CRAWFORD & CO - Annual Report: 2020 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-K

Commission file number 1-10356

CRAWFORD & COMPANY

(Exact name of Registrant as specified in its charter) 

Registrant's telephone number, including area code

(404) 300-1000 

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

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

None

(Title of Class)

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.

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. ☒ 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐     No ☒ 

The aggregate market value of the Registrant's voting and non-voting common stock held by non-affiliates of the Registrant was $198,769,113 as of June 30, 2020, 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 25, 2021, was:

Class A Common Stock — $1.00 Par Value — 30,853,833 Shares

Class B Common Stock — $1.00 Par Value — 22,452,075 Shares

Documents incorporated by reference: 

Portions of the Registrant's proxy statement for its 2020 annual shareholders' meeting, which proxy statement will be filed within 120 days of the Registrant's year end, are incorporated by reference into Part III hereof.

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CRAWFORD & COMPANY

FORM 10-K

For The Year Ended December 31, 2020

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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.

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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, 2020, the Company reported total revenues before reimbursements of $982.5 million.

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, respectively. 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.

DESCRIPTION OF SERVICES

The Company delivers services to its clients through a global service line reporting structure consisting of three operating segments as follows:

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

CRAWFORD CLAIMS SOLUTIONS.  The Crawford Claims Solutions segment accounted for 36.3% of the Company's revenues before reimbursements in 2020. Crawford Claims Solutions provides claims management and adjusting services globally to insurance carriers and self-insured entities related to property, casualty, and catastrophe losses caused by physical damage to commercial and residential real property, certain types of personal property and marine losses. Crawford Claims Solutions revenues are substantially derived from the insurance carrier market. Insurance companies customarily manage their own claims administration and adjusting functions, but often rely upon third-parties for certain services which the Company provides, primarily with respect to field investigation, catastrophe, and the evaluation and resolution of property and casualty insurance claims.

Claims management and adjusting services offered by our Crawford Claims Solutions 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:

In addition, the Crawford Claims Solutions segment, through the Company’s WeGoLook, LLC subsidiary, provides a variety of on-demand inspection, verification, and other task-specific field services for businesses and consumers through a mobile platform of independent contractors.

CRAWFORD TPA SOLUTIONS.  Our Crawford TPA Solutions segment, which operates under the Broadspire brand name, is a leading third party administrator that provides services to the global casualty and disability insurance and self-insured markets. This segment accounted for 37.1% of the Company's revenues before reimbursements in 2020.

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Through the Crawford TPA Solutions segment, the Company provides a complete range of claims and risk management services to corporations in the self-insured or commercially-insured marketplace inclusive of brokers and insurance companies. In addition to desktop claim adjusting and evaluation of claims, Crawford TPA Solutions 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. Crawford TPA Solutions services are provided through two major service lines:

CRAWFORD SPECIALTY SOLUTIONS.  The Crawford Specialty Solutions segment accounted for 26.6% of the Company's revenues before reimbursements in 2020. Crawford Specialty Solutions provides services to the global property and casualty insurance company markets.

MATERIAL CUSTOMERS

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, 2020, 2019, or 2018. However, for each of the years ended December 31, 2020, 2019 and 2018, our Crawford Specialty Solutions segment derived in excess of 10% of its revenue from one customer.

In the event we are not able to retain this significant relationship, or replace any lost revenues from such relationship, revenues and operating earnings within this segment 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. WeGoLook services are offered through a mobile platform of independent contractors.

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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, 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.

The Company competes 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 the Company's 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 the Company provides and, although such firms may secure business which has a local or regional source, the Company believes its 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 that provide a similar broad spectrum of claims management services and who directly compete with the Company.

HUMAN CAPITAL

Human Capital is a key component to our success. Our culture and organizational purpose is embodied by our RESTORE values of Respect, Empowerment, Sustainability, Training, One Crawford, Recognition and Entrepreneurial Spirit. These values define our desired culture, and influence organizational behavior, decision-making and our people priorities.

Employee Profile

Crawford & Company is committed to the health and safety of our people and providing quality services to our clients as we deliver on our purpose of Restoring and Enhancing Lives, Businesses and Communities. As of December 31, 2020, we had approximately 8,985 employees operating in 70 countries. 94% of our global employees are full-time. Approximately 80% of our workforce is concentrated in the U.S., Canada, United Kingdom (“U.K.”), Australia and the Philippines. Women comprised 55% of our global workforce, 50% of our country-presidents roles, 32% of our global senior management team and 44% of our people management roles. In 2020, our internal promotion rate for women was 52%. With respect to our employees in the U.S., percentages of our employees that identified as Black, Hispanic/Latino and Asian were 17%, 9% and 4% respectively. Among U.S. employees in our shared services roles, we have even higher percentages of ethnic diversity among Blacks and Asians, at 19% and 14%, respectively.

Diversity and Inclusion - Employee Hiring Practices

Diversity and inclusion are core to the Company’s values and instrumental in delivering stronger business growth. We are committed to recruiting the most qualified people for the job regardless of gender, ethnicity or other protected traits and to comply fully with all domestic, foreign and local laws relating to discrimination in the workplace. Additionally, we believe in providing opportunities for career progression for our people and as such, establish goals of filling open positions with internal talent. Crawford is committed to improving the diversity of our workforce and has affirmative action plans as required for our largest locations in the U.S. We launched our Office of Inclusion & Diversity in early 2020 and subsequently formed a global diversity council to work with our executive and country leadership teams to enhance our inclusion and diversity policies and practices. Two of our key accomplishments for 2020 were delivering unconscious bias training to our executive leadership team, managers and employees and launching two employee resource groups in the U.S.

Employee Wellness

At Crawford, we believe our ability to deliver on our purpose of Restoring and Enhancing Lives, Businesses and Communities is directly linked to the well-being of our workforce. As such, 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: formal wellness programs with fitness challenges and incentives for prioritizing physical exercise and accessing preventive care services; company-paid flu shots; employee assistance programs; group healthcare and telemedicine programs; discounts for gym memberships; company-sponsored retirement savings plans; financial education webinars; tuition assistance and college scholarships for children of employees; and programs that support work-life balance such as remote work arrangements, flex-time, paid-time off, and parental leave.

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The global COVID-19 pandemic presented an opportunity to demonstrate our commitment to the health and safety of our workforce. We immediately formed a global incident response team, transitioned our workforce to work-from-home for non-essential staff, procured PPE for those roles deemed “essential workers”, adopted safety protocols for field employees to protect themselves, our clients and the communities where we perform work and delivered weekly health and safety updates to our global workforce. Additionally, we modified our sick leave policies to ensure employees who became ill, self-isolated or needed to quarantine continued to receive pay. We continue to actively monitor the pandemic and remain committed to providing a positive, purposeful working experience for our employees that is reflective of our purpose and values.

Employee Engagement

Employee engagement is fundamental to our ability to retain and attract talent, particularly given the competitive nature of our industry’s labor market for critical roles. Crawford regularly measures employee engagement levels through an anonymous employee pulse survey. We adopted this formal listening strategy in 2016 and have seen progressive improvement in our survey results each time we conduct the survey. The results of the survey help us understand what is working well and our opportunities for improvement. In 2020, we only conducted one employee pulse survey as we also conducted a series of surveys throughout the year to help us manage our COVID-19 response. New for the 2020 survey were five questions related to Crawford’s response to the pandemic. Our overall response rate was 82% which was up from 76% in December of 2019. Favorable response rates increased across all five categories of questions; the way we execute; the way we lead; the way we manage; the way we see ourselves; and the way we work together. We are able to measure response rates through many data cuts including global service lines, geographies, shared services functions, and different demographic groups such as age, gender and tenure. Survey results are used to develop action plans for improvement. Key themes coming out of the survey results for 2020 include working hours, technology, training and communication. As a result, we are reviewing the future of work arrangements with our global reintegration teams, crafting a strategic digital plan, expanding our technical and management capabilities training, connecting with global employees with technology-enabled town hall meetings, sending regular communication updates from key members of the executive leadership team and continuing to provide a bi-weekly global employee health and safety updates.

Employee Development

Training is not only a core value today but also a key component of our heritage. Continuous learning through on-the-job training, coaching and structured learning are used for strengthening capabilities and preparing our workforce for the future. Crawford Educational Services, our training function, provides a variety of industry-specific, instructor-led courses that are both skill and behavior based. We also offer a comprehensive catalog of self-directed, continuing education credited, eLearning courses through our learning portal called KMC On Demand. For 2020, within the U.S., 2,680 individual learners spent a total of 10,850 hours on online training.

Additionally, we were able to pivot our classroom courses such as U.S.-Residential Property and U.S.-Commercial Property classes to a virtual setting due to the pandemic. By using virtual reality technology, we captured scans of different types of losses and embedded them in the property training curriculum. Using this new learning technology has allowed our learners to be exposed to a variety of peril types in a safe way while maintaining learner engagement levels. In 2020, we also launched the Advocacy at Work training for our care and case management professionals covering nearly 330 learners. This training helps our employees servicing injured workers, alleviates the fear of the unknown, and empowers stakeholders through continued worker/employer engagement via task assignments and guided interactions. With a focus on enhancing adjuster skills in the insurance industry, in 2020 we offered instructor led webinars to non-Crawford adjusters and complimentary access to KMC On Demand for our clients.

In addition to technical training, Crawford Educational Services also offers professional, management and leadership development programs for employees globally. In 2020, the popular instructor led classes included time management and business writing skills for employees. Managers were trained on leading virtual teams and other essential manager skills such as coaching and trust. Additionally, Crawford’s CEO routinely makes assigned reading mandatory for our managers and leaders in support of our commitment of fostering a culture of growth mindset. We also rolled out the fifth year of our popular on-line women leadership program called Women LEAD attended by over 90 women employees globally.

AVAILABLE INFORMATION

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

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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 a number of 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.

Our results of operations have been adversely affected and could in the future be materially adversely impacted by the COVID-19 coronavirus pandemic.

The global spread of the COVID-19 coronavirus has created significant volatility, uncertainty and economic disruption. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including:

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The closure of offices or restrictions inhibiting our employees’ ability to travel or interact with claimants and access claim sites, has disrupted, and could in the future disrupt our ability to provide our services and solutions and result in, among other things, terminations of client contracts, delay in our ability to perform services, an altering of the mix of services requested by clients and claimants, and other losses of revenue. Clients may also slow down decision making, delay planned work or seek to terminate existing agreements. Any of these events could cause or contribute to the risks and uncertainties enumerated in this Annual Report and could materially adversely affect our business, financial condition, results of operations and/or stock price.

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, 2020, 2019, or 2018. However, for each of the years ended December 31, 2020, 2019 and 2018, our Crawford Specialty Solutions segment derived in excess of 10% of its revenue from one customer.

In the event we are not able to retain this significant relationship, or replace any lost revenues from such relationship, revenues and operating earnings within this segment 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, protected 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, protected 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. 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.

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 NIST Cybersecurity Framework. However, we may not be able to prevent a cybersecurity breach 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. Any failure to effectively identify such attack, or quickly recover from such attack in a timely manner, could materially adversely affect our business, results of operations, and financial condition.

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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. Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. Globally, new laws, such as the General Data Protection Regulation (“GDPR”) in Europe, the California Consumer Privacy Act ("CCPA") in California, and industry self-regulatory codes have been enacted and more are being considered that may affect our ability to respond to customer requests under the laws, and to implement our business models effectively. These requirements, among others, may force us to bear the burden of more onerous obligations in our contracts. 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 contractual obligations or applicable laws, it could result in litigation or reputational harm to us.

Transferring personal information across international borders is becoming increasingly complex. The mechanisms that we and many other companies rely upon for European data transfers are being updated following recent rulings by the Court of Justice for the European Union (CJEU). We are closely monitoring developments related to requirements for transferring personal data outside the European Union ("EU"), including those which may be impacted by Brexit. These requirements 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, Canada and Australia, have also established specific legal requirements for cross-border transfers of personal information. These developments in Europe and elsewhere could harm our business, 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, 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 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.

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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 as a whole.

Our international operations subject us to political, legal, operational, exchange rate and other risks that we do not face in our domestic operations. 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.

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 have operations in the U.K. and the European Union that may be impacted by the U.K.'s departure from the EU, known as "Brexit". The uncertainty of this transition may impact our operations in this region or our business as a whole.

The U.K. and EU insurance markets in which we operate may be impacted by the outcome of Brexit. There are multiple regulatory, contractual, and supply chain issues that need to be considered, and also the potential impact to transactions and assets denominated in foreign currencies. The majority of our relationships in these countries are within our country of operations, however, to the extent we provide services cross-border, there may be increased risks regarding employee mobility, cross-border payments, data transfer and potential regulatory impacts. Failure to secure a pan-European agreement could lead to various country-by-country approaches being implemented, resulting in a lack of consistency between countries. Changes to these regulations could impact our ability to conduct business in these countries, which could have a material adverse effect on our business, results of operations, and financial condition.

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 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. 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 adversely affect our business, results of operations, and financial condition.

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, financial position, and cash flows.

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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 periods for our U.S. Qualified Plan, the projected benefit obligation was underfunded by $51.6 million. In recent years we have been required to make contributions to this plan and will have to make future contributions. Crawford expects to make discretionary contributions of $9.0 million per annum to the U.S. Qualified Plan for the next five fiscal years to improve the funded status of the plan and minimize future required contributions. 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 will 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.

While we intend to comply with our future funding requirements through the use of cash from operations, 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, amended and restated as of October 11, 2017, with Wells Fargo Bank, N.A., Bank of America, N.A., Citizens Bank, N.A., and the other lenders a party thereto, (as amended, the "Credit Facility"). The Credit Facility consists of a $450 million revolving credit facility, with a letter of credit subcommitment of $100 million. The available borrowing capacity under the Credit Facility totaled $325.7 million at December 31, 2020. 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 fixed charge 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. We do not believe there is significant risk to our debt covenants if LIBOR were to be replaced with an alternative reference rate in the future. We have no current hedged transactions, and our Credit Facility allows for the use of a suitable replacement rate if an alternative was required.

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 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.

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

As of December 31, 2020, Jesse C. Crawford, a member of our Board of Directors, and the father of Jesse C. Crawford, Jr., who is also a member of the Board of Directors, beneficially owned approximately 57% 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, 2020, 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 or improved technology 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 a sufficient number of qualified and experienced on-call claims adjusters, to respond to catastrophic events that may, singularly or in combination, significantly increase our clients' needs for 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 independent 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 materially negative impact on our results of operations.

We compete for nurses and other case management professionals in the healthcare industry, which may increase our labor costs and reduce profitability.

Our Crawford TPA Solutions business competes with the general healthcare industry in recruiting qualified nurses, other case management professionals and other talent. In some markets, the scarcity of nurses and other medical support personnel has become a significant operating issue to healthcare providers. Such competition could reduce availability, increase our costs and reduce our revenues. This shortage may require us to increase wages and benefits to recruit and retain qualified nurses and other healthcare professionals. Our failure to recruit and retain qualified management, nurses, and other healthcare professionals, or to control labor costs could result in reduced revenues, loss of customer goodwill and a material negative impact on our results of operations.

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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 nurses and adjusters 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 nurses and adjusters. 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. 

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 2.PROPERTIES

As of December 31, 2020, the Company owned an office in Kitchener, Ontario. As of December 31, 2020, the Company leased approximately 240 other office locations under various leases with varying terms. For additional information on the Company's 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. The Company generally believes that its office locations are sufficient for its 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 its business. No assurances can be given, however, that the Company would be able to obtain such office locations as and when needed, or on terms it considered to be reasonable, if at all.

ITEM 3.LEGAL PROCEEDINGS

In the normal course of the claims administration services business, the Company is from time to time named as a defendant in suits by insureds or claimants contesting decisions by the Company or its clients with respect to the settlement of claims. Additionally, clients of the Company have, in the past, brought and may, in the future, bring claims for indemnification on the basis of alleged actions on the part of the Company, its agents or its employees in rendering service to clients. The majority of these claims are of the type covered by insurance maintained by the Company; however, the Company is responsible for the deductibles and self-insured retentions under its various insurance coverages. In the opinion of the Company, 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.

The Company is also subject to numerous federal, state, and foreign labor, employment, worker health and safety, antitrust and competition, environmental and consumer protection, import/export, anti-corruption, and other laws. From time to time the Company faces claims and investigations by employees, former employees, and governmental entities under such laws or employment contracts with such employees or former employees.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

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PART II

Shares of the Company's two classes of common stock are traded on the NYSE under the symbols CRD-A and CRD-B, respectively. 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, 2020 was as follows: CRD-A — 2,968 and CRD-B — 377.

Effective May 9, 2019, 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, 2020 (the “2019 Repurchase Authorization”). On December 10, 2020, the Company’s Board of Directors extended the termination date of the 2019 Repurchase Authorization to December 31, 2021. At December 31, 2020, the Company had remaining authorization to repurchase 642,097 shares under the 2019 Repurchase Authorization.

The following graph and table show the value as of December 31, 2020 of a $100 investment in the Company's Class B common stock as of December 31, 2015 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. We caution you not to draw any conclusions from the data in this performance graph, as past results do not necessarily indicate future performance.

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.

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ITEM 6.SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto contained in Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

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The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand Crawford & 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, 2020, 2019, and 2018 consolidated financial statements include the financial position of such operations as of October 31, 2020 and 2019, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31, 2020, 2019 and 2018, 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. Shares of the Company's two classes of common stock are traded on the NYSE under the symbols CRD-A and CRD-B, respectively. 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.

As discussed in more detail in subsequent sections of this MD&A, we have three operating segments: Crawford Claims Solutions, Crawford TPA Solutions, and Crawford Specialty Solutions. Our three operating segments represent components of the 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. Crawford Claims Solutions serves the global property and casualty insurance company markets. Crawford TPA Solutions serves the global casualty, disability and self-insurance marketplace worldwide. Crawford Specialty Solutions serves the global property and casualty insurance company markets.

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 trust fund administration to pay their claims. Our Contractor Connection service line in our Crawford Specialty Solutions segment 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 we provide to insurance companies and self-insured entities. Accordingly, the volume of claim referrals to us is a key driver of our revenues. Generally, fees are earned over time on cases as services are provided, which generally occurs in the period the case is assigned to us, although sometimes a portion or substantially all of the revenues generated by a specific case assignment will be earned in subsequent periods. 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.

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Results of Operations

Executive Summary

Consolidated revenues before reimbursements were $982.5 million in 2020, a decrease of 2.3% compared with $1.006 billion in 2019. Net income attributable to Crawford & Company was $28.3 million in 2020, compared with $12.5 million in 2019. During 2020, we recognized a gain on disposal of businesses of $13.8 million. The Company recognized a non-cash goodwill impairment in 2020 totaling $17.7 million, partially offset by a $1.7 million credit in noncontrolling interest expense. We also recognized restructuring and other costs totaling $8.1 million in 2020. During 2019, we recognized $12.6 million for an arbitration settlement related to additional payments awarded to former executives of our former Garden City Group related to their departure in 2015. The Company recognized a non-cash goodwill impairment in 2019 totaling $17.5 million, partially offset by a $2.2 million reduction in income tax expense and $2.2 million credit in noncontrolling interest expense.

Consolidated revenues before reimbursements decreased 2.3% in 2020 due to decreases in our Crawford TPA Solutions and Crawford Specialty Solutions operating segments, primarily due to the economic impact of the COVID-19 pandemic in the U.S. and Canada, partially offset by an increase in revenues in our Crawford Claims Solutions segment, due to an increase in weather related activity in the U.S. and new client growth. Changes in foreign exchange rates decreased our segment revenues by $5.8 million, or approximately 0.6%, for 2020 compared with 2019. Excluding the change in foreign exchange rates, consolidated revenues before reimbursements decreased $17.5 million, or 1.7% compared with 2019.

Revenues from the Crawford Claims Solutions segment increased in 2020 due to an increase in weather related cases resulting from the hurricane activity in the U.S., and revenues from new client growth, partially offset by the economic impact of COVID-19. Revenues from the Crawford TPA Solutions segment decreased for the year primarily due to a decrease in the U.S. and Canada as a result of the economic impact of COVID-19. Revenues from the Crawford Specialty Solutions segment decreased primarily due to the impact of COVID-19 and the sale of LWI in our Global Technical Services service line. The net impact of acquisitions and dispositions in 2020 resulted in a net $3.7 million decrease in revenues, compared with 2019.

We estimate that COVID-19 negatively impacted our revenues in the range of $45.0 to $55.0 million in the year ended December 31, 2020 as compared with the 2019 period. We expect the ongoing global economic slowdown resulting from COVID-19 could have a material impact to our results of operations, financial condition, and cash flows in one or more future quarters.

Overall, there was a decrease in cases received of 2.4% for 2020 compared with 2019, due to the negative economic impact of COVID-19. As a result of the economic contraction from the COVID-19 pandemic, cases received in future quarters could be materially negatively impacted, unless offset by the impact of cases received from new clients or weather related activity.

Cases received are presented below by segment: 

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 Crawford Claims Solutions and Crawford Specialty Solutions operating segments, partially offset by a decrease in our Crawford TPA Solutions.

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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 Crawford Claims Solutions segment, operating earnings increased from $7.6 million, or 2.2% of revenues before reimbursements in 2019, to $14.4 million, or 4.0% of revenues before reimbursements in 2020, primarily due to the increase in revenues and reduction of expenses. Excluding indirect support costs, gross profit increased from $76.7 million, or 22.6% of revenues before reimbursements in 2019, to $77.5 million, or 21.7% of revenues before reimbursements in 2020.

In the Crawford TPA Solutions segment, operating earnings declined from $27.2 million, or 6.9% of revenues before reimbursements in 2019, to $21.5 million, or 5.9% of revenues before reimbursements in 2020, primarily due to a reduction in revenues as a result of COVID-19. Excluding indirect support costs, gross profit decreased from $99.7 million, or 25.3% of revenues before reimbursements in 2019, to $87.7 million, or 24.0% of revenues before reimbursements in 2020.

In the Crawford Specialty Solutions segment, operating earnings increased from $49.3 million, or 18.1% of revenues before reimbursements in 2019, to $52.6 million, or 20.1% of revenues before reimbursements in 2020, primarily due to cost reduction initiatives implemented in 2020. Excluding indirect support costs, gross profit increased from $95.4 million, or 35.1% of revenues before reimbursements in 2019, to $96.6 million, or 37.0% of revenues before reimbursements in 2020.

Cost of services provided, before reimbursements, decreased $7.3 million, or 1.0% for 2020 compared with 2019. The decrease was primarily due to a decrease in compensation expense, travel and entertainment, and other costs in each of our operating segments related to the overall reduction in revenues.

Selling, general and administrative ("SG&A") expenses were $8.2 million lower, a decrease of 3.6%, in 2020 compared with 2019. The decrease in 2020 was due to a decrease in compensation expense, travel and entertainment, and other administrative support costs, partially offset by CEO transition costs.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Company has not applied for governmental loans from the CARES Act or any other governmental programs to support the Company’s U.S. operations. The Company is taking advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits.

The Canadian government enacted the Canada Emergency Wage Subsidy (“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 the second, third and fourth quarters of 2020. The wage subsidy is included in "Costs of services provided, before reimbursements” or “Selling, general, and administrative expenses” on the Consolidated Statements of Operations, depending on the location of the employees, and is recorded as a reduction of compensation expense. In 2020, we recognized $13.8 million as a reduction of compensation expense as a result of this subsidy.

During 2020, we recognized a pretax gain on disposal totaling $13.8 million related to the sale of the Lloyd Warwick International (“LWI”) business in our Crawford Specialty Solutions reporting unit, net of a loss on the disposal of Crawford Compliance. The gain on disposal is presented in the Consolidated Statements of Operations as a separate item "(Gain) loss on disposition of businesses, net." 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.

On October 1, 2020, we acquired most of the remaining 85% equity interests in Crawford Carvallo and its subsidiaries. Crawford Carvallo is a leading provider of loss adjusting, claims management solutions and legal services in Chile. The Company held a 15% interest in Crawford Carvallo prior to this acquisition. The purchase price includes an initial cash payment of $11.6 million and a maximum of $11.7 million payable over the next six years based on achieving certain EBITDA performance goals as set forth in the purchase agreement. The acquisition was funded primarily through additional borrowings under the Company's credit facility. The operations of Crawford Carvallo did not have a material impact on our consolidated results of operations during 2020.

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We recognized a pretax non-cash goodwill impairment in 2020 totaling $17.7 million related to our Crawford Claims Solutions reporting unit. This expense was partially offset by a $1.7 million credit in noncontrolling interest expense. In 2019, we recognized a non-cash goodwill impairment totaling $17.5 million, also related to our Crawford Claims Solutions segment. This charge was partially offset by a $2.2 million reduction in income tax expense and $2.2 million credit in noncontrolling interest expense. There was no goodwill impairment in 2018. See the "Critical Accounting Policies" in Item 7 and Note 4, "Goodwill and Intangible Assets" of our accompanying consolidated financial statements for further discussion about goodwill impairments.

We recognized pretax restructuring and other costs totaling $8.1 million in 2020, related primarily to severance and other termination costs in an effort to consolidate and streamline various functions of our workforce. The restructuring and other costs are comprised of $9.4 million severance expense and related payroll taxes, $2.5 million asset impairment and lease termination costs, partially offset by $1.1 million gain from fair value remeasurement of cost method and equity method investments, $1.2 million liquidation dividends from a cost method investment, and $1.4 million gain from sale of IP addresses. This pretax expense is presented in the Consolidated Statements of Operations as a separate charge "Restructuring and Other Costs, Net." See Note 16, “Restructuring and Other Costs, Net” of our accompanying consolidated financial statements for further discussion about these transactions.

In 2019 we recognized $12.6 million for an arbitration settlement related to additional payments awarded to former executives of our former subsidiary Garden City Group related to their departure in 2015. There are no other potential claimants related to this matter. This pretax expense is presented in the Consolidated Statements of Operations as a separate charge "Arbitration and claim settlements."

In 2018, we recognized a pretax loss on disposal of our subsidiary Garden City Group business totaling $20.3 million. The loss on disposal is presented in the Consolidated Statements of Operations as a separate charge "(Gain) loss on disposition of businesses, net."

Segment Operating Earnings

We believe that a discussion and analysis of the segment operating earnings of our three 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 and intangible asset impairments, restructuring and other costs, (gain) loss on disposition of businesses, arbitration and claim settlements, income taxes, and net income or loss attributable to noncontrolling interests and redeemable 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.

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, and amortization of customer-relationship intangible assets 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. Amortization expense is a non-cash expense for finite-lived customer-relationship and trade name intangible assets acquired in business combinations. 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.

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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, defined benefit pension costs or credits for our frozen U.S. pension plan, certain unallocated professional fees, and certain self-insurance costs and recoveries that are not allocated to our individual operating segments.

Restructuring and other costs, as well as (gain) loss on disposition of businesses, goodwill and intangible asset impairments, and arbitration and claim settlements arise from time to time from events (such as internal restructurings, losses on subleases, establishment of new operations, and asset impairments) that 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.

Additional discussion and analysis of our income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, unallocated corporate and shared costs, goodwill and intangible asset impairments, restructuring and other costs, (gain) loss on disposition of businesses, and arbitration and claim settlements follows the discussion and analysis of the results of operations of our three 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 the Company is 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.

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.

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.

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

nm = not meaningful

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YEAR ENDED DECEMBER 31, 2020 COMPARED WITH YEAR ENDED DECEMBER 31, 2019

CRAWFORD CLAIMS SOLUTIONS SEGMENT

Operating Earnings

Our Crawford Claims Solutions segment reported operating earnings of $14.4 million, or 4.0% of revenues before reimbursements in 2020, as compared with $7.6 million, or 2.2% of revenues before reimbursements in 2019. Operating earnings increased from 2019 to 2020 primarily due to an increase in weather related cases and new client growth in the U.S., and a reduction in administrative support expenses, partially offset by the negative economic impact of COVID-19. There was a $3.2 million expense benefit in 2020 as a result of the Canada Emergency Wage Subsidy.

Excluding centralized indirect support costs, gross profit increased from $76.7 million, or 22.6% of revenues before reimbursements in 2019, to $77.5 million, or 21.7% of revenues before reimbursements in 2020, due primarily to the increased revenues in 2020.

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

Revenues before Reimbursements

Crawford Claims Solutions revenues are primarily derived from the global property and casualty insurance company markets in the U.S., U.K., Canada, Australia, Europe and Rest of World. Crawford Claims Solutions revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:

Revenues before reimbursements from our Crawford Claims Solutions segment totaled $356.4 million in 2020 compared with $339.8 million in 2019. This increase was primarily due to an increase in weather-related cases resulting from hurricanes in the U.S. in 2020 and new client growth, partially offset by the negative impact of COVID-19. Changes in foreign exchange rates resulted in a decrease of our Crawford Claims Solutions segment revenues by approximately 0.7% or $2.4 million for 2020. Absent foreign exchange rate fluctuations, Crawford Claims Solutions segment revenues would have been $358.8 million for 2020. Revenues were positively impacted by an increase in unit volumes, measured principally by cases received, which increased revenues 5.4% in 2020 compared with 2019. 4.9% of this increase was due to an increase of 23,000 high-frequency, low-severity cases received in our WeGoLook service line. Excluding these WeGoLook cases, there was an increase in segment unit volume of 2,500, or 0.5% of the increase in Crawford Claims Solutions cases received.

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Revenues in our U.S. Crawford Claims Solutions segment include revenues from a new client and expanding services from an existing client where we provide staff augmentation for our clients, which resulted in $20.9 million of increased revenues in 2020, or a 6.2% increase in Crawford Claims Solutions revenue. The revenues from these clients do not typically result in cases received. Excluding the impact of the WeGoLook case increase, changes in product mix and in the rates charged for those services accounted for a 1.1% revenue decrease for 2020 compared with 2019.

The increase in revenues in the U.S. in 2020 was due to the increase in weather related cases and an increase in new client growth, partially offset by the negative economic impact of COVID-19. Based on constant foreign exchange rates, there was an increase in revenues in the U.K. for 2020 compared with 2019 due to an increase in weather related activity and expanding new services. Revenues in Canada decreased in 2020 due to the impact of COVID-19. There was a revenue increase in Australia due to an increase in weather related cases. There was a slight decrease in revenues in Europe due to a change in the mix of services provided in Germany and Norway. The decrease in revenues in Rest of World for 2020 was primarily due to a reduction in Asia.

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Crawford Claims Solutions segment, which are included in total Company revenues, were $17.7 million in 2020 compared with $20.5 million in 2019. The 2020 decrease was due to a decreased use of third parties compared to 2019.

Case Volume Analysis

Crawford Claims Solutions unit volumes by underlying case category, as measured by cases received, for 2020 and 2019 were as follows: 

Overall, there was a 5.4% increase in cases received in the Crawford Claims Solutions segment in 2020 compared with 2019. 4.9% of the increase was due to an increase of 23,000 high-frequency, low-severity cases received in our WeGoLook service line. Excluding these WeGoLook cases, there was an increase in segment unit volume of 2,500, or 0.5%, in Crawford Claims Solutions cases received in 2020. The increase in U.S. case volumes was due to an increase in weather related activity due to hurricanes, and the WeGoLook cases referenced above. A portion of the increase in revenues in the U.S. is the result of new client growth, however the revenues generated for 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. The U.K. case volumes were higher in 2020 due to an increase in weather related activity and expanding new services. The decrease in Canada was due to the negative impact of COVID-19, a reduction in weather related activity, and a change in the mix of services provided. There was an increase in cases in Australia due to an increase in weather related activity in the current year. There was a decrease in cases received in Europe in 2020 due to a change in the mix of services provided. There was a decrease in cases received in Rest of World due to a decline in high-frequency, low-complexity property cases in Asia.

As a result of the economic contraction from the COVID-19 pandemic, cases received in future quarters could be materially negatively impacted, unless offset by the impact of cases received from new client programs or weather related activity.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Crawford Claims Solutions segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. Crawford Claims Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 66.9% for 2020 and 65.8% for 2019. The dollar amount of these expenses increased from $223.6 million in 2019 to $238.6 million in 2020. This increase was due to an increase in costs to support the new client growth and to provide staff to handle the hurricane related revenues in 2020. There was a benefit of $3.2 million in 2020 as a result of the CEWS.

There was an average of 2,884 FTEs in 2020 compared with an average of 2,905 FTEs in 2019.

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

Crawford Claims Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased from $108.6 million in 2019 to $103.5 million in 2020, and decreased as a percent of segment revenues from 31.9% in 2019 to 29.0% in 2020. These decreases were due to cost reduction initiatives in 2020 that resulted in lower travel and entertainment expense and lower administrative support expenses in 2020.

CRAWFORD TPA SOLUTIONS SEGMENT

Operating Earnings

Our Crawford TPA Solutions segment, which operates under the Broadspire brand globally, reported operating earnings of $21.5 million, or 5.9% of revenues before reimbursements in 2020, as compared to $27.2 million, or 6.9% of revenues before reimbursements in 2019. This decrease was due to lower revenues resulting from the economic impact of COVID-19 in the U.S. and Canada, partly offset by lower administrative costs. There was a benefit of $1.6 million in 2020 as a result of the Canada Emergency Wage Subsidy.

Excluding centralized indirect support costs, gross profit decreased from $99.7 million, or 25.3% of revenues before reimbursements in 2019, to $87.7 million, or 24.0% of revenues before reimbursements in 2020, due primarily to the revenue decline.

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

Revenues before Reimbursements

Crawford TPA Solutions revenues are from the global casualty and disability insurance and self-insured markets in the U.S., U.K., Canada, and Europe and Rest of World. Revenues before reimbursements by major region, based on actual exchange rates and using a constant exchange rate were as follows:

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Revenues before reimbursements from our Crawford TPA Solutions totaled $365.0 million in 2020, compared with $393.9 million in 2019. This decrease was primarily due to a decrease in the U.S. and Canada due to the impact of COVID-19. Changes in foreign exchange rates decreased our Crawford TPA Solutions segment revenues by $1.0 million, or approximately 0.2%, for 2020. Absent foreign exchange rate fluctuations, Crawford TPA Solutions segment revenues would have been $366.0 million in 2020. Revenues were negatively impacted by a decrease in unit volumes, measured principally by cases received, of 5.8% in 2020 compared with 2019. Changes in product mix and in the rates charged for those services accounted for a 1.3% revenue decrease for 2020 compared with the 2019 period.

The decrease in revenues in the U.S. for 2020 was due to a decrease in case volumes as a result of COVID-19 economic conditions and a reduction of Medical Management utilization. Based on constant foreign exchange rates, there was a decrease in revenues in the U.K. due to the impact of COVID-19 and a change in the mix of services provided. Revenues in Canada decreased in the current year due to a decrease in case volumes as a result of COVID-19 economic conditions. Revenues increased in Europe and Rest of World in 2020 due to the 2020 fourth quarter acquisition in Chile, partially offset by a change in the mix of services provided.

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Crawford TPA Solutions segment which are included in total Company revenue decreased to $7.3 million in 2020 from $11.6 million in 2019. The reduction in reimbursed expenses was due to the lower revenues in the 2020 period.

Case Volume Analysis

Crawford TPA Solutions unit volumes, as measured by cases received, by region for 2020 and 2019 were as follows: