Landstar CFO Calls $35 Million A Quarter In Insurance Costs 'Too Light' After $22 Million Hit
Jim Todd said $55 million a quarter probably feels too heavy, as Landstar stops guiding on insurance and claims.
Landstar Chief Financial Officer Jim Todd said on the company's third-quarter earnings call Tuesday that $35 million a quarter in insurance and claims costs "feels probably too light these days," while $55 million "probably feels too heavy." The trucking logistics company booked $22 million of net unfavorable adjustments to prior-year claim estimates in the quarter.
Where the insurance bill landed
Landstar, which arranges freight for shippers through independent sales agents and outside truck operators rather than owning most of the trucks, reported insurance and claims costs of $55.3 million in the third quarter, against $33 million a year earlier. Of the net prior-year adjustment, about $13 million, or 29 cents a share, came from an outside actuary's review, and about $8 million, or 18 cents a share, came from settling two claims.
The settlements were a $5 million charge on a truck brokerage claim in what CEO Frank Lonegro called an adversarial venue, and a $3 million charge on a fourth-quarter 2025 accident involving an independent truck owner leased to a subsidiary. Todd said two other brokerage claims settled within reserves set in the second quarter, and that the company now puts the two fourth-quarter 2025 crashes at $14 million, up from an $11 million reserve.
A run rate without guidance
An Evercore ISI analyst asked why the $13 million was not stripped out of the non-standard-accounting table, and whether a clean base was nearer $47 million. Todd said Landstar no longer gives insurance guidance and called any 90-day period "very lumpy." He said the company would "continue to book to those higher loss estimates prospectively."
He offered reference points: a trailing four-quarter average of about $46 million a quarter, and a six-quarter average of $41 million to $42 million. Reserves for claims incurred but not reported rose 27% in gross dollars from the fourth quarter of 2022 to the fourth quarter of 2025, he said, and 73% per truck on a shrinking truck count. Landstar's insurance guidance began in 2016 at 3.2% of independent-owner revenue and ended near 7%.
Strong freight, costly claims
Revenue rose 25% from a year earlier, with truck revenue up 29% to $1.407 billion. Lonegro said that without the insurance line, the quarter would have given management plenty of good news to report.
The company's actuary reviews reserves twice a year, at the third- and fourth-quarter balance sheet dates. Landstar reports fourth-quarter results in late January, and the board declared a 44-cent dividend payable December 8.
Landstar's next call, in late January, will show how the fourth-quarter actuarial review landed against Todd's $35 million to $55 million bracket.
Sources
- Landstar Stock Gears Up to Report Q3 Earnings: Is A Beat in Store? — Yahoo Finance
- Landstar System Non-GAAP EPS of $1.42 misses by $0.24, revenue of $1.51B beats by $10M (LSTR:NASDAQ) — seekingalpha.com
- Landstar System Reports Third Quarter Revenue of $1.512B — globenewswire.com
