities) was approximately $70.1 million, compared with $71.8 million at December 31, 2022. The decrease in working capital was primarily due to an increase in cash and cash equivalents, an increase in prepaid expenses and other current assets due to the timing of payments, and a decrease in short term borrowings, offset by decreases in accounts receivable and unbilled revenues and an increase in accrued incentive compensation. Cash and cash equivalents at the end of 2023 totaled $58.4 million, compared with $46.0 million at the end of 2022.

Cash and cash equivalents, excluding restricted cash, as of December 31, 2023 consisted of $22.3 million held in the U.S. and $36.1 million held in our foreign subsidiaries. All of the cash and cash equivalents held by our foreign subsidiaries is available for general corporate purposes. We generally do not provide for additional U.S. and foreign income taxes on undistributed earnings of foreign subsidiaries because they are considered to be indefinitely reinvested. We maintained our permanent reinvestment assertion on a portion of prior year undistributed earnings for certain foreign operations and accrued deferred taxes attributable to these earnings. The majority of the remaining historical earnings and future foreign earnings are expected to remain permanently reinvested and will be used to provide working capital for these operations, fund defined benefit pension plan obligations, repay non-U.S. debt, and fund capital improvements and future acquisitions.

However, if at a future date or time funds that remain permanently reinvested are necessary for our operations in the U.S. or we otherwise believe it is in our best interests to repatriate all or a portion of such funds, we may be required to accrue and pay taxes to repatriate these funds. No assurances can be provided as to the amount or timing thereof, the tax consequences related thereto, or the ultimate impact any such action may have on our results of operations or financial condition. We have estimated that we have book over tax basis differences of approximately $84.1 million. Due to withholding tax, basis computations, and other related tax considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.

---

Cash Provided by Operating Activities

Cash provided by operating activities totaled $103.8 million in 2023 compared to $27.6 million in 2022. The $76.2 million increase in cash provided by operating activities was primarily due to a $58.4 million improvement in the change in billed and unbilled accounts receivables, $19.8 million related to incentive compensation, and higher earnings, partially offset by timing of other payments, including settlement of a contract for performance-based fees in our International Operations segment. Interest payments were $18.9 million in 2023, and income tax payments, net of refunds, were $16.1 million in 2023.

Cash provided by operating activities totaled $27.6 million in 2022 compared to $54.3 million in 2021. The $(26.7) million decrease in cash provided by operating activities was primarily due to a $19.4 million increase in the change in billed and unbilled accounts receivables, $14.0 million related to incentive compensation, and a $7.9 million decrease in CEWS payments, partially offset by a $9.1 million reduction in defined benefit pension contributions and $5.5 million related to timing of other payments. There were $6.5 million payments in both 2022 and 2021 related to the deferral of U.S. payroll tax withholdings as allowed by the Coronavirus Aid, Relief, and Economic Security Act in 2020. Interest payments were $9.5 million in 2022, and income tax payments, net of refunds, were $20.9 million in 2022.

Cash Used in Investing Activities

Cash used in investing activities, primarily for acquisitions, capital expenditures and capitalized software, decreased by $(21.3) million in 2023, from $57.9 million in 2022 to $36.6 million in 2023. Acquisition costs in 2022 primarily included $20.9 million for deferred payments from the 2021 Praxis acquisition and $4.3 million for Van Dijk. These transactions are discussed in Note 3, "Business Acquisitions and Dispositions" included in Item 8 of this Annual Report on Form 10-K. The 2022 decrease in cash used also included $3.0 million in proceeds related to the sale of our Canadian head office building in Kitchener, Ontario. In 2023, cash used to acquire property and equipment and capitalized software, including capitalization of costs for internally developed software, was $36.6 million. We forecast that our property and equipment additions in 2024, including capitalized software, will approximate $40.0 million.

Cash used in investing activities, primarily for acquisitions, capital expenditures and capitalized software, decreased by $(12.9) million in 2022, from $70.8 million in 2021 to $57.9 million in 2022. Acquisition costs in 2022 primarily included $20.9 million for deferred payments from the 2021 Praxis acquisition and $4.3 million for Van Dijk. The 2022 decrease in cash used also included $3.0 million in proceeds related to the sale of our Canadian head office building in Kitchener, Ontario. In 2022, cash used to acquire property and equipment and capitalized software, including capitalization of costs for internally developed software, was $34.6 million.

Cash (Used in) Provided by Financing Activities

Cash used in financing activities was $(54.7) million in 2023, compared with $25.9 million provided by financing activities in 2022. In 2023, we borrowed $37.6 million for capital expenditures and other working capital needs and we repaid a total of $69.1 million. We used cash to pay dividends totaling $12.7 million in 2023, we repurchased shares for $2.7 million, and we received shares of CRD-A stock that were surrendered by employees to settle $2.0 million of withholding taxes owed on the issuance of restricted and performance shares. Payments of contingent consideration on acquisitions totaled $7.1 million in 2023, compared with $2.1 million in 2022.

Cash provided by financing activities was $25.9 million in 2022, compared with $24.7 million in 2021. In 2022, we borrowed $106.5 million for capital expenditures, share repurchases, dividends, and acquisitions and we repaid a total of $39.0 million. We used cash to pay dividends totaling $11.8 million in 2022, we repurchased shares for $26.7 million, we had $2.3 million lower capitalized costs related to our Credit Facility compared with 2021, and we received shares of CRD-A stock that were surrendered by employees to settle $0.7 million of withholding taxes owed on the issuance of restricted and performance shares. Payments of contingent consideration on acquisitions totaled $2.1 million in 2022, compared with $1.5 million in 2021.

---

Other Matters Concerning Liquidity and Capital Resources

Our short-term debt obligations typically peak during the first quarter of each year due to the payment of incentive compensation awards, contributions to retirement plans, and certain other recurring payments, and generally decline during the balance of the year. Our maximum month-end short-term debt obligations were $39.2 million and $43.7 million in 2023 and 2022, respectively. Our average month-end short-term debt obligations were $27.8 million and $34.2 million in 2023 and 2022, respectively. The outstanding balance of our short-term borrowings, excluding outstanding but undrawn letters of credit under our Credit Facility, was $14.8 million and $27.0 million at December 31, 2023 and 2022, respectively. The balance in short-term borrowings at December 31, 2023 primarily represents amounts under our revolving Credit Facility that we expect, but are not required, to repay in the next twelve months. We have historically used the proceeds from our long-term borrowings to finance, among other things, business acquisitions.

Our liquidity is defined as cash on hand and borrowing capacity based on our trailing twelve month EBITDA, as defined under our Credit Facility. Excluding restricted cash, at December 31, 2023, we had $58.4 million of cash on hand and, based on trailing twelve month EBITDA, additional borrowing capacity of $232.1 million resulting in total liquidity of $290.5 million at December 31, 2023.

Based on our financial plans, we expect to be able to remain in compliance with all required covenants throughout 2024. Our compliance with the consolidated total leverage ratio and consolidated interest coverage ratio is particularly sensitive to changes in our EBITDA, and if our financial plans for 2024 or other future periods do not meet our current projections, we could fail to remain in compliance with these financial covenants in our Credit Facility.

Our compliance with the consolidated total leverage ratio covenant is also sensitive to changes in our level of consolidated total funded debt, as defined in our Credit Facility. In addition to short- and long-term borrowings, capital leases, and bank overdrafts, among other things, consolidated total funded debt includes letters of credit, the need for which can fluctuate based on our business requirements. An increase in borrowings under our Credit Facility could negatively impact our leverage ratio, unless those increased borrowings are offset by a corresponding increase in our EBITDA. In addition, a reduction in EBITDA in the future could limit our ability to utilize available credit under the Credit Facility, which could negatively impact our ability to fund our current operations or make needed capital investments.

Our compliance with the consolidated interest ratio covenant, which measures our ability to pay interest expense is also sensitive to the level of debt outstanding and interest rates. A decrease in EBITDA could negatively impact our interest coverage ratio, as could increases in our interest expense. If we do not manage those items carefully, we could be in default under the Credit Facility, which would negatively impact our ability to fund our current operations or make needed capital investments.

We believe our current financial resources, together with funds generated from operations and existing and potential borrowing capabilities, will be sufficient to maintain our current operations for the next 12 months.

On January 29, 2024, we amended the Credit Agreement. Pursuant to the amendment, Canadian Dollar Offered Rate has been replaced with Term Canadian Overnight Repo Rate Average as the Canadian dollar reference rate.

Material Cash Commitments

As of December 31, 2023, the impact that our material cash commitments, including estimated interest payments, are expected to have on our liquidity and cash flow in future periods is as follows:

---

(Note references in the following table refer to the note in the accompanying consolidated financial statements in Item 8 of this Annual Report on Form 10-K).

 

		Payments Due by Period
		One Year or Less				1 to 3 Years				3 to 5 Years				After 5 Years				Total
		(In thousands)
Operating lease commitments (Note 6)		$	29,457			$	45,326			$	25,212			$	17,886			$	117,881
Long-term debt, including current portions (Note 5) (1)			14,727				194,273				—				—				209,000
Finance lease and other obligations (Note 5) (1)			86				62				—				—				148
Total, before interest payments			44,270				239,661				25,212				17,886				327,029
Estimated interest payments under Credit Facility			17,057				30,893				—				—				47,950
Total material cash commitments		$	61,327			$	270,554			$	25,212			$	17,886			$	374,979

Borrowings under our Credit Facility bear interest at a variable rate, based on a Term SOFR Rate, an alternative reference rate or a Base Rate, in either case plus an applicable margin. Long-term debt refers to the required principal repayment at maturity of the Credit Facility, and may differ significantly from estimates, due to, among other things, actual amounts outstanding at maturity or any refinancings prior to such date. Interest amounts are based on projected borrowings under our Credit Facility and interest rates in effect on December 31, 2023, and the actual interest payments may differ significantly from estimates due to, among other things, changes in outstanding borrowings and prevailing interest rates in the future.

At December 31, 2023, we had approximately $3.6 million of unrecognized income tax benefits related to uncertain tax positions. We cannot reasonably estimate when all of these unrecognized income tax benefits may be settled. We expect $0.4 million of reductions to unrecognized income tax benefits within the next 12 months.

Gross deferred income tax liabilities as of December 31, 2023 were approximately $44.6 million. This amount is not included in the contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, we believe scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling would not relate to liquidity needs.

Defined Benefit Pension Funding and Cost

We sponsor a qualified defined benefit pension plan in the U.S., (the "U.S. Qualified Plan") three defined benefit plans in the U.K. (the "U.K. Plans"), and defined benefit pension plans in the Netherlands, Norway, Germany, and the Philippines (the "Other International Plans"). Future cash funding of our defined benefit pension plans will depend largely on future investment performance, interest rates, changes to mortality tables, and regulatory requirements. Effective December 31, 2002, we froze our U.S. Qualified Plan. The aggregate deficit in the funded status of the U.S. Plan and Other International Plans with unfunded deficits totaled $24.0 million and $25.9 million at the end of 2023 and 2022, respectively. The 2023 decrease in the unfunded deficit of our defined benefit pension plans primarily resulted from market returns during the year. In 2023, we made no contributions to our U.S. Qualified Plan and $2.4 million to our U.K. Plans. In 2022, we made no contributions to our U.S. Qualified Plan and $0.6 million to our U.K. Plans. The U.K. Plans were in a funded status totaling $10.9 million and $20.4 million at the end of 2023 and 2022, respectively, with the fair value of plan assets exceeding the projected benefit obligation. There was a $(9.5) million decrease during 2023 in the net prepaid pension balances of the U.K. defined benefit plans.

Our frozen U.S. Qualified Plan was underfunded by $22.3 million at December 31, 2023 based on an accumulated benefit obligation of $285.3 million. The Company does not expect to make any discretionary contributions to the U.S. Qualified Plan for 2024.

Funding requirements are no longer as sensitive to changes in the discount rate used to determine the present value of projected benefits payable under the U.S. Qualified Plan. Volatility in the capital markets, mortality changes and future legislation may have a negative impact on our pension plans, which may further increase the underfunded portion and our attendant funding obligations. Expected and required contributions to our underfunded defined benefit pension plans could reduce our liquidity, restrict available cash for our operating, financing, and investing needs and may materially adversely affect our financial condition and our ability to deploy capital to other opportunities.

---

Commercial Commitments

As a component of our Credit Facility, we maintain a letter of credit facility to satisfy certain contractual obligations. At December 31, 2023, the issued, but undrawn, letters of credit totaled approximately $8.9 million. These letters of credit are typically renewed annually, but unless renewed, will expire as follows:

 

		Amount of Commitment Expiration per Period
		One Year or Less				1 to 3 Years				3 to 5 Years				After 5 Years				Total
		(In thousands)
Standby Letters of Credit		$	8,852			$	—			$	—			$	—			$	8,852

Changes in Financial Condition

The following addresses changes in our financial condition not addressed elsewhere in this MD&A.

Significant changes on our Consolidated Balance Sheet as of December 31, 2023, compared with our Consolidated Balance Sheet as of December 31, 2022, were as follows:

Critical Accounting Policies and Estimates

This MD&A addresses our consolidated financial statements, which are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate these estimates and judgments based upon historical experience and various other factors that we believe are reasonable under then-existing circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements. Changes in these underlying estimates could potentially materially affect consolidated results of operations, financial position and cash flows in the period of change. Although some variability is inherent in these estimates, the amounts provided for are based on the best information available to us and we believe these estimates are reasonable.

We have discussed the following critical accounting policies and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our related disclosure in this MD&A.

Revenue Recognition

Our revenues are primarily comprised of claims processing or program administration fees. Fees for professional services are recognized at the time such services are rendered. Out-of-pocket costs incurred in administering a claim are typically passed on to our clients and included in our revenues under GAAP.

---

We often sell multiple types of claims processing and different levels of processing depending on the complexity of the claims within a contract. We also typically provide a menu of offerings from which the customer chooses to purchase or not at their discretion (i.e., optional purchases). Each service and related pricing is separate and distinct and provides a separate and distinct value to the customer. Pricing is consistent for each service irrespective of the other service(s) or quantities requested by the customer. For example, if we provide claims processing for auto and general liability, those services are priced and delivered independently.

Deferred revenues, which are primarily in our Broadspire segment, represent the estimated unearned portion of fees related to future services to be performed under certain fixed-fee service arrangements. Deferred revenues are recognized into revenues based on the estimated rate at which the services are provided. These rates are primarily based on an evaluation of historical claim closing rates by major claim type. Additionally, recent claim closing rates are evaluated for a significant deterioration or improvement in the longer-term historical closing rates used.

Our fixed-fee service arrangements typically require us to handle claims on either a one- or two-year basis, or for the lifetime of the claim. In cases where we handle a claim on a non-lifetime basis, we typically receive an additional fee on each anniversary date that the claim remains open. For service arrangements where we provide services for the life of the claim, we are only paid one fee for the life of the claim, regardless of the duration of the claim. As a result, our deferred revenues for claims handled for one or two years are not as sensitive to changes in claim closing rates since the revenues are recognized in the near future, and additional fees are generated for handling long-lived claims. Deferred revenues for lifetime claim handling are considered more sensitive to changes in claim closing rates since we are obligated to handle these claims to their conclusion with no additional fees received for long-lived claims. For all fixed fee service arrangements, revenues are recognized over the expected service periods, by type of claim.

Based upon our historical averages, we close approximately 99% of all cases referred to us under lifetime claim service arrangements within five years from the date of referral. Also, within that five-year period, the percentage of cases remaining open in any one particular year has remained relatively consistent from period to period. Each quarter we evaluate our historical case closing rates by type of claim and make adjustments as necessary. Any changes in estimates are recognized in the period in which they are determined.

As of December 31, 2023, deferred revenues related to lifetime claim handling arrangements approximated $39.8 million. If the rate at which we close cases changes, the amount of revenues recognized within a period could be affected. In addition, given the competitive environment in which we operate, we may be unable to raise our prices to offset the additional expense associated with handling longer-lived claims should such case closing rates change. The change in our first-year case closing rates over the last ten years has ranged from a decrease of 1.3% to an increase of 2.2%, and has averaged an increase of 0.4%. A 1.0% change is a reasonably likely change in our estimate based on historical data. Absent an increase in per-claim fees from our clients, a 1.0% decrease in claim closing rates for lifetime claims would have resulted in the deferral of additional revenues of approximately $0.5 million, $1.4 million, and $1.3 million for the years ended December 31, 2023, 2022, and 2021, respectively. If our average claim closing rates for lifetime claims increased by 1.0%, we would have recognized additional revenues of approximately $0.5 million, $1.4 million, and $1.3 million in 2023, 2022 and 2021, respectively.

Allowance for Expected Credit Losses

We maintain allowances for expected credit losses resulting from the inability of our clients to make required payments and for adjustments to invoiced amounts. Losses resulting from the inability of clients to make required payments are accounted for as bad debt expense, while adjustments to invoices are accounted for as reductions to revenues. These allowances are established by using historical write-off or adjustment information intended to determine future loss expectations and by considering the current credit worthiness of our clients, any known specific collection problems, and our assessment of current industry conditions. Actual experience may differ significantly from historical or expected loss results. Each quarter, we evaluate the adequacy of the assumptions used in determining these allowances and make adjustments as necessary. Changes in estimates are recognized in the period in which they are determined. Historically, our estimates have been materially accurate.

As of December 31, 2023 and 2022, our allowance for expected credit losses totaled $8.6 million and $9.1 million, or approximately 6.1% and 6.2% of gross billed receivables at December 31, 2023 and 2022, respectively. If the financial condition of our clients deteriorates, resulting in an inability to make required payments to us, or if economic conditions deteriorate, additional allowances may be deemed to be appropriate or required. If the allowance for expected credit losses changed by 1.0% of gross billed receivables, reflecting either an increase or decrease in expected future write-offs, the impact to consolidated pretax income would have been approximately $1.4 million, $1.5 million, and $1.4 million in 2023, 2022 and 2021, respectively.

---

Valuation of Goodwill and Indefinite-Lived Intangible Assets

We regularly evaluate whether events and circumstances have occurred which indicate that the carrying amounts of goodwill and indefinite-lived intangible assets have been impaired. Goodwill is an asset that represents the excess of the purchase price over the fair value of the separately identifiable net assets (tangible and intangible) acquired in certain business combinations. Our indefinite-lived intangible assets consist of trade names associated with acquired businesses. Goodwill and indefinite-lived intangible assets are not amortized, but are subject to impairment testing at least annually. When factors indicate that such assets should be evaluated for possible impairment between the scheduled annual impairment tests, we perform an interim impairment test.

In the annual impairment analysis of goodwill, we compare the carrying value of our reporting units, including goodwill, to the estimated fair values of those reporting units as determined by a combination of the income approach, specifically discounting future projected cash flows, and the market approach, specifically the Guideline Public Company Method, as described in more detail in Note 1, "Significant Accounting and Reporting Policies," of our accompanying consolidated financial statements in Item 8 of this Annual Report on Form 10-K. We perform an interim impairment analysis of goodwill when an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value. The estimated fair values of our reporting units are based upon certain assumptions made by us. The estimated fair values of our reporting units are reconciled to the Company's total market capitalization, including an estimated implied control premium, as determined by its stock price in order to assist in evaluating the reasonableness of the estimated fair values of each of the reporting units.

Goodwill impairment testing is performed on a reporting unit basis. If the fair value of the reporting unit exceeds its carrying value, including goodwill, goodwill is considered not impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The loss recognized cannot subsequently be reversed.

We have the option to perform a qualitative assessment of goodwill prior to completing the quantitative analysis described above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If we conclude that this is the case, we perform the quantitative analysis discussed above.

During 2023, we performed our goodwill impairment testing. The estimated fair value of each reporting unit tested exceeded its carrying value. The key assumptions used in estimating the fair value of our reporting units as of October 1, 2023 utilizing the income approach include the discount rate and the terminal growth rate. The discount rates utilized in estimating the fair value of our reporting units as of October 1, 2023 range between 12.0% and 13.5%, reflecting the assessment of a market participant's view of the risks associated with the projected cash flows. The terminal growth rate used in the analysis was 2.0%. The assumptions used in estimating the fair values are based on currently available data and management's best estimates of revenues, EBITDA margins, and cash flows and, accordingly, a change in market conditions or other factors could have a material effect on the estimated values. There are inherent uncertainties related to the assumptions used and to management's application of these assumptions.

During the third quarter of 2022, we identified goodwill impairment indicators in our International Operations reporting unit and Crawford Legal Services reporting unit, which are reflected in the International Operations reportable segment, as a result of a reduction in forecasted revenue and earnings, higher interest rates, and a lower Crawford & Company stock price. We also identified goodwill impairment indicators in the North America Loss Adjusting and Platform Solutions reportable segments related to the edjuster Inc. and Praxis Consulting reporting units, respectively, as these reporting units had minimal historical excesses of fair values over their carrying values due to being recent acquisitions, given higher interest rates and a lower Crawford & Company stock price. As a result of these indicators, we performed an interim quantitative goodwill impairment test as of August 31, 2022 and recognized a non-cash pretax goodwill impairment of $36.8 million. The goodwill impairment charge reduced the carrying value of goodwill in edjuster Inc. and Praxis Consulting reporting units by $3.4 million and $10.7 million, respectively. Goodwill related to our International Operations and Crawford Legal Services reporting units were fully impaired with charges of $19.6 million and $3.2 million, respectively.

During the fourth quarter of 2022, for purposes of our October 1 annual impairment test, we elected to perform a qualitative assessment of goodwill considering the most recent quantitative assessment performed as of August 31, 2022. Based on the qualitative assessment, no events or circumstances were identified that indicated it was more likely than not that the carrying values of the reporting units exceeded their fair values.

---

The indefinite-lived intangible assets with carrying values of $30.6 million at December 31, 2023 are also evaluated for potential impairment on an annual basis or when indicators of potential impairment are identified. The indefinite-lived intangible asset impairment test involves estimating the fair value using an internally prepared discounted cash flow analysis. The fair values of the Company's trade names are established using the relief-from-royalty method, a form of the income approach. This method recognizes that, by virtue of owning the trade name as opposed to licensing it, a company or reporting unit is relieved from paying a royalty, usually expressed as a percentage of net sales, for the asset's use. The present value of the after-tax costs savings (i.e., royalty relief) at an appropriate discount rate including a tax amortization benefit indicates the value of the trade name. We determined the discount rate based on our performance compared to similar market participants, factored by risk in forecasting using a modified capital asset pricing model.

The values of the trade names are sensitive to changes in the assumptions used above, however the estimated fair value of our material trade name exceeds its carrying value. We will continue to monitor the value of these trade names for potential indicators of impairment.

Defined Benefit Pension Plans

We sponsor various defined benefit pension plans in the U.S. and U.K. that cover a substantial number of current and former employees in each location. Certain other employees participating in the Other International Plans have retirement benefits that are accounted for as defined benefit pension plans under GAAP. We utilize the services of independent actuaries to help us estimate our pension obligations and measure pension costs. Our U.S. Qualified Plan was frozen on December 31, 2002. Our U.K. Plans were closed to new employees as of October 31, 1997, but existing participants may still accrue additional limited benefits based on salary levels existing at the close date. Benefits payable under our U.S. Qualified Plan are generally based on career compensation; however, no additional benefits accrue on our frozen U.S. Qualified Plan after December 31, 2002. Benefits payable under the U.K. Plans are generally based on an employee's salary at the time the applicable plan was closed. Our funding policy is to make cash contributions in amounts sufficient to maintain the plans on an actuarially sound basis, but not in excess of amounts deductible under applicable income tax regulations. Note 8, "Retirement Plans," of our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K provides details about the assumptions used in determining the funded status of the plans, the unrecognized actuarial gain/(loss), the components of net periodic benefit cost, benefit payments expected to be made in the future and plan asset allocations.

Investment objectives for our U.S. and U.K. pension plan assets are to:

The long-term goal for the U.S. and U.K. defined benefit pension plans is to reach fully-funded status and to maintain that status. The investment policies contemplate the plans' asset return requirements and risk tolerances changing over time. Accordingly, reallocation of the portfolios' mix of return-seeking assets and liability-hedging assets will be performed as the plans' funded status improves. In conjunction with our investment policies, we have rebalanced the U.S. and U.K. defined benefit pension plans' target allocation mix from an equity-weighted to a fixed-income weighted investment strategy, as we have made cash contributions to the plans and the plans' funded status has improved.

The rules for pension accounting are complex and the assumptions used can produce volatility in our results, financial condition and liquidity. Our pension expense is primarily a function of the value of our plans' assets and the discount rate used to measure our pension liabilities at a single point in time at the end of our fiscal year (the measurement date). Both factors are significantly influenced by the stock and bond markets, which are subject to volatility.

In addition to expense volatility, we are required to record mark-to-market adjustments to our balance sheet on an annual basis for the net funded status of our pension plans. These adjustments have fluctuated significantly over the past several years and, like our pension expense, are a result of the discount rate and value of our plan assets at each measurement date, as well as periodic changes to mortality tables used to estimate the life expectancy of plan participants. The funded status of our plans may also impact our liquidity, as changes to funding laws in the U.S. may require higher funding levels for our pension plans.

---

The principal assumptions used in accounting for our defined benefit pension plans are the discount rate, the expected long-term return on plan assets, and the mortality expectations for plan participants. The discount rate assumptions reflect the rates at which the benefit obligations could be effectively settled. Our discount rates were determined with the assistance of actuaries, who calculate the yield on a theoretical portfolio of high-grade corporate bonds (rated Aa or better) with cash flows that generally match our expected benefit payments in future years. At December 31, 2023, the discount rate used to compute the benefit obligations of the U.S. and U.K. defined benefit pension plans were 4.94% and 5.78%, respectively.

The estimated average rate of return on plan assets is a long-term, forward-looking assumption that also materially affects our pension cost. It is required to be the expected future long-term rate of earnings on plan assets. Our pension plan assets are invested primarily in collective funds. As part of our strategy to manage future pension costs and net funded status volatility, we have transitioned to a liability-driven investment strategy with a greater concentration of fixed-income securities as described above.

Establishing the expected future rate of investment return on our pension assets is a judgmental matter. Management considers the following factors in determining this assumption:

We review the expected long-term rate of return on an annual basis and revise it as appropriate. To support our conclusions, we periodically commission asset/liability studies performed by third-party professional investment advisors and actuaries to assist us in our reviews. These studies project our estimated future pension payments and evaluate the efficiency of the allocation of our pension plan assets into various investment categories. These studies also generate probability-adjusted expected future returns on those assets. The expected long-term rates of return on plan assets assumption used to determine 2024 net periodic pension cost are estimated to be 5.90% and 6.20% for the U.S. and U.K. plans, respectively.

We review our employee demographic assumptions annually and update the assumptions as necessary. During 2023, we did not revise our mortality assumptions.

Pension expense is also affected by the accounting policy used to determine the value of plan assets at the measurement date. We apply our expected return on plan assets using fair market value as of the annual measurement date. The fair market value method results in greater volatility to our pension expense than the calculated value method. The amounts recognized in the balance sheet reflect the amount of our long-term pension liabilities at the plan measurement date and the effect of fair value accounting on plan assets. At December 31, 2023, we recorded a decrease to equity through other comprehensive income ("OCI") of $15.7 million (net of tax at the applicable jurisdictional rate) to reflect unrealized actuarial losses during 2023. At December 31, 2022, we recorded an decrease to equity through OCI of $11.7 million (net of tax at the applicable jurisdictional rate) to reflect unrealized actuarial losses during 2022. Those changes are subject to amortization over future years and may be reflected in future income statements.

Cumulative unrecognized actuarial losses for all plans were $261.1 million through December 31, 2023, compared with $256.7 million through December 31, 2022. These unrecognized losses reflect changes in the discount rates, differences between expected and actual asset returns, and changes to mortality expectations for plan participants, which are being amortized over future periods. These unrecognized losses may be recovered in future periods through actuarial gains. However, unless the minimum amount required to be amortized is below a corridor amount equal to 10.0% of the greater of the projected benefit obligation or the market-related value of plan assets, these unrecognized actuarial losses are required to be amortized and recognized in future periods. For example, projected pension plan expense includes $12.6 million of amortization of these actuarial losses in 2024 versus $12.0 million in 2023 and $10.2 million in 2022.

---

Net periodic pension expense for our defined benefit pension plans is sensitive to changes in the underlying assumptions for the expected rates of return on plan assets and the discount rates used to determine the present value of projected benefits payable under the plans. If our assumptions for the expected returns on plan assets of our U.S. and U.K. defined benefit pension plans changed by 0.50%, representing either an increase or decrease in expected returns, the impact to 2023 consolidated pretax income would have been approximately $2.2 million. If our assumptions for the discount rates used to determine the present value of projected benefits payable under the plans changed by 0.25%, representing either an increase or decrease in interest rates used to value pension plan liabilities, holding all other assumptions constant, the projected benefit obligations of our U.S. and U.K. defined benefit pension plans would have changed by approximately $9.3 million, and the impact to 2023 consolidated pretax income would have been approximately $0.2 million. Net periodic pension expense is also sensitive to mortality assumptions. If the life expectancy of pension plan participants in our U.S. Qualified Plan was to increase by one year compared to current assumptions, our pension obligations would have changed by $9.7 million and our annual pension cost would have changed by $0.6 million. If the life expectancy of pension plan participants in our U.K. Plans was to increase by one year compared to current assumptions, our pension obligations would have changed by $3.7 million and our annual pension cost would have changed by $0.6 million.

We estimate the service and interest components of net periodic benefit cost for U.S. and international pension and other postretirement benefits. This approach discounts the individual expected cash flows underlying the service cost and interest cost using the applicable spot rates derived from the yield curve used to discount the cash flows used to measure the benefit obligation. For the pension plans, the weighted average spot rates used to determine interest costs were 4.87% for our U.S. plan and 5.80% for the U.K. plans.

Income Taxes

We account for certain income and expense items differently for financial reporting and income tax purposes. Provisions for deferred taxes are made in recognition of these temporary differences. The most significant differences relate to accrued compensation and pensions, depreciation and amortization.

For financial reporting purposes in accordance with the liability method of accounting for income taxes, the provision for income taxes is the sum of income taxes both currently payable and deferred. Currently payable income taxes represent the liability related to our income tax returns for the current year, while the net deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on our consolidated balance sheets that are not related to balances in "Accumulated other comprehensive loss." The changes in deferred tax assets and liabilities are determined based upon changes between the basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for income tax purposes, multiplied by the enacted statutory tax rates for the year in which we estimate these differences will reverse. We must estimate the timing of the reversal of temporary differences, as well as whether taxable income in future periods will be sufficient to fully recognize any gross deferred tax assets.

Other factors which influence our effective tax rate used for financial reporting purposes include changes in enacted statutory tax rates, changes in tax law or policy, changes in the composition of taxable income from the countries in which we operate, our ability to utilize net operating loss and tax credit carryforwards, and changes in unrecognized tax benefits.

Our effective tax rate, defined as our provision for income taxes divided by income before income taxes, for financial reporting purposes in 2023, 2022, and 2021 was 36.1%, 467.2%, and 30.4%, respectively. If our effective tax rate used for financial reporting purposes changed by 1.0%, we would have recognized an increase or decrease to income taxes of approximately $0.5 million, $0.1 million and $0.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. Our effective tax rate for financial reporting purposes is expected to range between 33% and 35% in 2024 before considering any unknown discrete items and assuming no changes in tax law or policy in the material jurisdictions in which we operate.

It is possible that future changes in the tax laws of jurisdictions in which we operate, including but not limited to changes in tax law or policy, could have a significant impact on U.S.-based multinational companies such as our Company. At this time, we cannot predict the likelihood or details of any such changes or their specific potential impact on our Company.

Our most significant deferred tax assets are related to accrued but unpaid compensation and net operating loss ("NOL") carryforwards. The tax deduction for accrued but unpaid compensation generally occurs upon funding of the liabilities within specified timeframes after the fiscal year end has closed. Assuming that the compensation liability will be fulfilled, the deferred tax asset should be realized.

---

In accordance with GAAP, we have considered the four possible sources of taxable income that may be available to realize a tax benefit for deductible temporary differences and carryforwards and have a $29.6 million valuation allowance on certain net operating loss and tax credit carryforwards in our international and domestic operations as of December 31, 2023. For our remaining deferred tax assets, we believe that it is more likely than not that we will realize these assets based on our forecast of future taxable income and tax planning strategies that are available to us. Future changes in the valuation allowance, if required, should not affect our liquidity or our compliance with any existing debt covenants.

The NOL carryforwards for which a valuation allowance is not recorded primarily consists of $3.2 million of state NOL carryforwards generated by our domestic companies.

To fully utilize state NOL carryforwards, our domestic operations must generate taxable income prior to the expiration of the carryforwards. After consideration of the four sources of taxable income, we concluded that it was more likely than not that we should be able to utilize our state NOL carryforwards in the majority of jurisdictions before expiration. However, there were certain filing groups and jurisdictions that we do not expect to fully utilize our state NOL carryforwards before expiration. For those jurisdictions, we concluded that it was not more likely than not that we should be able to utilize our state NOL carryforwards and a valuation allowance was recorded. The valuation allowance against state NOL carryforwards was $0.5 million and $0.5 million for the periods ended December 31, 2023 and 2022, respectively.

The remaining NOL carryforwards were generated by certain foreign jurisdictions and are generally offset by full valuation allowances.

In 2021, the Organization for Economic Co-operation and Development released an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules, which aim to reform international corporate taxation rules, including a global minimum tax rate. Many tax jurisdictions have enacted or are expected to enact legislation effective as early as January 1, 2024. We are currently evaluating the potential future period impacts of the Pillar Two Model Rules.

Self-Insured Risks

We self-insure certain insurable risks consisting primarily of professional liability, auto liability, employee medical, disability, and workers' compensation. Insurance coverage is obtained for catastrophic property and casualty exposures, including professional liability on a claims-made basis, and those risks required to be insured by law or contract. Most of these self-insured risks are in the U.S. Provisions for claims incurred under self-insured programs are made based on our estimates of the aggregate liabilities for claims incurred, including estimated legal fees, losses that have occurred but have not been reported to us, and the adverse developments on reported losses. These estimated liabilities are calculated based on historical claim payment experience, the expected life of the claims, and other factors considered relevant to the claims. The liabilities for claims incurred under our self-insured workers' compensation and employee disability programs are discounted at the prevailing risk-free rate for government issues of an appropriate duration. All other self-insured liabilities are undiscounted. Each quarter we evaluate the adequacy of the assumptions used in developing these estimated liabilities and make adjustments as necessary. Changes in estimates are recognized in the period in which they are determined. Historically, our estimates have been materially accurate.

As of December 31, 2023 and 2022, our estimated liabilities for self-insured risks totaled $51.7 million and $24.3 million, respectively. We separately record a recoverable asset for the value of insurance recovery payments anticipated from our insurance carriers, which totaled $30.3 million and $8.6 million as of December 31, 2023 and 2022, respectively. The recoverability of each asset is based on the notification of each claim to our insurers, along with our independent assessment of the claim and the fact that we only have coverage with highly rated insurance carriers. Receipts from insurance up to the amount of the loss recognized are considered recoveries, which are accounted for when receipt is probable. The annual expense associated with our self-insured activities, excluding the Company’s portion of health insurance costs for coverage provided to our employees, totaled $14.5 million and $11.6 million for 2023 and 2022, respectively.

The estimated self-insured liability is most sensitive to changes in the ultimate liability for a claim and, if applicable, the interest rate used to discount the liability. We believe our provisions for self-insured losses are adequate to cover the expected cost of losses incurred. However, these provisions are estimates and amounts ultimately settled may be significantly greater or less than the provisions established. We used a discount rate of 4.49% to determine the present value of our self-insured workers' compensation liabilities as of December 31, 2023. If the average discount rate was decreased or increased by 1.0%, reflecting either an increase or decrease in underlying interest rates, our estimated net liabilities for these self-insured risks at December 31, 2023 would have been impacted by approximately $0.2 million, resulting in an equivalent increase or decrease to 2023 consolidated pretax income.

---

Business Combinations

The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date. Goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the fair value of the net assets acquired. We estimate the fair values of identifiable intangible assets, including customer relationships, tradenames, and developed technology, on valuations that require management to make significant judgments, estimates, and assumptions, such as the expected future cash flows to be derived from the intangible assets based on projected revenues, EBITDA, customer attribution rates, and royalty rates. Additionally, we make assumptions related to discount rates that reflect the risk factors associated with future cash flows and estimates of useful lives.

We measure and recognize contingent consideration at fair value as of the acquisition date based on a Monte Carlo simulation model. These fair value measurements require the use of significant judgments, estimates, and assumptions, including projected financial results such as projected revenues and EBITDA, discount rates, and volatility during the contingent consideration earnout period. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest financial projections and input from management, with any change in the fair value estimate recorded in earnings in that period. Increases or decreases in the fair value of contingent consideration liabilities resulting from changes in the estimates or assumptions could materially impact the financial statements. See Note 3 “Business Acquisitions and Dispositions” of our accompanying consolidated financial statements for additional information on our acquisitions and Note 12 “Fair Value Measurements” of our accompanying consolidated financial statements for additional information on our contingent consideration liabilities.

New Accounting Standards

See Note 1, "Significant Accounting and Reporting Policies," of our accompanying consolidated financial statements in Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements including the dates, or expected dates of adoption, and effects, or expected effects, on our disclosures, results of operations, financial condition and cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our operations expose us to various market risks, primarily from changes in foreign currency exchange rates and interest rates. Our objective is to identify and understand these risks and implement strategies to manage them. When evaluating potential strategies, we consider the fundamentals of each market and the underlying accounting and business implications. To implement our various strategies, we may enter into various hedging or similar transactions. The sensitivity analyses we present below do not consider the effect of possible adverse changes in the general economy, nor do they consider additional actions we may take from time to time in the future to mitigate our exposure to these or other market risks. There can be no assurance of the manner in which we will manage or continue to manage any risks in the future or that any of our efforts will be successful.

Foreign Currency Exchange Rate Risk

Our international operations expose us to foreign currency exchange rate changes that can impact translations of foreign-denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. Revenues before reimbursements from our international operations included in each of our operating segments were 37.8%, 38.3%, and 40.2% of consolidated revenues before reimbursements for 2023, 2022, and 2021, respectively. We do not presently engage in any hedging activities to compensate for the effect of potential currency exchange rate fluctuations on the net assets or operating results of our foreign subsidiaries. The following table illustrates revenue as a percentage of total revenue for the major currencies of the geographic areas in which Crawford does business:

 

Year Ended December 31,				2023							2022
(in thousands, except percentages)				USD equivalent				% of total				USD equivalent				% of total
U.S.		USD		$	788,364				62.2	%		$	734,264				61.7	%
U.K.		GBP			143,353				11.3	%			121,814				10.2	%
Canada		CAD			96,374				7.6	%			97,766				8.2	%
Australia		AUD			89,479				7.1	%			94,692				8.0	%
Europe		EUR			57,513				4.5	%			54,447				4.6	%
Rest of World					92,048				7.3	%			86,499				7.3	%
Total Revenues, before reimbursements				$	1,267,131							$	1,189,482

 

---

 

We measure foreign currency exchange rate risk based on changes in foreign currency exchange rates using a sensitivity analysis. The sensitivity analysis measures the potential change in earnings based on a hypothetical 10.0% change in currency exchange rates. Exchange rates and currency positions as of December 31, 2023 were used to perform the sensitivity analysis. Such analysis indicated that a hypothetical 10.0% change in foreign currency exchange rates would have increased or decreased consolidated pretax income during 2023 by approximately $1.2 million had the U.S. dollar exchange rate increased or decreased relative to the currencies to which we had exposure.

Interest Rate Risk

Borrowings under the Credit Facility bear interest at a variable rate, Base Rate (as defined) or Term SOFR or an alternative reference rate, at our option provided that borrowings in foreign currencies will be at an alternative reference rate. As a result, we have market risk exposure to changes in interest rates. Based on the amounts of our floating rate debt at December 31, 2023 and 2022, if market interest rates had increased or decreased an average of 1.00% our pretax interest expense would have changed by $2.1 million and $2.4 million in 2023 and 2022, respectively. We determined these amounts by considering the impact of the hypothetical change in interest rates on our borrowing costs.

Changes in the projected benefit obligations of our defined benefit pension plans are largely dependent on changes in prevailing interest rates as of the plans' respective measurement dates, which are used to value these obligations under ASC 715, "Compensation--Retirement Benefits." If our assumptions for the discount rates used to determine the present value of the projected benefit obligations changed by 0.25%, representing either an increase or decrease in the discount rate, the projected benefit obligations, holding all other assumptions constant, of our U.S. and U.K. defined benefit pension plans would have changed by approximately $9.3 million at December 31, 2023. The impact of this change to December 31, 2023 consolidated pretax income would have been approximately $0.2 million.

Periodic pension cost for our defined benefit pension plans is impacted primarily by changes in long-term interest rates whereas interest expense for our variable-rate borrowings is impacted more directly by changes in short-term interest rates. To the extent changes in interest rates on our variable-rate borrowings move in the same direction as changes in the discount rates used for our defined benefit pension plans, changes in our interest expense on our borrowings would be offset to some degree by changes in our defined benefit pension cost. We are unable to quantify the extent of any such offset.

Inflation Risk

An increase in inflation could affect our business in several ways. Inflation increases expenses for labor and other operating costs, potentially putting pressure on our profitability if such costs cannot be passed through to our customers. Inflation could also lead to increased costs for losses and loss adjustment expenses in each of our operating segments. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally, and may force governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity or inhibit our revenue growth opportunities.

Credit Risk Related to Performing Certain Services for Our Clients

We process payments for claims settlements, primarily on behalf of our self-insured clients. The liability for the settlement cost of claims processed, which is generally pre-funded, remains with the client. Accordingly, we do not incur significant credit risk in the performance of these services.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Table of Contents

 

	Page
Consolidated Statements of Operations	57
Consolidated Statements of Comprehensive Income (Loss)	58
Consolidated Balance Sheets	59
Consolidated Statements of Cash Flows	61
Consolidated Statements of Shareholders’ Investment	62
Notes to Consolidated Financial Statements	63
Management’s Statement on Responsibility for Financial Reporting	103
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)	104

 

---

CRAWFORD & COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

 

Year Ended December 31,		2023				2022				2021
Revenues from Services:
Revenues before reimbursements		$	1,267,131			$	1,189,482			$	1,102,032
Reimbursements			49,788				41,744				37,199
Total Revenues			1,316,919				1,231,226				1,139,231
Costs and Expenses:
Costs of services provided, before reimbursements			908,059				883,128				810,231
Reimbursements			49,788				41,744				37,199
Total costs of services			957,847				924,872				847,430
Selling, general, and administrative expenses			286,506				255,750				244,850
Corporate interest expense, net of interest income of $2,773, $655 and $424, respectively			17,036				10,311				6,559
Goodwill impairment			—				36,808				—
Total Costs and Expenses			1,261,389				1,227,741				1,098,839
Other (Loss) Income			(8,173	)			1,561				3,472
Income Before Income Taxes			47,357				5,046				43,864
Provision for Income Taxes			17,097				23,578				13,316
Net Income (Loss)			30,260				(18,532	)			30,548
Net Loss Attributable to Noncontrolling Interests			349				227				144
Net Income (Loss) Attributable to Shareholders of Crawford & Company		$	30,609			$	(18,305	)		$	30,692
Earnings (Loss) Per Share - Basic:
Class A Common Stock		$	0.63			$	(0.37	)		$	0.58
Class B Common Stock		$	0.63			$	(0.37	)		$	0.58
Earnings (Loss) Per Share - Diluted:
Class A Common Stock		$	0.61			$	(0.37	)		$	0.57
Class B Common Stock		$	0.62			$	(0.37	)		$	0.57
Weighted-Average Shares Used to Compute Basic Earnings (Loss) Per Share:
Class A Common Stock			29,039				29,196				30,760
Class B Common Stock			19,796				20,113				22,237
Weighted-Average Shares Used to Compute Diluted Earnings (Loss) Per Share:
Class A Common Stock			29,799				29,196				31,743
Class B Common Stock			19,796				20,113				22,237
Cash Dividends Per Share:
Class A Common Stock		$	0.26			$	0.24			$	0.24
Class B Common Stock		$	0.26			$	0.24			$	0.24

 

The accompanying notes are an integral part of these consolidated financial statements.

---

CRAWFORD & COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 

Year Ended December 31,		2023				2022				2021
Net Income (Loss)		$	30,260			$	(18,532	)		$	30,548
Other Comprehensive (Loss) Income:
Net foreign currency translation gain (loss), net of tax benefit of $0, $0 and $0, respectively			3,051				(30,554	)			9,024
Amounts reclassified into net income (loss) for defined benefit pension plans, net of tax benefit of $2,668, $2,675, and $2,691, respectively			9,351				7,645				7,765
Net unrealized (loss) gain on defined benefit plans arising during the year, net of tax benefit (provision) of $701, $3,681, and $(541), respectively			(15,740	)			(11,704	)			1,618
Other Comprehensive (Loss) Income			(3,338	)			(34,613	)			18,407
Comprehensive Income (Loss)			26,922				(53,145	)			48,955
Comprehensive loss (income) attributable to noncontrolling interests			393				(40	)			152
Comprehensive Income (Loss) Attributable to Shareholders of Crawford & Company		$	27,315			$	(53,185	)		$	49,107

 

The accompanying notes are an integral part of these consolidated financial statements.

---

CRAWFORD & COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

December 31,		2023				2022
ASSETS
Current Assets:
Cash and cash equivalents		$	58,363			$	46,007
Accounts receivable, less allowance for expected credit losses of $8,599 and $9,322, respectively			131,362				141,106
Unbilled revenues, at estimated billable amounts			116,611				126,274
Income taxes receivable			4,842				9,098
Prepaid expenses and other current assets			58,168				28,782
Total Current Assets			369,346				351,267
Net Property and Equipment			22,742				27,809
Other Assets:
Operating lease right-of-use asset, net			88,615				93,334
Goodwill			76,724				76,622
Intangible assets arising from business acquisitions, net			81,786				88,039
Capitalized software costs, net			96,770				82,975
Deferred income tax assets			26,247				19,573
Other noncurrent assets			36,969				51,888
Total Other Assets			407,111				412,431
TOTAL ASSETS		$	799,199			$	791,507

 

The accompanying notes are an integral part of these consolidated financial statements.

---

CRAWFORD & COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

 

December 31,		2023				2022
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings		$	14,813			$	27,048
Accounts payable			45,107				50,847
Accrued compensation and related costs			97,842				79,285
Self-insured risks			33,238				12,614
Income taxes payable			6,130				1,208
Operating lease liability			24,351				22,910
Other accrued liabilities			42,271				56,293
Deferred revenues			35,540				29,282
Total Current Liabilities			299,292				279,487
Noncurrent Liabilities:
Long-term debt and finance leases, less current installments			194,335				211,810
Deferred revenues			24,871				24,737
Accrued pension liabilities			24,006				25,914
Operating lease liability			78,029				84,628
Other noncurrent liabilities			38,835				41,553
Total Noncurrent Liabilities			360,076				388,642
Shareholders' Investment:
Class A common stock, $1.00 par value, 50,000 shares authorized; 29,525 and 28,764 shares issued and outstanding, respectively			29,525				28,764
Class B common stock, $1.00 par value, 50,000 shares authorized; 19,555 and 19,848 shares issued and outstanding, respectively			19,555				19,848
Additional paid-in capital			82,589				78,158
Retained earnings			228,564				213,094
Accumulated other comprehensive loss			(218,615	)			(215,321	)
Shareholders' Investment Attributable to Shareholders of Crawford & Company			141,618				124,543
Noncontrolling interests			(1,787	)			(1,165	)
Total Shareholders' Investment			139,831				123,378
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT		$	799,199			$	791,507

 

The accompanying notes are an integral part of these consolidated financial statements.

---

CRAWFORD & COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

Year Ended December 31,		2023				2022				2021
Cash Flows from Operating Activities:
Net income (loss)		$	30,260			$	(18,532	)		$	30,548
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation and amortization			35,742				36,098				40,176
Goodwill impairment			—				36,808				—
Deferred income taxes			(12,279	)			7,397				(2,992	)
Stock-based compensation costs			5,603				4,923				7,585
Loss (gain) on disposal of property and equipment			646				(1,490	)			104
Contingent earnout adjustments			4,025				2,921				—
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable, net			11,663				(15,537	)			(5,475	)
Unbilled revenues, net			11,879				(19,319	)			(9,979	)
Accrued or prepaid income taxes			13,063				(7,444	)			(7,232	)
Accounts payable and accrued liabilities			(2,822	)			(5,985	)			13,470
Deferred revenues			5,913				(397	)			3,562
Accrued retirement costs			7,174				(1,366	)			(15,478	)
Prepaid expenses and other operating activities			(7,077	)			9,557				32
Net cash provided by operating activities			103,790				27,634				54,321
Cash Flows from Investing Activities:
Acquisitions of property and equipment			(4,890	)			(6,838	)			(9,225	)
Capitalization of computer software costs			(31,706	)			(27,761	)			(21,729	)
Cash proceeds from sale of property and equipment			—				3,032				—
Payments for business acquisitions, net of cash acquired			—				(26,309	)			(46,398	)
Proceeds from settlement of life insurance policies			—				—				6,526
Net cash used in investing activities			(36,596	)			(57,876	)			(70,826	)
Cash Flows from Financing Activities:
Cash dividends paid			(12,701	)			(11,842	)			(12,663	)
Payments related to shares received for withholding taxes under employee stock-based compensation plans			(1,947	)			(704	)			(1,411	)
Proceeds from shares purchased under employee stock-based compensation plans			1,536				821				1,648
Repurchases of common stock			(2,731	)			(26,749	)			(19,134	)
Payments of contingent consideration on acquisitions			(7,060	)			(2,118	)			(1,544	)
Payments for equity investments			—				(600	)			(106	)
Increases in short-term and revolving credit facility borrowings			37,578				106,481				113,312
Payments on short-term and revolving credit facility borrowings			(69,066	)			(39,025	)			(52,306	)
Payments on finance lease obligations			(60	)			(59	)			(432	)
Capitalized loan costs			—				(7	)			(2,302	)
Dividends paid to noncontrolling interests			(229	)			(258	)			(405	)
Net cash (used in) provided by financing activities			(54,680	)			25,940				24,657
Effects of exchange rate changes on cash and cash equivalents			386				(2,742	)			881
Increase (decrease) in Cash, Cash Equivalents, and Restricted Cash			12,900				(7,044	)			9,033
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year			46,645				53,689				44,656
Cash, Cash Equivalents, and Restricted Cash at End of Year		$	59,545			$	46,645			$	53,689

 

The accompanying notes are an integral part of these consolidated financial statements.

---

CRAWFORD & COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

(In thousands)

 

		Common Stock										Shareholders'
		Class A Non-Voting		Class B Voting		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Investment Attributable to Shareholders of Crawford & Company		Noncontrolling Interests		Total Shareholders' Investment
Balance at December 31, 2020		$30,847		$22,510		$67,193		$265,245		$(198,856)		$186,939		$(11)		$186,928
Net income		—		—		—		30,692		—		30,692		(144)		30,548
Other comprehensive income (loss)		—		—		—		—		18,415		18,415		(8)		18,407
Cash dividends paid (Class A - $0.24 per share, Class B - $0.24 per share)		—		—		—		(12,663)		—		(12,663)		—		(12,663)
Stock-based compensation		—		—		7,585		—		—		7,585		—		7,585
Repurchases of common stock		(531)		(1,698)		—		(16,905)		—		(19,134)		—		(19,134)
Shares issued in connection with stock-based compensation plans, net		680		—		(443)		—		—		237		—		237
Decrease in value of noncontrolling interest due to acquisition		—		—		(106)		—		—		(106)		—		(106)
Dividends paid to noncontrolling interests		—		—		—		—		—		—		(405)		(405)
Balance at December 31, 2021		30,996		20,812		74,229		266,369		(180,441)		211,965		(568)		211,397
Net loss		—		—		—		(18,305)		—		(18,305)		(227)		(18,532)
Other comprehensive (loss) income		—		—		—		—		(34,880)		(34,880)		267		(34,613)
Cash dividends paid (Class A - $0.24 per share, Class B - $0.24 per share)		—		—		—		(11,842)		—		(11,842)		—		(11,842)
Stock-based compensation		—		—		4,923		—		—		4,923		—		4,923
Repurchases of common stock		(2,657)		(964)		—		(23,128)		—		(26,749)		—		(26,749)
Shares issued in connection with stock-based compensation plans, net		425		—		(308)		—		—		117		—		117
Decrease in value of noncontrolling interest due to acquisition		—		—		(686)		—		—		(686)		(379)		(1,065)
Dividends paid to noncontrolling interests		—		—		—		—		—		—		(258)		(258)
Balance at December 31, 2022		28,764		19,848		78,158		213,094		(215,321)		124,543		(1,165)		123,378
Net income		—		—		—		30,609		—		30,609		(349)		30,260
Other comprehensive loss		—		—		—		—		(3,294)		(3,294)		(44)		(3,338)
Cash dividends paid (Class A - $0.26 per share, Class B - $0.26 per share)		—		—		—		(12,701)		—		(12,701)		—		(12,701)
Stock-based compensation		—		—		5,603		—		—		5,603		—		5,603
Repurchases of common stock		—		(293)		—		(2,438)		—		(2,731)		—		(2,731)
Shares issued in connection with stock-based compensation plans, net		761		—		(1,172)		—		—		(411)		—		(411)
Dividends paid to noncontrolling interests		—		—		—		—		—		—		(229)		(229)
Balance at December 31, 2023		$29,525		$19,555		$82,589		$228,564		$(218,615)		$141,618		$(1,787)		$139,831

 

The accompanying notes are an integral part of these consolidated financial statements.

---

Notes to Consolidated Financial Statements

 

---

 

---

 

---

 

---

 

---

 

---

 

---

Management's Statement on Responsibility for Financial Reporting

The management of Crawford & Company is responsible for the integrity and objectivity of the financial information in this Annual Report on Form 10-K. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, using informed judgments and estimates where appropriate.

The Company maintains a system of internal accounting policies, procedures, and controls designed to provide reasonable, but not absolute, assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's authorization. The internal accounting control system is augmented by a program of internal audits and reviews by management, written policies and guidelines, and the careful selection and training of qualified personnel.

The Audit Committee of the Board of Directors, comprised solely of outside directors, is responsible for monitoring the Company's accounting and financial reporting practices. The Audit Committee meets regularly with management, the internal auditors, and the independent auditors to review the work of each and to assure that each performs its responsibilities. The independent registered public accounting firm, Ernst & Young LLP, was selected by the Audit Committee of the Board of Directors. Both the internal auditors and Ernst & Young LLP have unrestricted access to the Audit Committee allowing open discussion, without management present, on the quality of financial reporting and the adequacy of accounting, disclosure and financial reporting controls.

 

	/s/ Rohit Verma
	Rohit Verma
	President and Chief Executive Officer
	/s/ W. Bruce Swain
	W. Bruce Swain
	Executive Vice President – Chief Financial Officer
	/s/ Dalerick M. Carden
	Dalerick M. Carden
	Senior Vice President, Corporate Controller,
	and Chief Accounting Officer

 

March 4, 2024

---

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Crawford & Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Crawford & Company (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, statements of comprehensive income (loss), shareholders' investment and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 4, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

		Deferred Revenues for Lifetime Claim Handling
Description of the Matter		At December 31, 2023, the Company’s deferred revenues related to lifetime claim handling arrangements were $39,800,000. As discussed in Note 2 to the consolidated financial statements, revenue for lifetime claim handling is recognized over time as the related services are provided and performance obligations are satisfied. Revenue is recognized based on historical claim closure rates and claim type based on time elapsed for these claims, utilizing a portfolio approach. When the Company receives consideration from a customer prior to transferring services to the customer under the terms of certain claims management agreements, it records deferred revenues, which represent a contract liability. Auditing the estimate of deferred revenues related to lifetime claim handling was challenging given the high volume of data to derive the estimate and complex calculations used in the model to determine the amount of revenues to be deferred.

---

How We Addressed the Matter in Our Audit           Description of the Matter               How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s review of the recognition of lifetime claim handling revenues and related deferred revenues. For example, we tested controls over management’s review of the deferred revenue model and the completeness and accuracy of the data used in the deferred revenue calculation. To test the Company’s lifetime claim handling deferred revenues, we performed audit procedures that included, among others, testing the completeness and accuracy of the closure rates by claim type and other data used in the deferred revenue model, and recalculating the lifetime claim handling deferred revenue liability using management's model. Additionally, we evaluated the appropriateness of the model and consistency with the prior period.   Valuation of Goodwill – edjuster Reporting Unit As discussed in Notes 1 and 4 to the consolidated financial statements, goodwill is tested for impairment at least annually on a reporting unit basis, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. When performing a quantitative goodwill test, the Company determines the fair values of its reporting units using the discounted cash flow method, a form of the income approach, and the guideline public company method, a form of the market approach. As of October 1, 2023, the Company performed a quantitative impairment test of the edjuster reporting unit goodwill of $9,125,000. Auditing management’s estimates of the Company's edjuster reporting unit fair value using the discounted cash flow method involved especially subjective judgments due to the significant estimation uncertainty in determining the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions such as forecasted revenues, EBITDA margins, and discount rates. These significant assumptions are forward-looking and could be affected by future industry, market, and economic conditions. We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over review of the fair value of the reporting unit. This included testing controls over management’s review of the significant assumptions described above. To test the estimated fair value of the reporting unit, we performed audit procedures that included, among others, assessing the methodologies used to estimate fair value, testing the significant assumptions used to develop the fair value estimate, and testing the underlying data used by the Company in its analyses for completeness and accuracy. For example, we evaluated management’s forecasted revenues and EBITDA margins used in the fair value estimate by comparing those assumptions to historical results and current industry, market, and economic forecasts. We also involved our valuation specialists to evaluate the valuation methodologies and the discount rate. As part of this evaluation, we compared the discount rate to market data. In addition, we performed sensitivity analyses on the significant assumptions to evaluate the potential changes in the fair value of the reporting unit that would result from changes in the assumptions. In addition, we tested management’s reconciliation of the fair values of its reporting units to the market capitalization of the Company.

/s/ Ernst & Young LLP

 

We have served as the Company’s auditor since 2002.

 

Atlanta, Georgia

March 4, 2024

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Registrant maintains a set of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), designed to ensure that information required to be disclosed by the Registrant in reports that it files or submits under the Exchange Act is recorded, processed, summarized or reported within the time periods specified in SEC rules and regulations.

Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives. The Company's management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that its disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. Judgments in decision-making can be faulty and breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and while the Company's disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.

The Registrant's management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Registrant's disclosure controls and procedures as of December 31, 2023. Based on that evaluation, the Registrant's Chief Executive Officer and Chief Financial Officer concluded that the Registrant's disclosure controls and procedures were effective as of December 31, 2023.

Report of Management on Internal Control over Financial Reporting

The management of Crawford & Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on this assessment, management of the Company determined the Company’s internal control over financial reporting was effective as of December 31, 2023.

---

As discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, the Company’s operations in the United Kingdom ("Crawford UK") did not have effective information technology general controls ("ITGCs") in the areas of change management and logical access over certain information technology systems that supported its financial reporting processes. Crawford UK’s business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. The material weakness did not result in any identified misstatements in the Company’s financial statements.

During the current year, including during the quarter ended December 31, 2023, to remediate the material weakness described above, the Company implemented revised controls and processes in Crawford UK that included the following, among others: (1) improved the documentation of the user access review control activities and control activities over program change management, to more clearly communicate management’s expectation of the required responsibilities for the control activities; (2) developed personnel by enhancing training for ITGC owners regarding their roles and responsibilities within the control objectives and activities; and (3) implemented improved user access review and program change management tools to ensure compliance. The Audit Committee of the Board of Directors has reviewed and discussed these matters with management.

These changes and the remediation of the material weakness that existed as of December 31, 2022 were completed during the year ended December 31, 2023.

The Company's independent registered public accounting firm, Ernst & Young LLP, is appointed by the Audit Committee. Ernst & Young LLP has audited and reported on the consolidated financial statements of Crawford & Company and the Company's internal control over financial reporting, each as contained in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

Other than the remediation efforts described above, there were no changes in the Registrant's internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

During the three months ended December 31, 2023, none of the Company's directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

 

 

---

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Crawford & Company

Opinion on Internal Control Over Financial Reporting

We have audited Crawford & Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Crawford & Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, consolidated statements of comprehensive income (loss), shareholders' investment and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated March 4, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

 

Atlanta, Georgia

March 4, 2024

---

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this Item will be included under the captions "Election of Directors — Nominee Information", "Section 16(a) Beneficial Ownership Reporting Compliance," "Executive Officers," "Corporate Governance—Standing Committees and Attendance at Board and Committee Meetings," and "Corporate Governance — Corporate Governance Guidelines, Committee Charters and Code of Business Conduct" of the Registrant's Proxy Statement for its 2024 Annual Meeting of Shareholders (the "Proxy Statement") to be filed within 120 days after December 31, 2023, and is incorporated herein by reference.

The Registrant has adopted a Code of Business Conduct and Ethics for its CEO, CFO, principal accounting officer and all other officers, directors and employees of the Registrant. The Code of Business Conduct and Ethics, as well as the Registrant's Corporate Governance Guidelines and Committee Charters, are available at www.crawco.com. Any amendment or waiver of the Code of Business Conduct and Ethics will be posted on this website within four business days after the effectiveness thereof. The Code of Business Conduct and Ethics may also be obtained without charge by writing to Corporate Secretary, Legal Department, Crawford & Company, 5335 Triangle Parkway, Peachtree Corners, Georgia, 30092.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item will be included under the captions "Compensation Discussion and Analysis," "Summary Compensation Table," "Employment and Change in Control Arrangements," "Corporate Governance—Director Compensation," "Report of the Compensation Committee of the Board of Directors on Executive Compensation," and "Compensation Committee Interlocks and Insider Participation" of the Registrant's Proxy Statement, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information required by this Item will be included under the captions "Stock Ownership Information" and "Equity Compensation Plans" of the Registrant's Proxy Statement, and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item will be included under the captions "Information with Respect to Certain Business Relationships and Related Transactions" and "Corporate Governance - Director Independence" of the Registrant's Proxy Statement, and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding principal accountant fees and services will be included under the caption "Ratification of Independent Auditor — Fees Paid to Ernst & Young LLP" of the Registrant's Proxy Statement, and is incorporated herein by reference.

---

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

1. Financial Statements

The financial statements listed below and the related report of Ernst & Young LLP are incorporated herein by reference and included in Item 8 of this Annual Report on Form 10-K:

2. Financial Statement Schedule

Other schedules have been omitted because they are not applicable.

3. Exhibits filed with this report.

 

Exhibit No.		Document
3.1		Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2007).
3.2		Amended and restated By-laws of the Registrant, as amended (incorporated by reference to Appendix A of the Registrant's Proxy Statement filed with the Securities and Exchange Commission on April 8, 2022).
4.1		Description of Registrant’s Securities.
10.1*		Crawford & Company Non-Employee Director Stock Plan, as amended (incorporated by reference to Appendix B to the Registrant’s Proxy Statement for the Annual Meeting of Shareholders held on May 8, 2019).
10.2*		Crawford & Company Supplemental Executive Retirement Plan as amended and restated December 20, 2007, effective as of January 1, 2007 (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2007).
10.3*		Crawford & Company Deferred Compensation Plan, as amended and restated as of January 1, 2017 (incorporated by reference to Exhibit 10.3 the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021.
10.4*		Crawford & Company amended and restated Executive Stock Bonus Plan (incorporated by reference to Exhibit 99.1 to the Registrant's Registration statement on Form S-8 (File No. 333-199915) filed with the Securities and Exchange Commission on November 6, 2014).
10.5*		Form of Restricted Share Unit Award under the Registrant's 2016 Omnibus Stock and Incentive Plan (incorporated by reference to Exhibit 10.5 the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021).
10.6*		Form of Performance Share Unit Award under the Registrant's 2016 Omnibus Stock and Incentive Plan (incorporated by reference to Exhibit 10.6 the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021).
10.7*		Crawford & Company 2016 Omnibus Stock and Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (File No. 333-266665) filed with the Securities and Exchange Commission on May 8, 2022).
10.8*		Crawford & Company 2016 Management Team Incentive Compensation Plan (incorporated by reference to Appendix C to the Registrant’s Proxy Statement for the Annual Meeting of Shareholders held on May 11, 2016).

---

Exhibit No.		Document
10.9*		Terms of Employment Agreement between W. Bruce Swain, Jr. and the Registrant, dated October 29, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020).
10.10*		Terms of Employment Agreement between Larry Thomas and the Registrant, dated October 28, 2020 (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020).
10.11*		Terms of Employment Agreement between Andrew Bart and the Registrant, dated March 16, 2021 as amended on January 1, 2022 (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2022).
10.12*		Employment Agreement between Rohit Verma and the Registrant dated April 23, 2020 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Reporting on Form 8-K filed on April 27, 2020).
10.13*		Terms of Employment Agreement between Michael J. Hoberman and the Registrant, dated February 6, 2021 (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021).
10.14		Pledge and Security Agreement, dated as of November 5, 2021, by and among the Company, the Company's guarantor subsidiaries party thereto and Bank of America N.A. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021).
10.15		Guaranty Agreement, dated as of November 5, 2021, by Crawford & Company, the Company's guarantor subsidiaries party thereto and Bank of America N.A. (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021).
10.16		Second Amendment to the Credit Agreement, dated as of January 29, 2024, among Crawford & Company, Crawford & Company Risk Services Investments Limited, Crawford & Company (Canada) Inc. and Crawford & Company (Australia) Pty. Ltd., as borrowers, the lenders party thereto, Bank of America, N.A., as Administrative Agent, Australian Security Trustee, UK Security Trustee, Swing Line Lender and an L/C Issuer, and the other Swing Line Lenders from time to time party hereto.
10.17		Director Compensation Summary Term Sheet.
19.1		Insider Trading Policy
21.1		Subsidiaries of Crawford & Company.
23.1		Consent of Independent Registered Public Accounting Firm.
31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-19(a).
31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-19(a).
32.1		Certification of the Chief Executive Officer pursuant to Section 1350.
32.2		Certification of the Chief Financial Officer pursuant to Section 1350.
97.1		Executive Compensation Clawback and Recoupment Policy
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K.

ITEM 16. FORM 10-K SUMMARY Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

None.

---

SIGNATURES

 

			CRAWFORD & COMPANY
Date	March 4, 2024		By		/s/ Rohit Verma
					ROHIT VERMA, President and Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

			NAME AND TITLE
Date	March 4, 2024		/s/ Rohit Verma
			ROHIT VERMA, President and Chief Executive Officer (Principal Executive Officer) and Director
Date	March 4, 2024		/s/ W. Bruce Swain
			W. BRUCE SWAIN, Executive Vice President - Chief Financial Officer (Principal Financial Officer)
Date	March 4, 2024		/s/ Dalerick M. Carden
			DALERICK M. CARDEN, Senior Vice President and Controller (Principal Accounting Officer)
Date	March 4, 2024		/s/ Dame Inga K. Beale
			DAME INGA K. BEALE, Director
Date	March 4, 2024		/s/ Cameron M. Bready
			CAMERON M. BREADY, Director
Date	March 4, 2024		/s/ Jesse C. Crawford
			JESSE C. CRAWFORD, Director
Date	March 4, 2024		/s/ Jesse C. Crawford, Jr.
			JESSE C. CRAWFORD, JR, Director
Date	March 4, 2024		/s/ Fred R. Donner
			FRED R. DONNER, Director
Date	March 4, 2024		/s/ Lisa G. Hannusch
			LISA G. HANNUSCH, Director
Date	March 4, 2024		/s/ Michelle E. Jarrard
			MICHELLE E. JARRARD, Director
Date	March 4, 2024		/s/ Charles H. Ogburn
			CHARLES H. OGBURN, Director
Date	March 4, 2024		/s/ Rahul Patel
			RAHUL PATEL, Director
Date	March 4, 2024		/s/ D. Richard Williams
			D. RICHARD WILLIAMS, Director

 

---