Crawford & Company, an independent provider of claims management and outsourcing solutions to carriers, brokers and corporates, has reported a net loss of $11.4 million for the first-quarter of 2020, compared with income of $6.1 million in the prior year quarter.
In Q1, the company incurred a non-cash pre-tax goodwill impairment of $17.7 million, and also restructuring costs of $5.7 million.
The goodwill impairment relates to lower forecasts within the Crawford Claims Solutions segment, driven by lower forecasts in that reporting unit and a decline in the firm’s market capitalisation. Partially offsetting this charge was a $6.9 million reduction in income tax expense and a $1.7 million credit in non controlling interest expense, resulting a net impact of $9.1 million.
Restructuring costs of $5.7 million in 2020 relate primarily to severance and other termination costs as the company looked to consolidate and streamline a number of functions of its workforce. The company states that these costs were somewhat offset by a $2.4 million reduction in income tax expense, resulting in a net impact of $3.2 million.
Revenues before reimbursements totalled $237.5 million, which is down on the $247.1 million recorded a year earlier.
On a non-GAAP basis, excluding the goodwill impairment and restructuring costs, Crawford & Company’s net income totalled $1 million in Q1 2020, while consolidated adjusted operating earnings reached $7 million.
Regarding the COVID-19 pandemic, the firm estimates that the event negatively impacted revenues by $3.5 million and operating earnings by $1.8 million in the first-quarter of the year. Going forward, the company expects that the resulting economic slowdown could have a material impact on its results of operations, financial condition, and cash flow in one or more future quarters.
Harsha Agadi, President and Chief Executive Officer (CEO), commented: “While we saw solid momentum from new business wins, claims volume in the first quarter continued to be impacted by benign weather and a slowdown in certain areas of the business related to reduced commercial activity as COVID-19 spread across the globe.
“In addition, even though there were incremental claims from the weather-related surge events in Australia and the U.K., as expected, the lower number of absolute surge events we experienced in 2019 carried into the first quarter. These factors helped trigger a goodwill impairment in the quarter. However, our team continued to build the sales pipeline, albeit at a slower pace, demonstrating Crawford’s resilience despite the current economic conditions.
“Crawford entered the COVID-19 crisis with a strong financial position with low debt and solid liquidity. In the face of this unprecedented volatility, we continue to make prudent investments in the business to attract, acquire and more seamlessly serve clients through the enhancement of our IT infrastructure, as our scale will undoubtedly serve us in the future.”
The firm’s Q1 2020 results announcement shows that all of its operating segments experienced a reduction in revenues before reimbursements, when compared with the same period last year.
Crawford TPA Solutions recorded revenues of $96.9 million in the quarter, against $97.8 million a year earlier. Crawford Claims Solutions saw its quarterly revenues decline from $83.3 million in Q1 2019 to $77.6 million in Q1 2020. Additionally, Crawford Specialty Solutions recorded revenues of $63 million in Q1 2020, compared with $65.9 million in Q1 2019.
In early April, Crawford & Company announced its decision to withdraw its 2020 guidance provided on the company’s fourth quarter and full year 2019 earnings call on March 5th. In its Q1 2020 results, the firm states that it will provide additional business updates during its earnings call.
