Business Overview
Crawford & Company (CRD.A), a leading global provider of claims management and outsourcing solutions, has demonstrated its resilience and adaptability in the face of industry challenges. With a rich history spanning over a century, the company has navigated through various economic cycles, natural disasters, and evolving market dynamics, emerging as a stronger and more diversified player in the insurance services landscape.
Established in 1941 and headquartered in Atlanta, Georgia, Crawford & Company has built a reputation for delivering innovative claims management solutions to insurance companies and self-insured entities worldwide. The company's extensive global network, spanning over 70 countries, enables it to serve a diverse client base with a wide range of services, including property and casualty loss adjusting, third-party administration, and catastrophe response.
Historical Development
In its early years, Crawford focused primarily on serving the North American market, providing loss adjusting and claims management services to property and casualty insurers. The company's growth trajectory accelerated when it went public in the 1950s, listing its shares on the New York Stock Exchange. This strategic move provided Crawford with additional capital to fund its growth initiatives and raised its profile in the industry. Over the following decades, Crawford expanded its service offerings beyond loss adjusting into areas such as third-party administration, medical management, and subrogation.
The company's international expansion began with the establishment of operations in the United Kingdom, Europe, Australia, and Latin America, among other regions. This global footprint has allowed Crawford to better serve its growing client base and diversify its revenue streams. In the early 2000s, Crawford navigated a period of industry consolidation, acquiring several competitors to bolster its market position.
Adaptability and Growth
One of the defining features of Crawford & Company's growth story is its ability to adapt to changing market conditions. In the aftermath of the COVID-19 pandemic, the company demonstrated its agility by quickly implementing remote work solutions and leveraging digital technologies to ensure seamless service delivery to its clients. This proactive approach has been instrumental in maintaining the company's competitive edge and driving sustained revenue growth.
Financials
For the nine months ended September 30, 2024, Crawford & Company reported revenues before reimbursements of $945.26 million, a slight decrease of 2.7% compared to the same period in 2023. This decline was primarily attributable to a 38.4% decrease in revenues from the company's Platform Solutions segment, which was partially offset by growth in the North America Loss Adjusting, International Operations, and Broadspire segments.
The company's North America Loss Adjusting segment generated revenues before reimbursements of $232.72 million, a slight decrease of 0.5% year-over-year. This performance was impacted by a 16.9% decrease in case volumes, primarily due to the loss of a customer in the Contractor Connection service line in Canada. However, the segment's focus on higher-value services and pricing improvements helped offset the impact of the volume decline. In the third quarter of 2024, this segment reported revenues before reimbursements of $79.33 million, a slight decrease of 0.8% compared to the prior year period, due to a decrease in revenues in U.S. Field Operations and Canada. Segment operating earnings were $5.44 million, or 6.9% of revenues before reimbursements, in the third quarter of 2024, compared to $10.47 million, or 13.1%, in the prior year period. The decrease in operating earnings was attributed to the decrease in revenues, as well as increases in expenses within the Global Technical Services division and a decrease in higher margin claims in Canada.
The International Operations segment, on the other hand, reported a 7.3% increase in revenues before reimbursements to $306.12 million for the nine months ended September 30, 2024. This growth was driven by strong performance across the company's key geographic regions, including the United Kingdom, Europe, and Latin America. The segment's ability to capitalize on rising demand for its services and effectively manage its cost structure contributed to this positive outcome. In the third quarter of 2024, revenues before reimbursements for this segment were $105.74 million, an increase of 7.8% compared to the prior year period, driven by growth across all geographic regions. Segment operating earnings were $5.14 million, or 4.9% of revenues before reimbursements, in the third quarter of 2024, compared to $2.20 million, or 2.2%, in the prior year period. The increase in operating earnings was primarily due to the revenue growth in the U.K. and Europe.
Crawford & Company's Broadspire segment, which provides third-party administration services, delivered a robust 10.2% increase in revenues before reimbursements to $290.39 million for the nine months ended September 30, 2024. This performance was fueled by the successful onboarding of new client programs, increased medical management utilization, and strategic pricing initiatives. In the third quarter of 2024, revenues before reimbursements for this segment were $99.01 million, an increase of 7.4% compared to the prior year period, driven by new client growth and increased medical management usage. Segment operating earnings were $14.40 million, or 14.5% of revenues before reimbursements, in the third quarter of 2024, compared to $13.53 million, or 14.7%, in the prior year period.
The company's Platform Solutions segment, which includes the Contractor Connection, Networks, and Subrogation service lines, experienced a 38.4% decline in revenues before reimbursements to $116.02 million for the nine months ended September 30, 2024. This decrease was primarily due to lower volumes in the Networks and Contractor Connection service lines, as the segment faced challenging comparisons to the prior year's weather-related activity. In the third quarter of 2024, revenues before reimbursements for this segment were $45.30 million, a decrease of 24.3% compared to the prior year period, primarily due to a reduction in revenues in the Networks service line where the company provides staff augmentation services. Segment operating earnings were $3.83 million, or 8.5% of revenues before reimbursements, in the third quarter of 2024, compared to $8.52 million, or 14.2%, in the prior year period. The decrease in operating earnings was driven by the lower revenues.
For the most recent quarter, Crawford & Company reported consolidated revenues of $94,902,000 and net income of $9,700. The company's operating cash flow for the quarter was $40,526,000, while free cash flow stood at $28,324,000. Overall, Crawford Company's consolidated revenues before reimbursements decreased slightly by 0.2% in the third quarter of 2024 compared to the prior year period, while net income attributable to shareholders decreased 23.2% to $9.45 million.
Liquidity
Despite the mixed segment performance, Crawford & Company maintained a strong financial position, with a healthy balance sheet and ample liquidity. As of September 30, 2024, the company reported cash and cash equivalents of $52.34 million and total debt of $238.36 million, reflecting a disciplined approach to capital allocation and risk management.
Future Outlook
Looking ahead, Crawford & Company remains committed to its strategic priorities, which include driving organic growth, expanding its global footprint, and leveraging technology to enhance its service offerings. The company's management team has also emphasized the importance of identifying and capitalizing on new revenue streams that are less tied to the insurance underwriting cycle, further strengthening the company's resilience.
While the insurance services industry continues to face headwinds, such as increased competition and changing client demands, Crawford & Company's proven track record of navigating through challenging environments and its focus on operational excellence position the company well for long-term success. As the company continues to adapt and innovate, it remains a compelling investment opportunity for those seeking exposure to the dynamic and ever-evolving insurance services sector.
The company's financial performance was impacted by the decline in the Platform Solutions segment, partially offset by growth in the International Operations and Broadspire segments. This diverse portfolio of services and global presence allows Crawford & Company to navigate varying market conditions and capitalize on opportunities across different regions and business lines.
As Crawford & Company moves forward, it will be crucial for the company to continue its focus on operational efficiency, innovation in service delivery, and strategic expansion into high-growth markets. The company's ability to leverage its extensive global network and adapt to changing client needs will be key factors in driving sustainable growth and maintaining its competitive position in the insurance services industry.