Summary of Verisk Analytics FY Conference Call (September 09, 2025) Company Overview - **Company**: Verisk Analytics (NasdaqGS: VRSK) - **Industry**: Business and Information Services, specifically focused on insurance and risk assessment Key Points and Arguments Leadership Changes - Elizabeth Mann has taken on the role of Interim Head of Claims, focusing on the Claims Solutions business, particularly the Property Estimating Solutions (PES) and anti-fraud business [3][4] AccuLynx Acquisition - The acquisition of AccuLynx is strategically aligned with Verisk's PES business, enhancing its capabilities in property repair estimation [4][6] - AccuLynx is expected to generate approximately $150 million in revenue for 2025, with a growth rate in the mid to high teens and margins exceeding 55% [9] - The integration of AccuLynx will create cross-sell opportunities, leveraging the existing customer base of both companies [12][13] Revenue and Data Opportunities - The PES business generates revenue from various stakeholders: approximately 40% from insurance carriers, 40% from contractors, and 20% from third-party adjusters [6] - There is potential for data monetization, particularly in optimizing roofing claims, which constitute about 35% of property repair costs [15][17] - The integration of AccuLynx will allow for better benchmarking of contractor performance and material costs, creating significant value for insurance carriers [18] Financial Outlook - The acquisition is expected to be modestly dilutive in the initial quarters but accretive by the end of 2026 [31] - Verisk maintains a target leverage range of 2 to 3 times debt to EBITDA, currently at the high end of this range post-acquisition [38] Market Dynamics - Approximately 20% to 25% of Verisk's revenues are tied to contracts influenced by net written premium growth, with a two-year lag in pricing adjustments [47][56] - Historical organic revenue growth for Verisk has averaged around 6% to 8%, even during periods of soft market conditions [49][51] Industry Challenges - The company is monitoring the insurance landscape, particularly in Florida and California, where regulatory reforms and weather impacts have created challenges [70][72] - Consolidation in the insurance industry could pose headwinds, but historically, Verisk has managed to grow despite such challenges [74] Future Initiatives - The Core Lines Reimagine initiative aims to modernize Verisk's offerings, enhancing the efficiency of policy management and regulatory compliance for insurance carriers [75][77] - An upcoming investor day in March 2026 will provide updates on the company's strategic direction and performance metrics [78] Additional Important Insights - Verisk is actively engaged in discussions around AI and cyber risk, positioning itself as a key player in these emerging areas [41][45] - The company emphasizes responsible data use and is focused on building trusted relationships with industry participants and regulators [15][45] This summary encapsulates the critical insights from the Verisk Analytics FY Conference Call, highlighting the company's strategic initiatives, financial outlook, and industry positioning.

Core Insights - Verisk has launched the first Carbon Trust Assured Model for property claims in the UK, aimed at helping insurers measure and reduce their carbon footprint [1][2] - The new tool supports compliance with Scope 3 emissions reporting and promotes sustainability leadership within the insurance sector [1][4] Product Details - The Carbon Calculator was developed in collaboration with the Carbon Trust and is designed to meet the demand for transparent sustainability solutions in the insurance and property repair sectors [2] - It is assured against ISO 14064-3:2019, PAS 2050, and GHG Protocol standards, utilizing over 2,000 construction sector emission factors and Environmental Product Declarations (EPDs) [2] Industry Impact - The calculator provides insurers with insights through dashboard reporting and retrospective benchmarking, allowing them to track emissions at the claim level and identify carbon reduction opportunities [3] - The Association of British Insurers (ABI) has urged firms to review their disclosures and set Net Zero targets for all scopes by 2025, making Verisk's solution a timely response to these regulatory pressures [4] Company Strategy - Verisk is committed to advancing sustainable business practices through data-driven innovation and global risk intelligence, integrating geospatial analytics and climate science [5] - The company aims to empower clients to make informed decisions regarding environmental challenges, thereby enhancing resilience across various sectors [6]

Industry Overview - The U.S. insurance industry reported a net underwriting gain of $11.5 billion for the first half of 2025, an improvement from $3.8 billion in the same period of 2024, despite ongoing challenges such as extreme weather and inflation [1][6]. - The industry's surplus remained historically high at $1.08 trillion, indicating strong financial positioning to meet policyholder obligations [2][6]. Financial Performance - Net written premiums grew to $472 billion in the first half of 2025, a 1.9% increase from $464 billion in the same period of 2024 [6][7]. - Earned premiums increased by 3.9% to $453 billion compared to $436 billion in the first half of 2024 [6][7]. - The combined ratio improved to 96.4% in the first half of 2025 from 97.6% in the same period of 2024, reflecting better underwriting discipline [6][7]. Losses and Expenses - Incurred losses and loss adjustment expenses rose by 2.1% to $323 billion in the first half of 2025, compared to a 2.4% increase in the same period of 2024 [6][7]. - Realized capital gains sharply declined to $6.8 billion in the first half of 2025 from $58.1 billion in the same period of 2024, although overall investment gains remained stable [6][7]. Market Challenges - The industry faces persistent pressures from inflation, climate volatility, and specific line challenges, which could impact long-term profitability [2][4]. - The lack of significant natural catastrophes in the second quarter of 2025 helped mitigate earlier losses from wildfires, but the upcoming hurricane and wildfire season poses potential risks [3][5]. Strategic Insights - Insurers are adapting to a new risk landscape characterized by frequent extreme weather events, necessitating the use of predictive analytics and adaptive pricing strategies [4][5]. - The industry is leveraging advanced data analytics and technology to enhance underwriting processes and improve operational efficiency [8][9].

Core Insights - The global modeled insured average annual property loss (AAL) from natural catastrophes has increased to $152 billion, indicating a significant rise in expected annual insured property losses [1][3] - Non-crop property and casualty losses rose by 25 percent compared to 2024, with severe thunderstorms and other frequency perils accounting for two-thirds of total potential losses [1][4] - The report highlights a $32 billion increase in non-crop global modeled insured AAL over 2024, reflecting an upward trend in catastrophe losses globally [3] Industry Trends - Over the past five years, insured losses have averaged $132 billion per year, compared to $104 billion in the preceding five-year period, indicating a growing trend in catastrophe-related losses [3] - Frequency perils, such as severe thunderstorms, winter storms, wildfires, and inland floods, now account for two-thirds ($98 billion) of the total modeled AAL, outpacing risks from larger events by a ratio of 2 to 1 [4][5] - The report emphasizes the need for insurers to adapt their strategies to address the increasing frequency and impact of these perils [5] Regional Insights - Property exposure in Verisk-modeled countries grew by 7 percent annually from 2020 to 2024, driven by inflation and construction in high-hazard areas [11] - In Asia and Latin America, insured losses account for only 12 percent and 32 percent of economic losses, respectively, compared to 48 percent in North America, highlighting significant protection gaps [11] - The 2025 Palisades and Eaton fires in North America caused up to $65 billion in economic losses, with 60-70 percent insured, indicating high insurance penetration but escalating wildfire risk [11] Modeling Innovations - Verisk introduced new inland flood models for Malaysia, Indonesia, and Ireland, and updated models for Australia, Mexico, the UK, the U.S., and South Korea [10] - The report underscores the importance of adopting forward-looking risk models that reflect current environmental and climate realities [10]

Core Viewpoint - Verisk Analytics, Inc. is offering $750 million of 4.500% Senior Notes due 2030 and $750 million of 5.125% Senior Notes due 2036 to finance the acquisition of AccuLynx for approximately $2.35 billion [1][2]. Group 1: Offering Details - The offering consists of two sets of Senior Notes: $750 million of 4.500% Senior Notes due 2030 and $750 million of 5.125% Senior Notes due 2036 [1]. - The closing of the offering is expected on August 21, 2025, pending customary closing conditions [1]. - Goldman Sachs & Co. LLC, BofA Securities, Inc., and Wells Fargo Securities, LLC are acting as joint book-running managers for the offering [3]. Group 2: Use of Proceeds - The net proceeds from the offering, along with borrowings from a senior unsecured three-year delayed draw term loan facility and cash on hand, will be used to finance the acquisition of AccuLynx [2]. - The total purchase price for the acquisition is approximately $2.35 billion [2]. Group 3: Company Overview - Verisk is a leading global data analytics and technology provider, primarily serving the insurance industry [6]. - The company focuses on enhancing operational efficiency, improving underwriting and claims outcomes, and addressing global risks such as climate change and sustainability [6]. - Verisk operates in over 20 countries and is recognized for fostering an inclusive workplace culture [6].

Core Insights - Verisk Analytics reported Q2 2025 results with revenue of $773 million, a 7.8% increase year-over-year, and non-GAAP EPS of $1.88, up 8.0% from the previous year, exceeding Wall Street expectations [1][2] - The company raised its full-year 2025 revenue guidance to $3.09 billion to $3.13 billion, while narrowing adjusted EPS guidance due to higher forecast interest costs [1][13] Financial Performance - Q2 2025 non-GAAP EPS was $1.88, surpassing estimates of $1.78 and up from $1.74 in Q2 2024, reflecting an 8.0% year-over-year increase [2] - GAAP revenue reached $773 million, exceeding the estimate of $768.73 million and up from $717 million in Q2 2024, marking a 7.8% increase [2] - Adjusted EBITDA rose to $445 million, a 12.1% increase from $397 million in Q2 2024 [2] - Free cash flow increased by 22.7% to $189 million compared to $154 million in the prior year [2] Business Overview - Verisk Analytics specializes in data analytics for the property and casualty insurance sector, utilizing a proprietary database with over 36.3 billion statistical records [3] - The company focuses on predictive analytics and risk management products, serving all top 100 property and casualty insurers in the U.S. [4] Strategic Initiatives - Recent acquisitions include SuranceBay for $162.5 million and a pending deal for AccuLynx at $2.35 billion, aimed at enhancing compliance and property estimating capabilities [7][10] - The company is transitioning to subscription-based contracts, which stabilize cash flows and support predictable growth [11] Product Development - Verisk's product suite includes underwriting and claims solutions, with ongoing investments in cloud-native products and artificial intelligence tools [9][10] - New products like the Enterprise Exposure Manager and Verisk Synergy Studio are expected to enhance risk evaluation and catastrophe modeling [9] Outlook - Management raised revenue guidance for fiscal 2025 to $3.09 billion to $3.13 billion, while narrowing diluted adjusted EPS guidance to $6.80 to $7.00 due to increased interest expenses [13][14] - The quarterly dividend was increased by 15.4% to $0.45 per share, reaffirming the company's commitment to capital returns [14]

Group 1 - The core viewpoint is that Verisk Analytics (NASDAQ: VRSK) has been assigned a Sell rating due to its business growth being primarily driven by an increase in insurance premiums [1] - The acquisition of AccuLynx is expected to enhance Verisk Analytics' data analytics capabilities, indicating a strategic move to strengthen its market position [1]

Core Insights - Verisk (VRSK) reported strong second-quarter fiscal 2025 results, with earnings and revenues exceeding the Zacks Consensus Estimate [1] - Adjusted earnings per share were $1.88, surpassing estimates by 6.2% and increasing 8.1% year-over-year [1] - Total revenues reached $772.6 million, slightly above consensus and up 7.8% year-over-year [1] Financial Performance - Underwriting and Rating revenues grew 8.3% year-over-year to $550 million, exceeding the estimate of $538.5 million [3] - Claim revenues increased 6.6% year-over-year to $223 million, falling short of the estimate of $228.5 million [3] - Adjusted EBITDA rose 11.9% year-over-year to $445 million, surpassing the estimate of $427.4 million, with an adjusted EBITDA margin of 57.6% [4] Cash Flow and Shareholder Returns - The company reported net cash utilized from operating activities of $244.5 million and free cash flow usage of $188.7 million [5] - Share repurchases amounted to $100 million, and dividends returned to shareholders totaled $63 million [5] 2025 Guidance - Verisk raised its revenue guidance for fiscal 2025 to a range of $3.09-$3.12 billion, above the previous range of $3.03-$3.08 billion and higher than the Zacks Consensus Estimate of $3.08 billion [6] - Adjusted EBITDA forecast was increased to $1.70-$1.74 billion from $1.67-$1.72 billion [6] - Adjusted earnings per share guidance was slightly lowered to $6.80-$7.00 from $6.80-$7.10, below the consensus mark of $7.05 [7]

Financial Data and Key Metrics Changes - In Q2 2025, consolidated revenue was $773 million, reflecting a 7.8% increase year-over-year, driven by strong growth in underwriting and claims [21] - Net income decreased by 18% to $253 million, and diluted GAAP earnings per share fell by 16% to $1.81, primarily due to a prior year gain related to disposed businesses [21][28] - Organic constant currency revenue growth was 7.9%, with adjusted EBITDA growth of 9.7% and total adjusted EBITDA margins at 57.6%, up 220 basis points from the prior year [8][26] Business Line Data and Key Metrics Changes - Underwriting revenues grew by 7.7%, while claims revenues increased by 8.3% [23] - Subscription revenues, which accounted for 82% of total revenue, grew by 9.3% on an organic constant currency basis, driven by strong performance in forms, rules, loss costs, Extreme Event Solutions, and Anti-Fraud [23] - Transactional revenues, comprising 18% of total revenues, returned to growth at 1.8%, supported by international business strength [24] Market Data and Key Metrics Changes - The Extreme Events business saw strong revenue growth from securitization, with record issuance volumes [25] - The auto business experienced softness due to tough comparisons from the previous year and competitive pressures [25] - Federal government spending cuts are expected to impact revenue starting in Q3, although these contracts represent less than 1% of total revenue [24] Company Strategy and Development Direction - The company is focused on becoming a data analytics specialist and integrated technology network for the global insurance industry, emphasizing innovation and advanced technologies [10] - Recent acquisitions of AccuLinks and AssuranceBay are aimed at enhancing the company's service offerings and expanding its market presence [10][30] - The company plans to invest in integrating these acquisitions to drive long-term revenue growth and maximize synergies [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance, raising revenue and adjusted EBITDA outlook for 2025 due to strong first-half results and the impact of acquisitions [9][33] - The company anticipates challenges in the second half of the year due to strong prior year comparisons and known factors affecting certain business lines [50] - Management remains optimistic about the core business's strength and the potential for continued growth despite external pressures [50] Other Important Information - The company announced a definitive agreement to acquire AccuLinks for $2.35 billion, which is expected to enhance its Property Estimating Solutions business [10] - The acquisition is anticipated to be accretive to earnings by the end of 2026, with expected revenue contributions of $40 million to $50 million from acquisitions this year [30][33] - The company is committed to returning capital to shareholders, having increased its dividend by 15% and completed a $100 million share repurchase program [29] Q&A Session Summary Question: Can you discuss the AccuLinks deal and anticipated revenue and cost synergies? - Management highlighted the strategic importance of the AccuLinks merger, emphasizing customer overlap and synergy opportunities between the two businesses [39][41] - Cost synergies are not the primary focus, as AccuLinks has attractive margins, but there are revenue opportunities to pursue post-acquisition [44] Question: Is the revenue outlook softer than before? - Management acknowledged the strong first half but noted challenges in the second half due to tough comparisons and known factors affecting certain business lines [48][50] Question: What competitive pressures are being faced in the auto business? - Management indicated that a large competitor poses challenges, but they continue to find ways to innovate and provide value to clients [55] Question: Will there be more focus on SaaS platforms in the future? - Management confirmed that connectivity and integration of SaaS platforms are key strategic priorities moving forward [60][64] Question: What is the growth potential for AccuLinks in its core market? - Management noted that AccuLinks has a significant total addressable market and is well-positioned for continued growth due to its specialized offerings [68][70] Question: How will the company manage leverage while continuing share repurchases? - Management explained that they will balance debt repayment with share repurchase activities, leveraging strong free cash flow to manage both [91] Question: How does AccuLinks differentiate itself in the competitive landscape? - Management identified AccuLinks' specialization in roofing as a key differentiator compared to broader contractor SaaS providers [93]

Financial Data and Key Metrics Changes - In the second quarter of 2025, consolidated revenue was $773 million, reflecting a 7.8% increase year-over-year, driven by strong growth in underwriting and claims [19] - Net income decreased by 18% to $253 million, and diluted GAAP earnings per share were $1.81, down 16% year-over-year, primarily due to a prior year gain related to disposed businesses [19][26] - Organic constant currency revenue growth was 7.9%, with adjusted EBITDA growth of 9.7% and total adjusted EBITDA margins at 57.6%, up 220 basis points from the prior year [6][24] Business Line Data and Key Metrics Changes - Underwriting revenues grew by 7.7%, while claims revenues increased by 8.3% on an organic constant currency basis [20] - Subscription revenues, which comprised 82% of total revenue, grew by 9.3%, driven by strong performance in forms, rules, loss costs, Extreme Event Solutions, and Anti-Fraud [20] - Transactional revenues, accounting for 18% of total revenues, returned to growth with a modest increase of 1.8% [21] Market Data and Key Metrics Changes - The Extreme Events business saw strong revenue growth from securitization, with record issuance volumes [22] - The company experienced softness in the auto business due to tough comparisons from the previous year and competitive pressures [22] - Weakness in the sustainability business was noted due to market conditions [22] Company Strategy and Development Direction - The company is focused on becoming a data analytics specialist and integrated technology network for the global insurance industry, emphasizing innovation and advanced technologies [7][8] - The acquisition of AccuLinks for $2.35 billion is expected to enhance the company's property estimating solutions and create synergies through improved connectivity between insurers and contractors [9][10] - The company aims to maintain capital allocation discipline while investing in high-return opportunities and returning excess capital to shareholders [8][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance, raising revenue and adjusted EBITDA outlook for 2025 due to strong first-half results and the impact of acquisitions [7][31] - The company anticipates challenges in the second half of the year due to strong comparisons from 2024 and federal government spending cuts, although these contracts represent less than 1% of total revenue [21][46] - Management highlighted ongoing competitive pressures in the auto business and the need to adapt to changing market conditions [22][53] Other Important Information - The company announced a cash dividend of $0.45 per share, a 15% increase from the prior year, and completed a $100 million accelerated share repurchase program [27] - The company is committed to returning capital to shareholders while managing leverage, which is expected to temporarily increase due to the acquisition financing [29][87] Q&A Session Summary Question: Can you discuss the AccuLinks deal and its impact on revenue and cost synergies? - Management highlighted the strategic importance of the AccuLinks merger, emphasizing the overlap with existing customers and the potential for revenue synergies through enhanced connectivity [38][40] Question: Is the revenue guidance softer than before? - Management acknowledged the strong results in the first half but noted challenges in the second half due to tough comparisons and competitive pressures, maintaining a balanced outlook [44][46] Question: What competitive pressures are being faced in the auto business? - Management identified a large competitor in the auto space and acknowledged the need to find innovative solutions to maintain competitiveness [53] Question: Will the acquisition of AccuLinks change the growth outlook? - Management indicated that while AccuLinks is expected to be additive to growth, the overall impact on the 6% to 8% organic growth target will be assessed as the integration unfolds [95] Question: How does the company plan to manage leverage while repurchasing shares? - Management explained that they will raise debt for the acquisition but will also maintain share repurchase activity, balancing debt paydown with capital returns [87]