Crawford & Company's Q3 2025 Earnings Call: Contradictions Surface on Insurance Affordability, Broadspire Margins, and International Segment Margins

Date of Call: November 4, 2025

Financials Results

• Revenue: $322.2M, down 2.2% YOY
• EPS: GAAP diluted EPS $0.25 for CRD-A/CRD-B, up from $0.19 prior year; non-GAAP diluted EPS $0.32, up from $0.22 prior year
• Operating Margin: Non-GAAP operating earnings 8.3% of revenues, up from 6.6% prior year

Guidance:

• Q4 2025 revenue will not repeat the ~$30M lift from Hurricanes Helene and Milton, creating a difficult comparison to Q4 2024.
• Expect continued absence of significant weather events and lower U.S. claims activity to impact results through Q4 2025.
• Anticipate claims activity and deductibles to normalize and return to more typical levels over the next 12–18 months.
• No discretionary contributions to the U.S. defined benefit pension plan planned for the remainder of the year.
• Board authorized an additional 2M shares to the repurchase program and extended the program through Dec 31, 2027.

Business Commentary:

• Revenue and Earnings Performance:
• Crawford & Company delivered solid third quarter results with consolidated revenues slightly below the prior year due to reduced U.S. property claims activity, while operating earnings improved significantly by 22% year-over-year.

• The growth in operating earnings was driven by disciplined cost management, improved operational efficiency, and the strength of its diversified business lines such as Broadspire and International operations.

• International Expansion:

• International operations showed revenue growth of 6.7% and operating earnings increasing by 45% year-over-year.

• Growth was driven by a combination of weather-related claims, particularly in Australia and Asia, as well as new client wins across key regions, reflecting the segment's ability to capture opportunities and maintain strong pricing.

• Broadspire's Growth:

• Broadspire achieved record quarterly revenues of $103.4 million, with year-over-year growth of 4.4%, and operating earnings increased by 8.1%.

• This performance is attributed to strong client retention, robust new business pipeline, and the segment's scale and efficiency, indicating its critical role in Crawford's growth strategy.

• U.S. Market Dynamics:

• North America Loss Adjusting experienced a 2.9% decrease in revenue, primarily due to lower significant weather and U.S. property claim activity.
• Despite this, operating earnings increased by 28% due to strong performance in the U.S. Global Technical Services business, reflecting operational efficiencies and adjustments to the business mix.

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted consolidated operating earnings up 22% YOY, Broadspire record quarterly revenue of $103.4M, International revenue +6.7% with operating earnings +45%, and improved cash flow (YTD operating cash flow $51.7M vs $11.1M prior).

Q&A:

• Question from Mark Hughes (Truist Securities): The North American Loss Adjusting margin seems like it was pretty strong with the top line decline. How much of that was a mix shift? You talked about the GTS in Canada. How sticky is that better margin there?
  Response: Margin strength was largely a mix shift toward higher‑margin large & complex (GTS) and improved Canadian operations; management expects these margin gains to be durable as the large & complex business continues to grow.

• Question from Mark Hughes (Truist Securities): You made an interesting point last quarter about higher insurance costs, higher deductibles, fear about insurers raising rates suppressing residential claims. Any update on that point?
  Response: This is primarily a U.S. phenomenon; residential deductibles remain high and are still suppressing claims, but management expects deductibles to come down and claims to normalize in 12–18 months, though not yet observed.

• Question from Mark Hughes (Truist Securities): The international margin was also up. Was that just incremental flow-through from weather claims? Was there a GTS impact there as well?
  Response: International margin improvement was driven materially by weather (Australia, U.K., earlier Europe) and new client wins; the company is targeting a medium-term 10% international margin while acknowledging quarterly fluctuations.

• Question from Mark Hughes (Truist Securities): Any more you can say about the business pipeline in Broadspire? Is this sales initiatives or more movement in the market?
  Response: RFP activity picked up in Q3 after a Q2 slowdown; Broadspire is growing organically ~3–4% YTD with healthy margins and a robust pipeline, supporting continued organic growth.

• Question from Kevin Steinke (Barrington Research): Is the insurance affordability phenomenon U.S.-specific at this point?
  Response: Yes — management sees affordability/deductible pressure mainly in the U.S.; international markets experienced similar effects but recovered much more quickly.

• Question from Kevin Steinke (Barrington Research): Anything specific that helped Broadspire margin sequentially in Q3 versus Q2 — revenue ramp or cost items?
  Response: Sequential margin improvement reflected timing (hiring and client on‑boarding straddling quarters); margins should remain in the current band while management continues technology and AI investments that may require short‑term spend.

• Question from Kevin Steinke (Barrington Research): How did Platform Solutions improve margin year-over-year despite a 36% revenue decline?
  Response: Improved margin was largely mix‑driven: lower CAT volume (lower margin) shifted mix toward higher‑margin subrogation and Contractor Connection work; management expects revenue to recover as normal weather patterns return.

• Question from Kevin Steinke (Barrington Research): Bruce, you called out one-time benefits in last year's Q4 for international — anything else to be aware of?
  Response: Last year's Q4 outperformance included a tax benefit plus elevated revenue from Middle East floods, Taiwan earthquake claims and Latin America flooding; those items are unlikely to repeat.

• Question from Kevin Steinke (Barrington Research): With the increase in share repurchase authorization, how active do you expect to be and what's the rationale?
  Response: Shares trade below management's view of intrinsic value; repurchases are executed opportunistically (275k shares in Q3) via open market at disciplined prices, with willingness to consider blocks — activity expected to continue through 2027 under current authorization.

Contradiction Point 1

Insurance Affordability and Claims Activity

It involves differing perspectives on how insurance affordability is affecting claims activity, which is crucial for understanding revenue trends.

Any updates on last quarter's concerns about higher insurance costs and deductibles, insurance companies raising rates after claims are reported, leading to suppressed residential claims in Q3? - Mark Hughes (Truist Securities)

2025Q3: Continues to see a duality where rate adequacy is being passed to commercial line customers, but not yet to residential customers due to lack of claims activity despite market rate adequacy. - Rohit Verma(CEO)

Did weather activity in March pick up late in Q1? Will this impact Q2? - Mark Hughes (Truist)

2025Q1: There is an hypothesis that underreporting of claims is occurring due to affordability issues and economic headwinds, leading to a decrease in reported claims. - Rohit Verma(CEO)

Contradiction Point 2

Broadspire Margin Stability and Growth

This contradiction involves the expected stability and growth trajectory of Broadspire's margins, which are crucial for revenue projections and investor confidence.

What specific factors contributed to the sequential improvement in Broadspire's margin between Q3 and Q2? Was it primarily increased revenue or particular cost items? - Kevin Steinke (Barrington Research Associates, Inc., Research Division)

2025Q3: The Improved Broadspire margins are due to better revenue mix and operational efficiency. The company aims to maintain a healthy margin while investing in technology for long-term growth. - Rohit Verma(CEO)

Regarding Broadspire, where are you in the staffing and technology investment cycle relative to margins? - Kevin Mark Steinke (Barrington)

2025Q2: Margin fluctuations are within normal range of 100-200 basis points. We're staffing for new business and expect more results next year. Margins are expected to fluctuate between 13%-16%. - Rohit Verma(CEO)

Contradiction Point 3

International Segment Margin Expectations

It involves differing expectations for the international segment's margin performance, which is a key financial indicator.

Was the increase in international margin due to incremental weather claims and GTS contributions? - Mark Hughes (Truist)

2025Q3: The long-term target is to reach a 10% margin. While quarterly fluctuations are expected, the trend is towards improved margins. - Rohit Verma(CEO)

What's driving growth in the U.S. and international markets, and can you provide details on margins? - Kaan Karabulut (VersusPoint)

2025Q1: The international segment improved 60 basis points, and we expect that trend to continue over the next couple of quarters. - Bruce W. Swain(CFO)

Contradiction Point 4

Insurance Costs and Rate Adequacy

It involves differing perspectives on the impact of insurance costs and rate adequacy on claims activity, which could affect revenue projections and operational strategies.

Has the increase in insurance costs, higher deductibles, and concerns about insurers raising rates after claims suppressed residential claims in 3Q? - Mark Hughes (Truist Securities, Inc., Research Division)

2025Q3: Continues to see a duality where rate adequacy is being passed to commercial line customers, but not yet to residential customers due to lack of claims activity despite market rate adequacy. Expects a change in 12 to 18 months with normal claims activity resuming, but no improvement yet. - Rohit Verma(CEO)

How do you view pricing strategy for 2025 in international markets? - Maxwell Fritscher (Truist)

2024Q4: We continue to see this theme now playing out where for the first time in a while, we're seeing rate adequacy in many commercial lines. And so those premiums are ... are coming up, and we're seeing the results of that in the claims being adjusted. - Rohit Verma(CEO)