CRAWFORD & CO (CRD-A)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Concerning Forward-Looking Statements

This report contains 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 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 recently completed 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 and project 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 contained in this report.

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 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. Included among the risks and uncertainties we face are risks related to the following:

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a decline in cases referred to us for any reason, including changes in the degree to which property and casualty insurance carriers outsource their claims handling functions,

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changes in global economic conditions, including the impact of tariffs,

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the impact of changing climate conditions,

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changes in interest rates,

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changes in foreign currency exchange rates,

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changes in regulations and practices of various governmental authorities,

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changes in our competitive environment,

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changes in the financial condition of our clients,

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changes in the rate of inflation and our ability to recover increased operating costs,

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the loss of any material customer,

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our ability to successfully integrate the operations of acquired businesses,

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our ability to timely identify and effectively remediate material weaknesses in internal control over financial reporting,

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regulatory changes related to funding of defined benefit pension plans,

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our U.S., U.K. and other international defined benefit pension plans and our future funding obligations thereunder,

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our ability to complete any transaction involving the acquisition or disposition of assets on terms and at times acceptable to us,

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our ability to identify new revenue sources not tied to the insurance underwriting cycle,

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our ability to develop or acquire information technology resources to support and grow our business,

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our ability to attract and retain qualified personnel,

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our ability to renew existing contracts with clients on satisfactory terms,

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our ability to collect amounts due from our clients and others,

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continued availability of funding under our financing agreements,

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general risks associated with doing business outside the U.S., including changes in tax rates,

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our ability to comply with the covenants in our financing or other agreements,

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changes in the frequency or severity of man-made or natural disasters,

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the ability of our third-party service providers, used for certain aspects of our internal business functions, to meet expected service levels,

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our ability to prevent or detect cybersecurity breaches and cyber incidents,

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our ability to achieve targeted integration goals with the consolidation and migration of multiple software platforms,

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proliferation and escalation of international hostilities and geopolitical events, such as the ongoing conflicts in the Middle East and Russia/Ukraine,

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risks associated with our having a controlling shareholder, and

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impairments of goodwill or our other indefinite-lived intangible assets.

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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 expressed 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.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with (i) our unaudited condensed consolidated financial statements and accompanying notes thereto for the three months ended March 31, 2026 and 2025, and as of March 31, 2026, and December 31, 2025, contained in Item 1 of this Quarterly Report on Form 10-Q, and (ii) our Annual Report on Form 10-K for the year ended December 31, 2025. As described in Note 1, "Basis of Presentation," the financial results of our operations outside of the U.S., Canada, the Caribbean, and certain subsidiaries in the Philippines are included in our consolidated financial statements on a two-month delayed basis (fiscal year-end of October 31) as permitted by U.S. generally accepted accounting principles ("GAAP") in order to provide sufficient time for accumulation of their results.

Results of Operations

Consolidated revenues before reimbursements decreased $2.5 million, or (0.8)%, for the three months ended March 31, 2026, compared with the same period of 2025. This decrease was primarily driven by lower volumes in our U.S. Property & Casualty reportable segment. Changes in foreign exchange rates increased our consolidated revenues before reimbursements by $7.8 million, or 2.5%, for the three months ended March 31, 2026, as compared with the prior year period. To illustrate this impact, segment revenues are presented below, using a constant exchange rate, for the three months ended March 31, 2026.

Excluding foreign currency impacts, consolidated revenues before reimbursements decreased $10.3 million, or (3.3)%, for the three months ended March 31, 2026 compared with the same period of 2025. Revenues from the U.S. Property & Casualty segment decreased in the 2026 first quarter primarily due to revenue reductions in Catastrophe Services, Claims Solutions and Contractor Connection. Revenues from the Broadspire segment increased for the quarter due to an increase in Claims and Medical Management revenues, partially offset by a reduction in Subrogation revenues. Excluding foreign currency impacts, revenues from the International Operations segment decreased in the 2026 first quarter compared with the same period in 2025 due to reductions in the U.K., Europe and Latin America, partially offset by revenue increases in Australia, Canada, and Asia.

Overall, there was an increase in cases received of 0.8% for the three months ended March 31, 2026. Within our U.S. Property & Casualty segment, cases decreased for the 2026 first quarter as a result of a weather-related reduction in all service lines other than Contractor Connection. There was an increase in cases within our Broadspire segment for the first quarter primarily due to an increase in new disability clients within Claims Management. Cases within our International Operations segment increased for the first quarter, primarily due to an increase in high-frequency, low-severity cases in Spain and weather-related activity in Australia, partially offset by reductions in low-severity cases in Brazil.

Cases received are presented below by segment for the three months ended March 31, 2026 and 2025:

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To illustrate exposure to the impact of changes in foreign currencies, revenues before reimbursements are presented below by denominated currency for the three months ended March 31, 2026:

Costs of services provided, before reimbursements, decreased $0.5 million, or (0.2)%, for the three months ended March 31, 2026, as compared to the 2025 period. As a percentage of revenues before reimbursements, costs of services decreased consistent with the decrease in revenues.

Selling, general, and administrative ("SG&A") expenses increased $1.6 million, or 2.1%, in the three months ended March 31, 2026 as compared with the 2025 period. The increase was primarily due to an increase in self-insurance expense, partially offset by a reduction in contingent earnout expenses.

Operating Earnings of our Operating Segments

We believe that a discussion and analysis of the segment operating earnings of our 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 Stan

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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the Company, our operations, and our business environment. This MD&A is provided as a supplement to — and should be read in conjunction with — our audited consolidated financial statements and the accompanying notes thereto contained in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. As described in Note 1, "Significant Accounting and Reporting Policies," of those accompanying audited consolidated financial statements, financial results from our operations outside of the U.S., Canada, the Caribbean, and certain subsidiaries in the Philippines, are reported and consolidated on a two-month delayed basis in accordance with the provisions of ASC 810, "Consolidation," in order to provide sufficient time for accumulation of their results. Accordingly, the Company's December 31, 2025, 2024, and 2023 consolidated financial statements include the financial position of such operations as of October 31, 2025 and 2024, respectively, and the results of their operations and cash flows for the fiscal periods ended October 31, 2025, 2024 and 2023, respectively.

Business Overview

Based in Atlanta, Georgia, Crawford & 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.

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

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North America Loss Adjusting, which services the North American property and casualty market. This is comprised of Loss Adjusting operations in the U.S. and Canada, including Global Technical Services, and Field Operations. The Canadian operations include all operations within that country, including third party administration and Contractor Connection.

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International Operations, which services the global property and casualty market outside North America. This is comprised of all operations in the U.K., Europe, Australia, Asia and Latin America. The International Operations include Loss Adjusting, Global Technical Services, Legal Services, third party administration, and where applicable, Contractor Connection services, within the respective countries.

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Broadspire, which provides third party administration for workers' compensation, auto and liability, disability absence management, medical management, and accident and health to corporations, brokers and insurers in the U.S.

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Platform Solutions, which consists of the Contractor Connection, Networks, and Subrogation service lines in the U.S. The Networks service line includes Catastrophe operations.

As discussed in more detail in subsequent sections of this MD&A, our four reportable segments represent components of our Company for which separate financial information is available, and which is evaluated regularly by our chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing operating performance. The Company’s CEO is considered the CODM as he is responsible for strategic decisions including the allocation of resources to each reporting segment and the assessment of their performance.

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

The global claims management services market is highly competitive and comprised of a large number of companies that vary in size and that offer a varied scope of services. The demand from insurance companies and self-insured entities for services provided by independent claims service firms like us is largely dependent on industry-wide claims volumes, which are affected by, among other things, the insurance underwriting cycle, weather-related events, general economic activity, overall employment levels and workplace injury rates. Demand is also impacted by decisions insurance companies and self-insured entities make with respect to the level of claims outsourced to independent claim service firms as opposed to those handled by their own in-house claims adjusters. In addition, our ability to retain clients and maintain or increase case referrals is also dependent in part on our ability to continue to provide high-quality, competitively priced services and effective sales efforts.

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

Results of Operations

Executive Summary

Consolidated revenues before reimbursements were $1.266 billion in 2025, a decrease of 2.1% compared with $1.293 billion in 2024. Net income attributable to the Company decreased to $19.6 million in 2025, from $26.6 million in 2024, primarily due to restructuring and other costs, net of $14.0 million in the current year.

Consolidated revenues before reimbursements decreased $26.8 million, or 2.1%, in 2025, compared with 2024. This decrease was due to declines in weather-related activity within the Platforms Solutions and North America Loss Adjusting segments. This was partially offset by growth in our International Operations and Broadspire segments. Changes in foreign exchange rates increased our consolidated revenues before reimbursements by $2.0 million, or 0.1%, for 2025 as compared with the prior year.

Excluding foreign currency impacts, consolidated revenues before reimbursements decreased $28.7 million, or (2.2)%, for 2025. Revenues from the North America Loss Adjusting segment decreased in 2025 primarily due to a decrease in U.S. Field Operations. Revenues from the International Operations segment increased due to increases in the U.K., Europe and Asia. Revenues from the Broadspire segment increased due to increases in Claims and Medical Management. Revenues from the Platform Solutions segment decreased primarily due to a reduction in our Networks service line, which experienced a reduction in catastrophe related claims.

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Overall, there was a decrease in cases received of (6.9)% in 2025 compared with 2024. Within our North America Loss Adjusting segment, cases increased in 2025 as a result of an increase in low value inspection services cases transferred from our Platforms Solutions group with minimal revenues. Excluding the impact of this transfer, cases decreased (6.1)% due to decreased business in the U.S. from existing clients and the absence of significant weather-related activity in 2025. Cases within our International Operations segment declined in 2025, primarily due to decreases in high-frequency, low-severity cases in the U.K., Europe, and Latin America, and decreases in Australia due to higher weather-related activity in the prior year. There was an increase in cases within our Broadspire segment primarily due to an increase in new disability clients within Claims Management. Within our Platform Solutions segment, the decrease is primarily related to the transfer of low value inspection services to North America Loss Adjusting, as well as a decrease in Contractor Connection and Subrogation cases and the absence of significant weather-related activity in 2025.

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 North America Loss Adjusting, International Operations, and Broadspire operating segments, partially offset by a decrease in our Platform Solutions segment.

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

In the North America Loss Adjusting segment, operating earnings increased from $18.2 million, or 5.8% of revenues before reimbursements in 2024, to $21.0 million, or 6.9% of revenues before reimbursements in 2025, primarily due to improved staff utilization in U.S. Global Technical Services and Canada Loss Adjusting, a decrease in allowance for estimated credit losses, and a reduction in centralized indirect support costs. Excluding indirect expenses, gross profit increased slightly from $56.8 million, or 18.2% of revenues before reimbursements in 2024, to $57.0 million, or 18.7% of revenues before reimbursements in 2025.

In the International Operations segment, operating earnings increased from $21.0 million, or 5.0% of revenues before reimbursements in 2024, to $25.1 million, or 5.7% of revenues before reimbursements in 2025, primarily due to a $19.6 million increase in revenues and improved operating efficiencies in the U.K., Australia, and Asia, partially offset by an increase in centralized indirect support costs. Excluding indirect expenses, gross profit increased from $77.5 million or 18.5% of revenues before reimbursements in 2024, to $86.6 million, or 19.8% of revenues before reimbursements in 2025.

In the Broadspire segment, operating earnings increased from $52.4 million, or 13.5% of revenues before reimbursements in 2024, to $54.6 million, or 13.6% of revenues before reimbursements in 2025, primarily due to a $13.8 million increase in revenues. Excluding indirect expenses, gross profit increased from $97.5 million, or 25.1% of revenues before reimbursements in 2024, to $103.4 million, or 25.7% of revenues before reimbursements in 2025.

In the Platform Solutions segment, operating earnings decreased from $11.2 million, or 6.4% of revenues before reimbursements in 2024, to $7.6 million, or 6.3% of revenues before reimbursements in 2025, primarily due to a $52.9 million decrease in revenues from a reduction in weather-related claims in our Networks service line. Excluding indirect expenses, gross profit decreased from $34.9 million, or 20.1% of revenues before reimbursements in 2024, as a result of reduced catastrophe related claims volume, to $27.0 million, or 22.3% of revenues before reimbursements in 2025.

Cost of services provided, before reimbursements, decreased $26.3 million, or 2.8% for 2025 compared with 2024. This decrease was primarily due to a decrease in compensation expense within our North America Loss Adjusting and Platform Solutions segments, as a result of reduced weather-related claims volumes, partially offset by increases in compensation expense in our International Operations and Broadspire segments. This decrease was consistent with the decrease in revenues of $26.8 million, or 2.1%.

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Selling, general, and administrative ("SG&A") expenses decreased $5.5 million, or 1.8%, in 2025, as compared with 2024. This decrease was primarily due to reduction in professional fees, partially offset by a one-time indirect tax expense of $3.1 million.

Contingent earnout adjustments represent the fair value adjustment of earnout liabilities arising from recent acquisitions. This expense totaled $0.5 million for 2025, compared to a benefit of $(1.1) million for 2024. The fair value adjustment is based on changes to projections of acquired entities over the respective earnout periods.

Non-service pension costs totaled $9.4 million for 2025, compared to $9.8 million for 2024, primarily due to lower interest costs in 2025 for the U.K. plans. Non-service pension costs represents the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan is frozen and the U.K. plans are closed to new participants. The service cost component of the U.K. plans remains in compensation expense.

Segment Operating Earnings

We believe that a discussion and analysis of the segment operating earnings of our four 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") 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, non-service pension costs, restructuring and other costs, net, contingent earnout adjustments, income taxes, and net income or loss attributable to noncontrolling interests.

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

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

Income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, non-service pension costs, and restructuring and other costs, net, are 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. Contingent earnout adjustments relate to changes in the fair value of earnouts associated with our past acquisitions. Non-service pension costs represent the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan was frozen in 2002 and the U.K. plans are closed to new participants. Restructuring and other costs, net, are costs associated with initiatives intended to improve operating performance, profitability, and efficiency of business processes. Restructuring and other costs, net, include asset impairments, lease termination costs, severance and termination costs, and loss on sale of a business. None of these costs relate directly to the performance of our services or operating activities and, therefore, are excluded from segment operating earnings to better assess the results of each segment's operating activities on a consistent basis.

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

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Additional discussion and analysis of our income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, non-service pension costs, restructuring and other costs, net, and unallocated corporate and shared costs follows the discussion and analysis of the results of operations of our four segments.

Segment Revenues

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

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

Segment Expenses

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

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

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

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

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

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

nm = not meaningful

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YEAR ENDED DECEMBER 31, 2025 COMPARED WITH YEAR ENDED DECEMBER 31, 2024

NORTH AMERICA LOSS ADJUSTING SEGMENT

Operating Earnings

Operating earnings in our North America Loss Adjusting segment totaled $21.0 million, or 6.9% of revenues before reimbursements, in 2025, compared with 2024 operating earnings of $18.2 million, or 5.8% of revenues before reimbursements. The increase in operating earnings in 2025 was primarily due to improved staff utilization in U.S. Global Technical Services and Canada Loss Adjusting, a decrease in allowance for estimated credit losses, and a reduction in centralized indirect support costs.

Excluding indirect expenses, gross profit increased slightly from $56.8 million, or 18.2% of revenues before reimbursements in 2024, to $57.0 million, or 18.7% of revenues before reimbursements in 2025, primarily due to improved staff utilization in U.S. Global Technical Services and Canada Loss Adjusting, a decrease in allowance for estimated credit losses, partially offset by increases in data processing costs and software costs.

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

Revenues before Reimbursements

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

Revenues before reimbursements from our North America Loss Adjusting segment totaled $304.9 million in 2025, compared with $312.2 million in 2024. This decrease was substantially driven by a reduction in weather-related activity, primarily within the U.S. The change in exchange rates decreased our North America Loss Adjusting segment revenues by (0.8)%, or $(2.4) million, for 2025 as compared with 2024. Absent foreign exchange rate fluctuations, North America Loss Adjusting segment revenues would have been $307.3 million for 2025. There was an increase in segment unit volume, measured principally by cases received, of 35.4% for 2025, compared with 2024. This includes an increase in low value inspection services cases, previously handled within Platform Solutions, of 100,800 or 41.5%. There was a decrease in high-frequency, low-severity cases received in Canada of (4,300) or (1.8)%. Changes in product mix and in the rates charged for those services accounted for a 2.8% revenue increase for the year ended 2025 compared with 2024.

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The decrease in revenues in the U.S. for 2025 was due primarily to a reduction in U.S. Field Operations, as a result of decreased weather-related activity and a reduction in industry-wide claim activity. There was also a decrease in revenues in Canada in 2025, compared with 2024, attributable to lower significant weather events, including two major floods that occurred in the prior year.

Revenue variance components for our North America Loss Adjusting segment for the year ended December 31, 2025 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our North America Loss Adjusting segment, which are included in total Company revenues, were $8.4 million in 2025 compared with $8.6 million in 2024.

Case Volume Analysis

North America Loss Adjusting segment unit volumes by geographic region, measured by cases received, for 2025 and 2024 were as follows:

Overall, there was an increase in cases of 35.4% in 2025, compared with 2024. The increase in U.S. case volumes in 2025 was primarily due to the increase in low value inspection services of 100,800 cases, transferred from Platform Solutions. There was a decrease in cases in Canada in 2025 primarily due to a reduction in high-frequency, low-severity cases as a result of flooding in the prior year.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our North America Loss Adjusting segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. North America Loss Adjusting direct compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 71.5% for 2025 and 72.5% for 2024. The dollar amount of these expenses decreased from $226.2 million in 2024 to $217.8 million in 2025. The decrease in expense was primarily due to the reduction in revenues, lower incentive compensation expense, and improved staff utilization, in U.S. Global Technical Services and Canada Loss Adjusting, compared to 2024. The decrease in expenses as a percentage of revenues before reimbursements were due to improved staff utilization in U.S. Global Technical Services and Canada Loss Adjusting.

There was an average of 2,016 FTEs in 2025 compared with an average of 1,996 FTEs in 2024.

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

North America Loss Adjusting segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased from $67.8 million in 2024 to $66.1 million in 2025, remaining consistent as a percent of segment revenues before reimbursements at 21.7% for each respective period. The decrease in costs was in line with the decrease in revenues and due to decreases in allowance for estimated credit losses and centralized indirect support costs, partially offset by increases in data processing costs and software costs.

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INTERNATIONAL OPERATIONS SEGMENT

Operating Earnings

Our International Operations segment reported operating earnings of $25.1 million, or 5.7% of revenues before reimbursements in 2025, compared with operating earnings of $21.0 million, or 5.0% of revenues before reimbursements in 2024. This increase in operating earnings was due to improved operating results in the U.K., Australia, and Asia, partially offset by an increase in centralized indirect support costs.

Excluding centralized indirect expenses, gross profit increased from $77.5 million, or 18.5% of revenues before reimbursements in 2024, to $86.6 million, or 19.8% of revenues before reimbursements in 2025. The increase in gross profit was driven by improved operating results in the U.K., Australia, and Asia.

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

Revenues before Reimbursements

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

Revenues before reimbursements from our International Operations segment totaled $438.2 million in 2025, compared with $418.6 million in 2024. This increase was primarily due to increases in the U.K., Europe, and Asia. The change in exchange rates increased our International Operations segment revenues by approximately 1.1%, or $4.4 million, for 2025 as compared with 2024. Absent foreign exchange rate fluctuations, International Operations segment revenues would have been $433.8 million for 2025. There was a decrease in segment unit volume, measured principally by cases received, of (10.5)% for 2025, compared with the 2024 period. There was a net decrease in high-frequency, low-severity cases of 50,300 or (10.1%), primarily in Brazil and the U.K. There was also an increase in higher-value third-party administration claims in the U.K., which led to a 3.3% increase in revenue for 2025, compared with the 2024 period. Changes in product mix and in the rates charged for those services accounted for a 0.7% revenue increase for 2025 compared with the same period in 2024.

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Based on constant foreign exchange rates, the increase in the U.K. for 2025, compared with 2024, was due to an increase in higher-value third-party administration revenues. There was an increase in revenues in Europe in the 2025 period, compared with 2024, due to an expansion of the Spanish business. Revenues in Australia decreased slightly, primarily due to the disposal of our legal services business, partially offset by growth in specialty claims. There was an increase in revenues in Asia in 2025, compared with 2024, due to increases in Taiwan for claims related to the earthquake that occurred in 2024 and related to an earthquake impacting Thailand in the current year. The decrease in revenues in Latin America in 2025 is primarily driven by decreased revenues in Brazil and Chile.

Revenue variance components for our International Operations segment, for the year ended December 31, 2025 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our International Operations segment which are included in total Company revenue decreased to $32.7 million in 2025 from $34.3 million in 2024.

Case Volume Analysis

International Operations unit volumes, as measured by cases received, by region for 2025 and 2024 were as follows:

Overall, there was a decrease in cases received of (10.5)% for 2025, compared with 2024. There was a decrease in cases in the U.K., due to decreases in high-frequency, low-severity cases in third party administration. Cases increased in Europe due to an increase in claims in Spain, partially offset by a decrease in claims in Germany. Australia decreased primarily due to higher weather-related activity in the prior year. There was an increase in cases received in Asia due to an increase in cases in Thailand, Malaysia, and Singapore. Latin America experienced a decrease in high-frequency, low-severity cases received in Brazil as well as cases received in Chile.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our International Operations segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of International Operations segment revenues before reimbursements, increased from 65.4% in 2024 to 66.7% in 2025. The total dollar amount of these expenses increased from $273.7 million in 2024 to $292.4 million in 2025. The increase in cost and as a percentage of revenues before reimbursements for 2025 as compared to the prior year was due to an increase in compensation expense, including incentive compensation, and an increase in non-employee labor.

There was an average of 3,492 FTEs in this segment in 2025, compared with an average of 3,642 FTEs in 2024.

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

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased in the International Operations segment from $123.9 million in 2024 to $120.7 million in 2025, and decreased as a percent of revenues before reimbursements from 29.6% in 2024 to 27.5% in 2025. The decrease in the expense and as a percentage of revenues before reimbursements for 2025 was due to a reduction in professional and legal fees as well as an insurance recovery, partially offset by an increase in centralized indirect support costs.

BROADSPIRE SEGMENT

Operating Earnings

Our Broadspire segment reported operating earnings of $54.6 million, or 13.6% of revenues before reimbursements in 2025, as compared to $52.4 million, or 13.5% of revenues before reimbursements in 2024. This increase was due to an increase in revenues and a reduction in cost of risk, partially offset by an increase in centralized indirect support costs.

Excluding centralized indirect expenses, gross profit increased from $97.5 million, or 25.1% of revenues before reimbursements in 2024, to $103.4 million, or 25.7% of revenues before reimbursements in 2025, due to the increased revenues and a reduction in cost of risk.

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

Revenues before Reimbursements

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

Revenues before reimbursements from Broadspire totaled $401.9 million in 2025, compared with $388.1 million in 2024. This increase was primarily due to an increase in new client growth across both service lines, increased medical management usage, and pricing improvements. Revenues were positively impacted by a slight increase in unit volumes, measured principally by cases received, of 1.3% for 2025 compared with 2024. Revenues were negatively impacted by a $(3.6) million decrease within our Claims Management service line related to income earned which offsets the costs of managing the funds maintained to administer claims for our customers, for which no cases are received, or (0.9)% decrease in revenues. There was also a $4.7 million increase in revenues within our Medical Management service line for which no cases are received, or 1.2% of the increase in revenues. Changes in product mix and in the rates charged for those services accounted for a 2.0% revenue increase for 2025 as compared with 2024.

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Revenue variance components for our Broadspire segment for the year ended December 31, 2025 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Broadspire segment which are included in total Company revenue decreased to $3.2 million in 2025 from $3.5 million in 2024.

Case Volume Analysis

Broadspire unit volumes by service line, as measured by cases received, for 2025 and 2024 were as follows:

Overall case volumes were 1.3% higher in 2025 compared with 2024, due primarily to an increase in new disability clients within our Claims Management service line, partially offset by a decline in cases within Medical Management.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Broadspire segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of Broadspire segment revenues before reimbursements, increased slightly from 60.6% in 2024 to 60.8% in 2025. The total dollar amount of these expenses increased from $235.3 million in 2024 to $244.4 million in 2025. The increase in the amounts was due to increased employees, average wages, and incentive compensation, related to the increase in revenues.

There was an average of 2,816 FTEs in this segment in 2025, an increase from an average of 2,708 FTEs in the 2024 period.

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

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased in the Broadspire segment from $100.4 million in 2024 to $102.9 million in 2025, but decreased slightly as a percent of revenues before reimbursements from 25.9% in 2024 to 25.6% in 2025. The increases in the expenses was due to higher software costs and higher centralized indirect support costs, partially offset by a reduction in cost of risk and office rent costs.

PLATFORM SOLUTIONS SEGMENT

Operating Earnings

Our Platform Solutions segment recorded operating earnings of $7.6 million in 2025, or 6.3% of revenues before reimbursements, compared with operating earnings of $11.2 million in 2024, or 6.4% of revenues before reimbursements. The decrease was primarily driven by a reduction in catastrophe related claims in our Networks service line.

Excluding indirect expenses, gross profit decreased from $34.9 million, or 20.1% of revenues before reimbursements in 2024, to $27.0 million, or 22.3% of revenues before reimbursements in 2025. The decrease in gross profit was primarily due to a reduction in weather-driven services. The increase in gross profit as a percent of revenues before reimbursements was due to a shift in business mix within the Platform Solutions segment, driven by the reduction in catastrophe related claims and transfer of low value inspection services to North America Loss Adjusting.

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

Revenues before Reimbursements

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

Revenues before reimbursements from our Platform Solutions segment totaled $120.8 million in 2025, compared with $173.7 million in 2024. This decrease was primarily due to a decrease in weather-driven services, as well as a reduction in low value inspection service cases. There was a decrease in segment unit volume, measured principally by cases received, of (48.4)% for 2025, compared with the 2024 period. This was primarily related to the transfer of low value inspection services cases from our Networks service line to North America Loss Adjusting, which resulted in (119,400), or (38.5%), fewer cases in 2025, compared to 2024. There was a decrease in revenues from weather-driven activity in our Networks service line which decreased revenues $(43.1) million, or (24.8)%, in 2025, compared to 2024. Changes in product mix and in the rates charged for those services accounted for a 4.2% revenue increase for 2025, compared with 2024.

Revenue variance components for our Platform Solutions segment for the year ended December 31, 2025 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Platform Solutions segment were $0.7 million and $1.8 million for 2025 and 2024, respectively. The decrease was due to reduced Networks revenues in 2025.

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Case Volume Analysis

Platform Solutions unit volumes by service line, as measured by cases received, for 2025 and 2024 were as follows:

Overall case volumes were (48.4)% lower in 2025 compared with 2024, primarily due to the transfer to North America Loss Adjusting of low value inspection services cases from our Networks service line resulting in 119,400 fewer cases in the 2025 period as compared to 2024. The decrease in our Contractor Connection service line is due to reduced claims activity in the marketplace. The reduction in cases in our Subrogation service line in 2025 is due to a reduction of high-frequency, low-severity cases as compared to the 2024 period.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Platform Solutions segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Platform Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of the related revenues before reimbursements, was 56.9% in 2025 and 64.4% in 2024. The amount of these expenses decreased from $111.8 million in 2024 to $68.7 million in 2025. The decrease in costs was due to lower compensation costs due to reduced weather-related revenues and the reduction of employees performing low value inspection services. The decrease as a percentage of revenues before reimbursements in the current year was due to the reduction in revenues in our Networks service line which is more labor intensive than our other Platform Solutions service lines.

Average FTEs in this segment totaled 714 in 2025, down from an average of 1,049 FTEs in 2024 due to fewer adjusters in the Networks service line.

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

Platform Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor decreased as a percent of segment revenues before reimbursements from $50.7 million, or 29.2% of revenues before reimbursements in 2024, to $44.5 million, or 36.8% of revenues before reimbursements in 2025. The decrease in costs in 2025 as compared to the 2024 period, is due to a reduction in data processing costs, the reduction of costs related to low value inspection services and a reduction in centralized indirect support costs. Costs as a percent of revenues increased related to the decrease in revenues for the 2025 period as compared to the prior year.

YEAR ENDED DECEMBER 31, 2024 COMPARED WITH YEAR ENDED DECEMBER 31, 2023

NORTH AMERICA LOSS ADJUSTING SEGMENT

Operating Earnings

Operating earnings in our North America Loss Adjusting segment totaled $18.2 million, or 5.8% of revenues before reimbursements, in 2024, compared with 2023 operating earnings of $23.2 million, or 7.6% of revenues before reimbursements. The decrease in operating earnings in 2024 was primarily due to the decrease in revenues in Canada and U.S. Field Operations and reduced staff utilization related to the higher weather-related activity in the prior year.

Excluding indirect expenses, gross profit decreased from $62.2 million, or 20.5% of revenues before reimbursements in 2023, to $56.8 million, or 18.2% of revenues before reimbursements in 2024, due to a decrease in revenues in U.S. Field Operations, increases in expenses within U.S. Global Technical Services, and a decrease in revenues in Canada, as compared to the prior year.

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

Revenues before Reimbursements

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

Revenues before reimbursements from our North America Loss Adjusting segment totaled $312.2 million in 2024, compared with $303.6 million in 2023. This increase was due to increased business in the U.S. from both new and existing clients and pricing increases. The change in exchange rates decreased our North America Loss Adjusting segment revenues by (0.5)%, or $(1.3) million, for 2024 as compared with 2023. Absent foreign exchange rate fluctuations, North America Loss Adjusting segment revenues would have been $313.5 million for 2024. There was a decrease in segment unit volume, measured principally by cases received, of (12.4)% for 2024, compared with 2023. This includes a decrease in high-frequency, low-severity cases received in Contractor Connection in Canada of 35,800 or 12.9%. Changes in product mix and in the rates charged for those services accounted for a 2.8% revenue increase for the year ended 2024 compared with 2023.

The increase in revenues in the U.S. for 2024 was due primarily to an increase in Global Technical Services, as a result of an increase in expert adjusting staff, increased business from new and existing clients, and pricing increases. There was a decrease in revenues in Canada in 2024, compared with 2023, due to the decrease in Contractor Connection cases.

Revenue variance components for our North America Loss Adjusting segment for the year ended December 31, 2024 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our North America Loss Adjusting segment, which are included in total Company revenues, were $8.6 million in 2024 compared with $9.8 million in 2023. The decrease was due to a decrease in mileage reimbursements.

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Case Volume Analysis

North America Loss Adjusting segment unit volumes by geographic region, measured by cases received, for 2024 and 2023 were as follows:

Overall, there was a decrease in cases of (12.4)% in 2024, compared with 2023. The slight decrease in U.S. case volumes in 2024 was due to higher weather-related activity in the prior year partially offset by an increase in U.S. Global Technical Services. There was a decrease in cases in Canada in 2024 primarily due to 35,800 less high-frequency, low-severity Contractor Connection cases related to the loss of a customer, as compared with 2023.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our North America Loss Adjusting segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment our staff. North America Loss Adjusting direct compensation, fringe benefits, and non-employee labor expense, as a percent of segment revenues before reimbursements, was 72.5% for 2024 and 70.7% for 2023. The dollar amount of these expenses increased from $214.6 million in 2023 to $226.2 million in 2024. The increase in amounts was due to increases in expert adjusting staff in U.S. Global Technical Services, partially offset by decreases in employees in U.S. Field Operations and Canada. The increase in the percentage of revenues before reimbursements is due to lower staff utilization in U.S. Field Operations and Canada, compared to 2023.

There was an average of 1,996 FTEs in 2024 compared with an average of 2,055 FTEs in 2023.

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

North America Loss Adjusting segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased from $65.8 million in 2023 to $67.8 million in 2024, remaining consistent as a percent of segment revenues before reimbursements at 21.7% for each respective period. The increase in costs was in line with the increase in revenues and due to increases in automobile expense, professional fees and data processing costs.

INTERNATIONAL OPERATIONS SEGMENT

Operating Earnings

Our International Operations segment reported operating earnings of $21.0 million, or 5.0% of revenues before reimbursements in 2024, compared with operating earnings of $11.2 million, or 2.9% of revenues before reimbursements in 2023. This increase in operating earnings was due to increased revenues in the U.K., Europe, Asia, and Latin America.

Excluding centralized indirect expenses, gross profit increased from $60.4 million, or 15.8% of revenues before reimbursements in 2023, to $77.5 million, or 18.5% of revenues before reimbursements in 2024. The increase in gross profit was driven by the increase in revenues.

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

Revenues before Reimbursements

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

Revenues before reimbursements from our International Operations segment totaled $418.6 million in 2024, compared with $382.4 million in 2023. This increase was primarily due to increases in the U.K., Europe, Asia, and Latin America. The change in exchange rates increased our International Operations segment revenues by approximately 0.2%, or $0.5 million, for 2024 as compared with 2023. Absent foreign exchange rate fluctuations, International Operations segment revenues would have been $418.1 million for 2024. There was an increase in segment unit volume, measured principally by cases received, of 2.8% for 2024, compared with the 2023 period. There was a net decrease in high-frequency, low-severity cases of 11,250 or (2.3%), driven primarily by fewer high-frequency, low-severity cases in the U.K., partially offset by an increase in high-frequency, low-severity cases in Brazil. There was also an increase in higher-value third-party administration claims in the U.K., which led to a 2.7% increase in revenue for 2024, compared with the 2023 period. Changes in product mix and in the rates charged for those services accounted for a 1.5% revenue increase for 2024 compared with the same period in 2023.

Based on constant foreign exchange rates, the increase in the U.K. for 2024, compared with 2023, was due to an increase in property and third party administration revenues driven by higher value claims. There was an increase in revenues in Europe in the 2024 period, compared with 2023, due to increases in Netherlands, Norway, the Middle East, and Germany. There was an increase in revenues in Asia in 2024, compared with 2023, due to an increase in high-frequency, low-severity case activity in Singapore, as well as increases in Taiwan related to an earthquake. The increase in revenues in Latin America in 2024 was primarily driven by increased volumes across third-party administration and loss adjusting in Brazil.

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Revenue variance components for our International Operations segment for the year ended December 31, 2024 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our International Operations segment which are included in total Company revenue increased to $34.3 million in 2024 from $33.8 million in 2023. The increase in reimbursed expenses was primarily due to the increase in revenues in the current year.

Case Volume Analysis

International Operations unit volumes, as measured by cases received, by region for 2024 and 2023 were as follows:

Overall, there was an increase in cases received of 2.8% for 2024, compared with 2023. There was a decrease in cases in the U.K., due to decreases in high-frequency, low-severity cases in third party administration and property. Cases increased in Europe due to an increase in cases in the Middle East from flooding events and an increase in claims in Germany and the Netherlands, partially offset by a decrease in claims from Finland and Poland. Australia increased due to an increase in weather-related cases as well as an increase in high-frequency, low-severity cases in Contractor Connection. There was an increase in cases received in Asia due to an increase in high-frequency, low-severity activity in Singapore. Latin America experienced an increase in high-frequency, low-severity cases received in Brazil as well as cases received in Chile.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our International Operations segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of International Operations segment revenues before reimbursements, decreased from 67.1% in 2023 to 65.4% in 2024. The total dollar amount of these expenses increased from $256.6 million in 2023 to $273.7 million in 2024. The increase was due to increases in compensation expense, related to the increase in revenues. The decrease in the percentage of revenues before reimbursements is due to higher revenues in 2024 and improved staff utilization.

There was an average of 3,642 FTEs in this segment in 2024, compared with an average of 3,631 FTEs in 2023.

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

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased in the International Operations segment from $114.7 million in 2023 to $123.9 million in 2024, but decreased as a percent of revenues before reimbursements from 30.0% in 2023 to 29.6% in 2024. The increase in the expense for 2024 was due to an increase in revenues, while the percentage of revenues before reimbursements decreased due to improved operating leverage.

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BROADSPIRE SEGMENT

Operating Earnings

Our Broadspire segment reported operating earnings of $52.4 million, or 13.5% of revenues before reimbursements in 2024, as compared to $41.9 million, or 11.8% of revenues before reimbursements in 2023. This increase was due to an increase in revenues resulting from new client programs, increased medical management usage, and pricing improvements.

Excluding centralized indirect expenses, gross profit increased from $88.6 million, or 24.9% of revenues before reimbursements in 2023, to $97.5 million, or 25.1% of revenues before reimbursements in 2024, due to the increased revenues and improved staff utilization.

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

Revenues before Reimbursements

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

Revenues before reimbursements from Broadspire totaled $388.1 million in 2024, compared with $355.7 million in 2023. This increase was primarily due to an increase in new client growth across both service lines, increased medical management usage, and pricing improvements. Revenues were positively impacted by a slight increase in unit volumes, measured principally by cases received, of 0.4% for 2024 compared with 2023. Claims increased from growth within the Medical Management service line that was partially offset by an increase of takeover claims for disability clients in the prior year. This resulted in a reduction of 24,700 claims, or 4.6%, which had minimal revenues associated with them. Revenues were positively impacted by a $2.7 million increase within our Claims Management service line related to income earned which offsets the costs of managing the funds maintained to administer claims for our customers, for which no cases are received, or 0.8% of the increase in revenues. There was also an $8.0 million increase in revenues within our Medical Management service line for which no cases are received, or 2.2% of the increase in revenues. Changes in product mix and in the rates charged for those services accounted for a 1.1% revenue increase for 2024 as compared with 2023.

Revenue variance components for our Broadspire segment for the year ended December 31, 2024 are summarized as follows:

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Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Broadspire segment which are included in total Company revenue increased to $3.5 million in 2024 from $3.3 million in 2023. The increase in reimbursed expenses in the 2024 period was primarily due to the increased revenues in the current year.

Case Volume Analysis

Broadspire unit volumes by service line, as measured by cases received, for 2024 and 2023 were as follows:

Overall case volumes were 0.4% higher in 2024 compared with 2023, due to an increase in Medical Management referrals, partially offset by an increase of 24,700 takeover claims for disability clients in the prior year within Claims Management.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Broadspire segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Direct compensation expenses, fringe benefits, and non-employee labor, as a percent of Broadspire segment revenues before reimbursements, decreased from 61.1% in 2023 to 60.6% in 2024. The total dollar amount of these expenses increased from $217.3 million in 2023 to $235.3 million in 2024. The increase in the amounts was due to increased employees, average wages, and incentive compensation, related to the increase in revenues. The decrease as a percentage of revenues before reimbursements was due to increases in revenues in services with higher margins.

There was an average of 2,708 FTEs in this segment in 2024, an increase from an average of 2,610 FTEs in the 2023 period.

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

Expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased in the Broadspire segment from $96.5 million in 2023 to $100.4 million in 2024, but decreased as a percent of revenues before reimbursements from 27.1% in 2023 to 25.9% in 2024. The increase in the expense was due to the higher revenues and an increase in the rates charged for certain vendor services. The decrease in the percent of revenues before reimbursements was due to the higher revenues and improved operating efficiencies.

PLATFORM SOLUTIONS SEGMENT

Operating Earnings

Our Platform Solutions segment recorded operating earnings of $11.2 million in 2024, or 6.4% of revenues before reimbursements, compared with operating earnings of $28.5 million in 2023, or 12.7% of revenues before reimbursements. The decrease was primarily due to a reduction in revenues in our Networks service line due to higher weather-related activity in the prior year period resulting in decreased need for staff augmentation services in 2024 and lower Contractor Connection revenues.

Excluding indirect expenses, gross profit decreased from $51.6 million, or 22.9% of revenues before reimbursements in 2023, to $34.9 million, or 20.1% of revenues before reimbursements in 2024. This decrease was primarily due to a reduction in revenues in our Networks service line due to higher weather-related activity in the prior year periods resulting in decreased need for staff augmentation services by our clients in the 2024 periods and lower Contractor Connection revenues.

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

Revenues before Reimbursements

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

Revenues before reimbursements from our Platform Solutions segment totaled $173.7 million in 2024, compared with $225.5 million in 2023. This decrease was primarily due to a reduction in our Networks service line where we provide staff augmentation for our clients, along with a decrease in our Contractor Connection service line due to higher weather-related activity in the prior year period, partially offset by an increase in our Subrogation service line. There was a decrease in segment unit volume, measured principally by cases received, of (7.7)% for 2024, compared with the 2023 period. There was a reduction in low value inspection services cases within our Networks service line of 21,600 cases, or 6.4% in 2024, compared to 2023. There was a change in revenues from staff augmentation within our Networks service line, which have no corresponding cases, which resulted in decreased revenues of (21.3)% in 2024. Changes in product mix and in the rates charged for those services accounted for a (0.4)% revenue decrease for 2024 compared with 2023.

Revenue variance components for our Platform Solutions segment for the year ended December 31, 2024 are summarized as follows:

Reimbursed Expenses Included in Total Revenues

Reimbursements for out-of-pocket expenses incurred in our Platform Solutions segment were $1.8 million and $2.7 million for 2024 and 2023, respectively. The decrease was due to reduced Networks revenues in 2024.

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Case Volume Analysis

Platform Solutions unit volumes by service line, as measured by cases received, for 2024 and 2023 were as follows:

Overall case volumes were (7.7)% lower in 2024 compared with 2023, due to decreases in Contractor Connection and Networks driven by higher weather-related activity in the prior year. There was a reduction in low value inspection services cases within our Networks service line of 21,600 cases in 2024. The decrease in cases in our Contractor Connection service lines in 2024 is due to higher weather-related activity in the prior year. The increase in Subrogation cases for the year is due to an increase from higher volume customers.

Direct Compensation, Fringe Benefits & Non-Employee Labor

The most significant expense in our Platform Solutions segment is the compensation of employees, including related payroll taxes and fringe benefits, and payments to outsourced service providers that augment the functions performed by our employees. Platform Solutions direct compensation, fringe benefits, and non-employee labor expense, as a percent of the related revenues before reimbursements, was 64.4% in 2024 and 65.6% in 2023. The amount of these expenses decreased from $147.8 million in 2023 to $111.8 million in 2024. The decrease in costs was due to the lower revenues in the current year and reduction of employees in our Networks service line. The decrease as a percentage of revenues before reimbursements in the current year was due to the reduction in revenues in our Networks service line which is more labor intensive than our other Platform Solutions service lines.

Average FTEs in this segment totaled 1,049 in 2024, down from an average of 1,314 FTEs in 2023 due to fewer adjusters in the Networks service line.

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

Platform Solutions segment expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased as a percent of segment revenues before reimbursements from $49.1 million, or 21.8% of revenues before reimbursements in 2023, to $50.7 million, or 29.2% of revenues before reimbursements in 2024. The increase in expense and as a percent of revenues before reimbursements is due to the increased technology investments and lower revenues.

EXPENSES AND CREDITS EXCLUDED FROM SEGMENT OPERATING EARNINGS

Unallocated Corporate and Shared Costs, Net

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

Unallocated corporate and shared costs and credits were $26.0 million, $28.1 million, and $19.4 million in 2025, 2024, and 2023, respectively. The decrease for 2025 was due to a $6.6 million decrease in professional fees, partially offset by a one-time indirect tax expense of $3.1 million, and a $1.0 million increase in compensation expenses. The increase for 2024 was due to a $3.3 million increase in professional fees, $3.0 million increase in compensation expenses, and a $2.4 million increase in self-insurance costs.

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Net Corporate Interest Expense

Net corporate interest expense consists of interest expense that we incur on our short- and long-term borrowings, partially offset by interest income we earn on available cash balances and short-term investments. These amounts vary based on interest rates, borrowings outstanding, and the amounts of invested cash. Corporate interest expense totaled $18.0 million, $20.3 million, and $19.8 million for 2025, 2024, and 2023, respectively. Corporate interest income totaled $3.3 million, $3.4 million, and $2.8 million in 2025, 2024, and 2023, respectively. We pay interest on borrowings under our Credit Facility based on variable rates. Our level of interest expense is dependent on the future direction of interest rates as well as the level of outstanding borrowings relative to prior periods. The weighted average interest rates under our Credit Facility were 6.0%, 6.8%, and 6.6% for the years ending December 31, 2025, 2024, and 2023, respectively.

Stock Option Expense

Stock option expense, a component of stock-based compensation, is comprised of non-cash expenses related to stock options granted under our various stock option and employee stock purchase plans. Stock option expense is not allocated to our operating segments. Stock option expense of $0.6 million for each of the years ended 2025, 2024, and 2023. Other stock-based compensation expense related to our Executive Stock Bonus Plan and our Omnibus Stock and Incentive Plan (pursuant to which we have authority to grant performance shares and restricted shares) is charged to our operating segments and included in the determination of segment operating earnings or loss.

Amortization of Customer-Relationship Intangible Assets

Amortization of customer-relationship intangible assets represents the non-cash amortization expense for finite-lived customer-relationship and trade name intangible assets. Amortization expense associated with these intangible assets totaled $8.4 million, $7.5 million, and $7.8 million in 2025, 2024, and 2023, respectively. This amortization is included in "Selling, general and administrative expenses" in our Consolidated Statements of Operations.

Restructuring and Other Costs, Net

Restructuring and other costs, net are related to restructuring initiatives intended to improve operating performance, profitability and efficiency of business processes. These costs include asset impairments, lease termination costs, severance and termination costs, and loss on sale of a business. This resulted in an expense of $14.0 million in 2025, with no costs in 2024 and 2023.

Contingent Earnout Adjustments

Contingent earnout expense (benefit) represents the fair value adjustment of earnout liabilities arising from past acquisitions. This resulted in an expense of $0.5 million in 2025, a benefit of $(1.1) million in 2024, and an expense of $4.0 million in 2023. The fair value adjustment is based on changes to projections of acquired entities over the respective earnout periods, which span multiple years.

Non-Service Pension Cost and Credits

Non-service pension cost totaled $9.4 million for 2025, $9.8 million for 2024, and $8.6 million in 2023. The decrease in 2025 was due to lower interest costs for the U.K. plan compared to 2024. The increase in 2024 was due to higher amortization of net losses compared to 2023. Non-service pension costs represent the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan is frozen and the U.K. plans are closed to new participants. The service cost component of the U.K. plans remains in compensation expense.

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Income Taxes

Our consolidated effective income tax rate for financial reporting purposes may change periodically due to changes in enacted tax rates, changes in tax law, fluctuations in the mix of income earned from our various domestic and international operations, which are subject to income taxes at different rates, our ability to utilize loss and tax credit carryforwards, and amounts related to uncertain income tax positions. Income tax provisions totaled $14.9 million, $14.6 million, and $17.1 million for 2025, 2024, and 2023, respectively. Our effective tax rate for financial reporting purposes was 43.1%, 35.5%, and 36.1% for 2025, 2024, and 2023, respectively. The Company's effective income tax rate in 2025 was impacted by improved profitability in certain jurisdictions, net of global intangible low-taxed income expense and a one-time expense relating to administrative guidance issued by a foreign tax authority. The Company's effective income tax rate in 2024 was impacted by performance in certain foreign jurisdictions and changes in valuation allowances. The Company's effective income tax rate in 2023 was impacted by changes in domestic tax guidance and changes in valuation allowances in certain jurisdictions. Based on our 2026 operating plans, we anticipate our effective tax rate for financial reporting purposes in 2026 to be in the 32% to 34% range before considering any discrete items and assuming no material changes to tax law and policy in the material jurisdictions in which we operate.

Liquidity, Capital Resources, and Financial Condition

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

On December 2, 2025, the Company and certain of its subsidiaries (Crawford & Company EMEA/AP Management Ltd (the "U.K. Borrower"), Crawford & Company (Canada) Inc. (the "Canadian Borrower") and Crawford & Company (Australia) Pty. Ltd, (the "Australian Borrower"), collectively known with the Company, as the "Borrowers") entered into an Amended and Restated Credit Facility (the "Credit Facility"), which amended and restated that certain credit agreement, dated as of November 5, 2021, as subsequently amended.

The Credit Facility consists of a $500.0 million revolving credit facility, with a letter of credit sub-commitment of $125.0 million. The Credit Facility contains sublimits of $250.0 million for borrowings by the U.K. Borrower, $125.0 million for borrowings by the Canadian Borrower, and $75.0 million for borrowings by the Australian Borrower. The Credit Facility matures, and all amounts outstanding thereunder, will be due and payable on December 2, 2030.

Borrowings under the Credit Facility may be made in U.S. dollars, Euros, Canadian dollars, Yen, Australian dollars, and Sterling and, subject to the terms of the Credit Facility, other currencies. Borrowings under the Credit Facility bear interest, at the option of the applicable Borrower, based on the Base Rate (as defined below) or Term SOFR or an alternative reference rate, in each case plus an applicable interest margin based on our leverage ratio (as defined below), provided that borrowings in foreign currencies will be at an alternative reference rate. The Credit Facility, as amended, defines Term SOFR based on the published forward-looking SOFR rate administered by the CME Group or any acceptable successor. The Credit Facility defines alternative reference rates for non-U.S. Dollar currencies as Alternative Currency Term Rates or Alternative Currency Daily Rates. The interest margin for Term SOFR Rate or alternative reference rate loans ranges from 1.00% to 1.625% and for Base Rate loans ranges from 0.00% to 0.625%. Base Rate is defined as the highest of (a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate”, (c) the Term SOFR plus 1.00% and (d) 1.00%. The weighted average interest rates under our Credit Facility were 6.0%, 6.8%, and 6.6% for the years ending December 31, 2025, 2024, and 2023, respectively.

At December 31, 2025, a total of $189.1 million of short-term and long-term debt was outstanding, and there was an undrawn amount of $8.5 million under the letter of credit sub-commitments of the Credit Facility. These letter of credit commitments were for our own obligations. Including the amounts committed under the letter of credit sub-commitments, the available balance under the Credit Facility totaled $290.7 million at December 31, 2025.

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

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

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

At December 31, 2025, we were in compliance with the financial covenants under the Credit Facility. Our leverage ratio was 1.39 and 1.85 as of December 31, 2025 and December 31, 2024, respectively, and our interest coverage ratio was 6.26 and 5.50 as of December 31, 2025 and December 31, 2024, respectively. If we do not meet the covenant requirements in the future, we would be in default under the Credit Facility. Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Credit Facility and ancillary documents.

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

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

The operations of our North America Loss Adjusting and International Operations reportable segments expose us to foreign currency exchange rate changes that can impact translations of foreign-denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies, as well as the risk of changes in tax rates or tariffs on earnings or services provided outside the U.S. Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results. Increases in the value of the U.S. dollar compared with the other functional currencies in certain of the locations in which we do business negatively impacted our revenues and operating earnings in 2025, 2024, and 2023. We cannot predict the impact that foreign currency exchange rates may have on our future revenues or operating earnings.

At December 31, 2025, our working capital balance (current assets less current liabilities) was approximately $42.8 million, compared with $74.5 million at December 31, 2024. The decrease in working capital was primarily due to decreases in accounts receivable and unbilled revenues, partially offset by an increase in cash and cash equivalents. Cash and cash equivalents at the end of 2025 totaled $64.1 million, compared with $55.4 million at the end of 2024.

Cash and cash equivalents, excluding restricted cash, as of December 31, 2025 consisted of $21.3 million held in the U.S. and $42.8 million held in our foreign subsidiaries. All of the cash and cash equivalents held by our foreign subsidiaries is available for general corporate purposes. We generally do not provide for additional U.S. and foreign income taxes on undistributed earnings of foreign subsidiaries because they are considered to be indefinitely reinvested. We maintained our permanent reinvestment assertion on a portion of prior year undistributed earnings for certain foreign operations and accrued deferred taxes attributable to the earnings that were not permanently reinvested. The majority of the remaining historical earnings and future foreign earnings are expected to remain permanently reinvested and will be used to provide working capital for these operations, fund defined benefit pension plan obligations, repay non-U.S. debt, and fund capital improvements and future acquisitions.

However, if at a future date or time funds that remain permanently reinvested are necessary for our operations in the U.S. or we otherwise believe it is in our best interests to repatriate all or a portion of such funds, we may be required to accrue and pay taxes to repatriate these funds. No assurances can be provided as to the amount or timing thereof, the tax consequences related thereto, or the ultimate impact any such action may have on our results of operations or financial condition. We have estimated that we have book over tax basis differences of approximately $128.0 million. Due to withholding tax, basis computations, and other related tax considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.

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Cash Provided by Operating Activities

Cash provided by operating activities totaled $101.8 million in 2025 compared to $51.6 million in 2024. The $50.2 million increase in cash provided by operating activities was primarily due to a $56.1 million increase in the change in billed and unbilled accounts receivables, an increase in the change of prepaid expenses and other operating activities of $9.4 million, partially offset by a decrease in the change in accounts payable and accrued liabilities of $17.3 million. Interest payments were $17.4 million in 2025, and income tax payments, net of refunds, were $17.0 million in 2025.

Cash provided by operating activities totaled $51.6 million in 2024 compared to $103.8 million in 2023. The $52.2 million decrease in cash provided by operating activities was primarily due to a $48.0 million decrease in the change in billed and unbilled accounts receivables and lower earnings. Interest payments were $19.3 million in 2024, and income tax payments, net of refunds, were $20.0 million in 2024.

Cash Used in Investing Activities

Cash used in investing activities decreased by $5.4 million in 2025, from $41.6 million in 2024 to $36.2 million in 2025. The decrease was primarily due to a reduction in capitalized software costs, partially offset by proceeds from the disposition of a business within our International Operations segment. We forecast that our property and equipment additions in 2026, including capitalized software, will approximate $32.5 million to $37.5 million.

Cash used in investing activities, primarily for capital expenditures and capitalized software, including the capitalization of costs for internally developed software, increased by $5.1 million in 2024, from $36.6 million in 2023 to $41.6 million in 2024.

Cash Used in Financing Activities

Cash used in financing activities was $57.6 million in 2025, compared with $12.9 million in 2024. In 2025, there was a decrease of $29.7 million in net borrowing from our revolving credit facility, compared with a net increase during the 2024 period of $8.6 million. The decrease in net borrowing in the 2025 period was primarily related to the increase in cash provided by operations. We used cash to pay dividends totaling $14.3 million in 2025, we repurchased shares for $10.5 million, and we received shares of CRD-A stock that were surrendered by employees to settle $1.5 million of withholding taxes owed on the issuance of restricted and performance shares. Payments of contingent consideration on acquisitions totaled $1.3 million in 2025, compared with $3.3 million in 2024.

Cash used in financing activities was $12.9 million in 2024, compared with $54.7 million used in financing activities in 2023. In 2024, we borrowed $70.2 million for capital expenditures and other working capital needs and we repaid a total of $61.6 million. We used cash to pay dividends totaling $13.8 million in 2024, we repurchased shares for $3.9 million, and we received shares of CRD-A stock that were surrendered by employees to settle $2.1 million of withholding taxes owed on the issuance of restricted and performance shares. Payments of contingent consideration on acquisitions totaled $3.3 million in 2024, compared with $7.1 million in 2023.

Other Matters Concerning Liquidity and Capital Resources

Our short-term debt obligations typically peak during the first quarter of each year due to the payment of incentive compensation awards, contributions to retirement plans, and certain other recurring payments, and generally decline during the balance of the year. Our maximum month-end short-term debt obligations were $41.2 million and $34.4 million in 2025 and 2024, respectively. Our average month-end short-term debt obligations were $26.7 million and $22.0 million in 2025 and 2024, respectively. The outstanding balance of our short-term borrowings, excluding outstanding but undrawn letters of credit under our Credit Facility, was $38.5 million and $17.8 million at December 31, 2025 and 2024, respectively. The balance in short-term borrowings at December 31, 2025 primarily represents amounts under our revolving Credit Facility that we expect, but are not required, to repay in the next twelve months. We have historically used the proceeds from our long-term borrowings to finance, among other things, business acquisitions.

Our liquidity is defined as cash on hand and borrowing capacity under our Credit Facility based on our trailing twelve-month EBITDA. Borrowing capacity under our Credit Facility is defined as the lesser $500.0 million less the unutilized credit facility or 4.5 times trailing twelve-month EBITDA less funded debt, as defined under our Credit Facility. At December 31, 2025, this resulted in total liquidity of $353.1 million.

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Based on our financial plans, we expect to be able to remain in compliance with all required covenants throughout 2026. Our compliance with the consolidated total leverage ratio and consolidated interest coverage ratio is particularly sensitive to changes in our EBITDA, and if our financial plans for 2026 or other future periods do not meet our current projections, we could fail to remain in compliance with these financial covenants in our Credit Facility.

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

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

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

Material Cash Commitments

As of December 31, 2025, the impact that our material cash commitments, including estimated interest payments, are expected to have on our liquidity and cash flow in future periods is as follows:

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

(1)
Assumes principal amounts are repaid at maturity and not refinanced.

Borrowings under our Credit Facility bear interest at a variable rate, based on a Term SOFR Rate, an alternative reference rate or a Base Rate, in either case plus an applicable margin. Long-term debt refers to the required principal repayment at maturity of the Credit Facility, and may differ significantly from estimates, due to, among other things, actual amounts outstanding at maturity or any refinancings prior to such date. Interest amounts are based on projected borrowings under our Credit Facility and interest rates in effect on December 31, 2025, and the actual interest payments may differ significantly from estimates due to, among other things, changes in outstanding borrowings and prevailing interest rates in the future.

Gross deferred income tax liabilities as of December 31, 2025 were approximately $33.0 million. This amount is not included in the contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, we believe scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling would not relate to liquidity needs.

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Defined Benefit Pension Funding and Cost

We sponsor a qualified defined benefit pension plan in the U.S., (the "U.S. Qualified Plan") three defined benefit plans in the U.K. (the "U.K. Plans"), and defined benefit pension plans in the Netherlands, Norway, Germany, and the Philippines (the "Other International Plans"). Future cash funding of our defined benefit pension plans will depend largely on future investment performance, interest rates, changes to mortality tables, and regulatory requirements. Effective December 31, 2002, we froze our U.S. Qualified Plan. The aggregate deficit in the funded status of the U.S. Plan and Other International Plans with unfunded deficits totaled $17.9 million and $21.1 million at the end of 2025 and 2024, respectively. The 2025 decrease in the unfunded deficit of our defined benefit pension plans primarily resulted from returns on plan assets during the year. In 2025, we made no contributions to our U.S. Qualified Plan and $2.9 million to our U.K. Plans. In 2024, we made no contributions to our U.S. Qualified Plan and $2.9 million to our U.K. Plans. The U.K. Plans were in a funded status totaling $12.0 million and $9.2 million at the end of 2025 and 2024, respectively, with the fair value of plan assets exceeding the projected benefit obligation. There was a $2.9 million increase during 2025 in the net prepaid pension balances of the U.K. defined benefit plans.

Our frozen U.S. Qualified Plan was underfunded by $15.4 million at December 31, 2025 based on an accumulated benefit obligation of $233.4 million. We expect to make discretionary contributions of $3.0 million to the U.S Qualified Plan in the next fiscal year to minimize future required contributions.

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

Commercial Commitments

As a component of our Credit Facility, we maintain a letter of credit facility to satisfy certain contractual obligations. At December 31, 2025, the issued, but undrawn, letters of credit totaled approximately $8.5 million. These letters of credit are typically renewed annually, but unless renewed, will expire as follows:

Changes in Financial Condition

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

Significant changes on our Consolidated Balance Sheet as of December 31, 2025, compared with our Consolidated Balance Sheet as of December 31, 2024, were as follows:

•
Accounts receivable decreased by $26.4 million, excluding the impacts from foreign currency exchange, in 2025 compared with 2024. The decrease was primarily due to higher collections in the U.S. in our North American Loss Adjusting and Platform Solutions segments in 2025. Accounts receivable was elevated as of December 31, 2024 due to higher weather-related billings in the fourth quarter of 2024 from Hurricanes Helene and Milton.

•
Unbilled revenues decreased $5.3 million, excluding the impacts from foreign currency exchange. The decrease was primarily due to higher weather-related billings at the end of 2024 within the U.S in our North America Loss Adjusting segment. This reduction was partially offset by increases in the U.K. and Europe in our International Operations segment.

•
Accounts payable and accrued liabilities decreased $9.9 million, excluding the impacts from foreign currency exchange. The decrease is primarily due to the timing of payroll and payments to vendors within the U.S.

•
Accrued retirement costs decreased $8.0 million, excluding the impacts from foreign currency exchange. The decrease was primarily due to changes in the value of minimum pension liabilities.

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Critical Accounting Policies and Estimates

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

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

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

Revenue Recognition

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

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

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

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

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

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As of December 31, 2025, deferred revenues related to lifetime claim handling arrangements approximated $40.0 million. If the rate at which we close cases changes, the amount of revenues recognized within a period could be affected. In addition, given the competitive environment in which we operate, we may be unable to raise our prices to offset the additional expense associated with handling longer-lived claims should such case closing rates change. The change in our first-year case closing rates over the last ten years has ranged from a decrease of 1.3% to an increase of 1.7%, and has averaged an increase of 0.4%. A 1.0% change is a reasonably likely change in our estimate based on historical data. Absent an increase in per-claim fees from our clients, a 1.0% decrease in claim closing rates for lifetime claims would have resulted in the deferral of additional revenues of approximately $0.6 million for the year ended December 31, 2025, and $0.5 million for each of the years ended December 31 2024, and 2023. If our average claim closing rates for lifetime claims increased by 1.0%, we would have recognized additional revenues of approximately $0.6 million for the year ended December 31, 2025, and $0.5 million for each of the years ended December 31 2024, and 2023.

Allowance for Expected Credit Losses

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

As of December 31, 2025 and 2024, our allowance for expected credit losses totaled $7.2 million and $8.1 million, or approximately 5.9% and 5.4% of gross billed receivables at December 31, 2025 and 2024, respectively. If the financial condition of our clients deteriorates, resulting in an inability to make required payments to us, or if economic conditions deteriorate, additional allowances may be deemed to be appropriate or required. If the allowance for expected credit losses changed by 1.0% of gross billed receivables, reflecting either an increase or decrease in expected future write-offs, the impact to consolidated pretax income would have been approximately $1.2 million, $1.5 million, and $1.4 million in 2025, 2024 and 2023, respectively.

Valuation of Goodwill and Indefinite-Lived Intangible Assets

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

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

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

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

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During 2025, we performed our goodwill impairment testing. The estimated fair value of each reporting unit tested exceeded its carrying value. The key assumptions used in estimating the fair value of our reporting units as of October 1, 2025 and 2024 utilizing the income approach include the discount rate and the terminal growth rate. The discount rates utilized in estimating the fair value of our reporting units as of October 1, 2025 and 2024 range between 13.0% - 15.5% and 13.0% - 17.0%, respectively, reflecting the assessment of a market participant's view of the risks associated with the projected cash flows. The terminal growth rate used in the analysis was 2.0%. The assumptions used in estimating the fair values are based on currently available data and management's best estimates of revenues, EBITDA margins, and cash flows and, accordingly, a change in market conditions or other factors could have a material effect on the estimated values. There are inherent uncertainties related to the assumptions used and to management's application of these assumptions.

The indefinite-lived intangible assets with carrying values of $30.8 million at December 31, 2025 are also evaluated for potential impairment on an annual basis or when indicators of potential impairment are identified. The indefinite-lived intangible asset impairment test involves estimating the fair value using an internally prepared discounted cash flow analysis. The fair values of the Company's trade names are established using the relief-from-royalty method, a form of the income approach. This method recognizes that, by virtue of owning the trade name as opposed to licensing it, a company or reporting unit is relieved from paying a royalty, usually expressed as a percentage of net sales, for the asset's use. The present value of the after-tax costs savings (i.e., royalty relief) at an appropriate discount rate including a tax amortization benefit indicates the value of the trade name. We determined the discount rate based on our performance compared to similar market participants, factored by risk in forecasting using a modified capital asset pricing model.

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

Defined Benefit Pension Plans

We sponsor various defined benefit pension plans in the U.S. and U.K. that cover a substantial number of current and former employees in each location. Certain other employees participating in the Other International Plans have retirement benefits that are accounted for as defined benefit pension plans under GAAP. We utilize the services of independent actuaries to help us estimate our pension obligations and measure pension costs. Our U.S. Qualified Plan was frozen on December 31, 2002. Our U.K. Plans were closed to new employees as of October 31, 1997, but existing participants may still accrue additional limited benefits based on salary levels existing at the close date. Benefits payable under our U.S. Qualified Plan are generally based on career compensation; however, no additional benefits accrue on our frozen U.S. Qualified Plan after December 31, 2002. Benefits payable under the U.K. Plans are generally based on an employee's salary at the time the applicable plan was closed. Our funding policy is to make cash contributions in amounts sufficient to maintain the plans on an actuarially sound basis, but not in excess of amounts deductible under applicable income tax regulations. Note 7, "Retirement Plans," of our accompanying consolidated financial statements included in Item 8 of this Annual Report on Form 10-K provides details about the assumptions used in determining the funded status of the plans, the unrecognized actuarial gain/(loss), the components of net periodic benefit cost, benefit payments expected to be made in the future and plan asset allocations.

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

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ensure availability of funds for payment of plan benefits as they become due;

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provide for a reasonable amount of long-term growth of capital, without undue exposure to volatility, and protect the assets from erosion of purchasing power; and

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provide investment results that meet or exceed the actuarially assumed long-term rate of return of each plan.

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

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We periodically commission asset/liability studies performed by third-party professional investment advisors and actuaries to ensure our investment strategy is aligned with the plan liabilities and the risk profile is appropriate for our objectives and risk tolerance. These studies model the future behavior of plan assets and liabilities under various economic scenarios and investment strategies to evaluate the impact on funded status, required contributions, and ultimate plan cost.

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

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

The principal assumptions used in accounting for our defined benefit pension plans are the discount rate, the expected long-term return on plan assets, and the mortality expectations for plan participants. The discount rate assumptions reflect the rates at which the benefit obligations could be effectively settled. Our discount rates were determined with the assistance of actuaries, who calculate the yield on a theoretical portfolio of high-grade corporate bonds (rated Aa or better) with cash flows that generally match our expected benefit payments in future years. At December 31, 2025, the discount rate used to compute the benefit obligations of the U.S. and U.K. defined benefit pension plans were 5.24% and 5.42%, respectively.

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

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

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the duration of our pension plan liabilities, which drives the investment strategy we can employ with our pension plan assets;

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the types of investment classes in which we invest our pension plan assets and the expected return we can reasonably expect those investment classes to earn over time; and

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the investment returns we can reasonably expect our investment management program to achieve in excess of the returns we could expect if investments were made strictly in indexed funds.

We review the expected long-term rate of return on an annual basis and revise it as appropriate. To support our decisions, we rely on probability-adjusted expected future return modeling for our asset allocations based on long-term capital market assumptions. Based on this process, the expected long-term rates of return on plan assets assumption used to determine 2026 net periodic pension cost are 6.40% and 5.90% for the U.S. and U.K. plans, respectively.

We review our employee demographic assumptions annually and update the assumptions as necessary. During 2025, we did not revise our mortality assumptions.

Pension expense is also affected by the accounting policy used to determine the value of plan assets at the measurement date. We apply our expected return on plan assets using fair market value as of the annual measurement date. The fair market value method results in greater volatility to our pension expense than the calculated value method. The amounts recognized in the balance sheet reflect the amount of our long-term pension liabilities at the plan measurement date and the effect of fair value accounting on plan assets. At December 31, 2025, we recorded a decrease to equity through other comprehensive income ("OCI") of $0.9 million (net of tax at the applicable jurisdictional rate) to reflect unrealized actuarial losses during 2025. At December 31, 2024, we recorded an decrease to equity through OCI of $8.0 million (net of tax at the applicable jurisdictional rate) to reflect unrealized actuarial losses during 2024. Those changes are subject to amortization over future years and may be reflected in future income statements.

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Cumulative unrecognized actuarial losses for all plans were $244.9 million through December 31, 2025, compared with $257.1 million through December 31, 2024. These unrecognized losses reflect changes in the discount rates, differences between expected and actual asset returns, and changes to mortality expectations for plan participants, which are being amortized over future periods. These unrecognized losses may be recovered in future periods through actuarial gains. However, unless the minimum amount required to be amortized is below a corridor amount equal to 10.0% of the greater of the projected benefit obligation or the market-related value of plan assets, these unrecognized actuarial losses are required to be amortized and recognized in future periods. For example, projected pension plan expense includes $12.2 million of amortization of these actuarial losses in 2026 versus $12.5 million in 2025 and $12.6 million in 2024.

Net periodic pension expense for our defined benefit pension plans is sensitive to changes in the underlying assumptions for the expected rates of return on plan assets and the discount rates used to determine the present value of projected benefits payable under the plans. If our assumptions for the expected returns on plan assets of our U.S. and U.K. defined benefit pension plans changed by 0.50%, representing either an increase or decrease in expected returns, the impact to 2025 consolidated pretax income would have been approximately $1.9 million. If our assumptions for the discount rates used to determine the present value of projected benefits payable under the plans changed by 0.25%, representing either an increase or decrease in interest rates used to value pension plan liabilities, holding all other assumptions constant, the projected benefit obligations of our U.S. and U.K. defined benefit pension plans would have changed by approximately $8.1 million, and the impact to 2025 consolidated pretax income would have been approximately $0.1 million. Net periodic pension expense is also sensitive to mortality assumptions. If the life expectancy of pension plan participants in our U.S. Qualified Plan was to increase by one year compared to current assumptions, our pension obligations would have changed by $7.9 million and our annual pension cost would have changed by $0.5 million. If the life expectancy of pension plan participants in our U.K. Plans was to increase by one year compared to current assumptions, our pension obligations would have changed by $4.2 million and our annual pension cost would have changed by $0.5 million.

We estimate the service and interest components of net periodic benefit cost for U.S. and international pension and other postretirement benefits. This approach discounts the individual expected cash flows underlying the service cost and interest cost using the applicable spot rates derived from the yield curve used to discount the cash flows used to measure the benefit obligation. For the pension plans, the weighted average spot rates used to determine interest costs were 4.71% for our U.S. plan and 4.88% for the U.K. plans.

Income Taxes

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

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

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

Our effective tax rate, defined as our provision for income taxes divided by income before income taxes, for financial reporting purposes in 2025, 2024, and 2023 was 43.1%, 35.5%, and 36.1%, respectively. If our effective tax rate used for financial reporting purposes changed by 1.0%, we would have recognized an increase or decrease to income taxes of approximately $0.4 million, $0.4 million and $0.5 million for the years ended December 31, 2025, 2024, and 2023, respectively. Our effective tax rate for financial reporting purposes is expected to range between 32% and 34% in 2026 before considering any unknown discrete items and assuming no changes in tax law or policy in the material jurisdictions in which we operate.

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

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

In accordance with GAAP, we have considered the four possible sources of taxable income that may be available to realize a tax benefit for deductible temporary differences and carryforwards and have a $39.9 million valuation allowance on certain loss and tax credit carryforwards in our international and domestic operations as of December 31, 2025. For our remaining deferred tax assets, we believe that it is more likely than not that we will realize these assets based on our forecast of future taxable income and tax planning strategies that are available to us. Future changes in the valuation allowance, if required, should not affect our liquidity or our compliance with any existing debt covenants.

The largest portion of the loss carryforwards for which a valuation allowance is not recorded is state net operating loss ("NOL") carryforwards generated by our domestic companies. The amount of unreserved state NOL carryforwards was $1.2 million for the period ended December 31, 2025.

To fully utilize state NOL carryforwards, our domestic operations must generate taxable income prior to the expiration of the carryforwards. After consideration of the four sources of taxable income, we concluded that it was more likely than not that we should be able to utilize our state NOL carryforwards in certain jurisdictions before expiration; however, there were certain filing groups and jurisdictions where we do not expect to fully utilize our state NOL carryforwards before expiration. For those jurisdictions, we concluded that it was not more likely than not that we should be able to utilize our state NOL carryforwards and a valuation allowance was recorded. The valuation allowance against state NOL carryforwards was $2.0 million for the period ended December 31, 2025.

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

Our tax credit carryforwards primarily consist of $5.2 million of U.S. foreign tax credit ("FTC") carryforwards, which materially expire by 2035. Companies that cannot credit all the foreign taxes paid or deemed paid in a particular tax year because their foreign taxes exceed their FTC limitation are allowed to carry their excess taxes back to the preceding tax year and then forward to the ten succeeding years. Utilization of our FTCs is dependent upon sufficient U.S. regular taxable income and foreign source income in the relevant foreign tax credit basket which is impacted by the interaction of overall domestic and overall foreign loss rules. After consideration of the four sources of income, we concluded that it was more likely than not that we should be able to utilize all but $3.0 million of the FTC carryforwards before expiration.

In 2021, the Organization for Economic Co-operation and Development released an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules, which aim to reform international corporate taxation rules, including a global minimum tax rate. Many tax jurisdictions have enacted or are expected to enact legislation effective as early as January 1, 2024. The current year impact of the Pillar Two Model Rules did not have a significant impact on year ended December 31, 2025 results.

On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the United States. The OBBBA contains changes to key U.S. federal income tax laws. This change was immaterial to the Company's overall income tax provision.

Self-Insured Risks

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

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As of December 31, 2025 and 2024, our estimated liabilities for self-insured risks totaled $42.1 million and $47.1 million, respectively. We separately record a recoverable asset for the value of insurance recovery payments anticipated from our insurance carriers, which totaled $20.2 million and $20.7 million as of December 31, 2025 and 2024, respectively. The recoverability of each asset is based on the notification of each claim to our insurers, along with our independent assessment of the claim and the fact that we only have coverage with highly rated insurance carriers. Receipts from insurance up to the amount of the loss recognized are considered recoveries, which are accounted for when receipt is probable. The annual expense associated with our self-insured activities, excluding the Company’s portion of health insurance costs for coverage provided to our employees, totaled $14.3 million and $21.5 million for 2025 and 2024, respectively.

The estimated self-insured liability is most sensitive to changes in the ultimate liability for a claim and, if applicable, the interest rate used to discount the liability. We believe our provisions for self-insured losses are adequate to cover the expected cost of losses incurred. However, these provisions are estimates and amounts ultimately settled may be significantly greater or less than the provisions established. We used a discount rate of 3.67% to determine the present value of our self-insured workers' compensation liabilities as of December 31, 2025. If the average discount rate was decreased or increased by 1.0%, reflecting either an increase or decrease in underlying interest rates, our estimated net liabilities for these self-insured risks at December 31, 2025 would have been impacted by approximately $0.2 million, resulting in an equivalent increase or decrease to 2025 consolidated pretax income.

New Accounting Standards

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