The Verisk First Quarter 2024 Earnings Results Conference Call is being recorded and will include remarks from Verisk's Head of Investor Relations, Stacey Brodbar, as well as CEO Lee Shavel and CFO Elizabeth Mann. The earnings release, presentation, and 10-Q can be found on the Investors section of the website, and a replay of the call will be available. The call may include forward-looking statements and a reconciliation of non-GAAP financial measures will be provided.

Verisk has delivered strong performance in the first quarter of 2024, with 6.9% organic constant currency revenue growth and a focus on cost discipline and operating efficiency. The company's priorities remain consistent, including driving revenue growth, improving profitability, and strategic allocation of free cash flow.

The company recently hosted the Verisk Insurance Conference, which was well-attended by industry representatives. The event included educational sessions and panel discussions on various insurance-related topics, such as fairness, AI, fraud, and climate risk. One of the most popular sessions focused on the Florida property insurance market and lessons learned from past crises. The event also featured a solutions gallery and the unveiling of the company's Next Generation Models. This event helped to strengthen collaboration with clients and partners and further the company's goal of becoming a strategic data and technology partner to the global insurance ecosystem.

Verisk has released a full suite of over 100 models for all perils and geographies on their Touchstone platform, called Next Generation Models (NGM). These models provide better quantification of uncertainty and allow for more accurate assessment of insured losses. NGM also offers new advantages for managing risk and dealing with complex insurance policies. Verisk is continuously investing in advanced data and technology, and has made progress in modernizing their systems for digital-first content creation. They have recently introduced Filing Intelligence on their new platform as part of their Core Lines Reimagine program.

Verisk's Filing Intelligence tool simplifies the filing process by consolidating all necessary documents and providing easy access to important information. The Actuarial Hub offers new insights and resources for clients to make informed decisions. Verisk plans to launch additional modules to further streamline processes and enhance underwriting accuracy. The Reimagine program is driving positive results for Verisk and May 1 is officially Verisk Generative AI day, where teams are collaborating and sharing best practices on their work with GenAI. Generative AI is a top priority for clients and is a topic of discussion among industry executives.

Verisk had a successful first quarter in 2024, with consolidated revenue of $704 million and income from continuing operations of $219 million. The company saw solid growth in both underwriting and claims, and their organic constant currency revenues grew by 6.9%. This was an improvement from the previous quarter and in line with their financial guidance for the year.

The company's subscription revenues, which make up 80% of their total revenue, grew by 7.8% in the first quarter. This growth was driven by strong renewals and expanded relationships with existing customers, as well as solid sales of new solutions. The largest contributor to subscription growth was forms, rules, and loss costs. The company is also seeing positive responses to their enhanced commercial lines property solutions. Transactional revenues, which make up 20% of total revenue, increased by 3.1% in the first quarter. This was a tough comparison to the previous year, which had strong auto shopping activity. The company has decided to discontinue their telematics offering, but this is not expected to have a significant impact on revenue.

The company's transactional revenue growth was driven by strong demand for life insurance solutions and better-than-expected growth in extreme events business. Adjusted EBITDA growth was 10.6% and the total adjusted EBIT margin increased by 180 basis points. The margin expansion was influenced by sales leverage and cost discipline, but also affected by nonoperating items and recent acquisitions. The company remains confident in meeting margin expansion targets while investing in future growth opportunities. Net interest expense was $29 million, reflecting lower cash balances compared to the previous year.

The company's effective tax rate for the quarter decreased compared to the prior year due to certain one-time charges. Adjusted net income and diluted EPS increased due to revenue growth, margin expansion, lower tax rate, and lower share count. Cash flow from operating activities and free cash flow also increased, but were impacted by an indemnification obligation and the divested energy business. The company is committed to returning capital to shareholders through a completed share repurchase program and increased dividend. They still have remaining capacity for repurchases.

Verisk has reported strong results for the first quarter and is confident in their outlook for 2024. They expect revenue, EBITDA, and earnings to be within a specific range and have provided a complete listing of all guidance measures. The company's execution priorities remain consistent, with a focus on revenue growth, operating efficiency, and disciplined cash flow allocation. They have seen a strong start to 2024 and attribute it to their strategic engagement with clients. The company appreciates the support and interest in Verisk and asks for one question from analysts. The health of their clients, the P&C insurance industry, is assessed as very solid.

The property and casualty insurance industry is experiencing strong premium growth and improved profitability, which is reflected in their combined ratios. This has put them in a positive position and they are feeling optimistic about achieving better pricing and rate adequacy. However, there are still risks such as catastrophic losses and cyber exposure. The industry's financial strength is also leading to increased investments in improving their business. While there has been a lag effect in marketing spend, there are early signs that it is picking up.

The speaker discusses the positive trend in their business and mentions that it may not be easily visible due to being a small business. They note that they also provide insights to other industries besides insurance, which may affect their output. The next question is about new solutions gaining traction and the speaker mentions that their performance in the first quarter exceeded their guidance from Investor Day. They are pleased with the growth and believe it reflects the achievement of their revenue growth goals. The other speaker agrees with this assessment.

The company has seen success in new product adoption, with examples including the Discovery Navigator in claims, image forensics in antifraud, and Core Lines Reimagine and Next Generation Models in extreme events. They have also seen strong uptake in their life insurance offering and internationally, as well as increased value and revenue from existing product investments.

Tom Roesch, on behalf of Andrew, asks about the pricing environment for the company. Elizabeth Mann responds that they are seeing positive tailwinds in line with last year for contracts tied to net written premium growth. Lee Shavel adds that they are seeing a receptive environment due to the industry's strength and recognition of the value of their products. He also mentions improvements in their go-to-market strategy contributing to good outcomes on pricing. Toni Kaplan asks about the discontinuation of the company's auto telematic offering.

The speaker explains that the decision to discontinue a data exchange service was due to the entities providing the data deciding to stop collecting it. This had a small financial impact and was likely influenced by media attention to connected car data. However, the company continues to serve auto insurers through other products and this discontinuation will not affect their overall auto business. The next question asks about subscription growth and the speaker mentions a strong renewal cycle and price realization. They note that this level of growth may not be consistent throughout the year and could be influenced by various factors.

The company has seen broad-based strength across its business this quarter, with forms, rules, and loss cost being the largest driver. The antifraud and extreme events businesses have also shown strong growth, with the conversion to subscription being a contributing factor. The company is focused on growing subscription revenue and has engaged with clients at a senior level to demonstrate the value they provide. This has resulted in potential opportunities for developing new revenue sources through joint product development and distribution.

The speaker discusses the primary path for sustaining and growing subscription growth and mentions that they do not break out specific areas of investment. They also address potential headwinds in transactional revenue due to strong comps from the previous year.

The first quarter saw strong shopping activity, but the company anticipates tough comparisons in the next quarter due to previous growth and weather patterns. The company also expects challenges in securitization activity due to strong performance in the previous year. Despite these potential headwinds, the company's subscription revenue remains strong, showcasing the strength of their business model. The focus is currently on capital allocation, with small- and medium-sized M&A opportunities being sought after, but high valuations make it challenging to find attractive returns.

Surinder Thind asks about the level of investment in internal projects such as Core Lines Reimagine and AI, and how it will affect CapEx. Elizabeth Mann explains that some of the investment is for overdue technology updates, and will not continue going forward. Lee Shavel adds that the integration of generative AI technology is being absorbed into the businesses' financial models.

The company has decided to invest in new products and areas in the future, but for now, they will maintain their current level of investment. They are also making a sizable investment in an ERP upgrade, which may free up capital for future opportunities. The company has rolled out a new nat peril model and expects it to contribute to subscription revenue growth. They have also been able to realize more pricing on renewals due to product upgrades, which may present an upside opportunity for their guidance for '24.

The Next Generation Models are a major upgrade for the company and allow clients to better estimate and quantify their losses. The models take environmental and weather risks into account and can be applied to all perils and geographies. The company expects to deliver more value to risk modeling clients and the pricing upside is reflected in their guidance. The international side saw 23% growth year-over-year, although it is not organic.

The speaker discusses the growth of their businesses and mentions that they are seeing double-digit growth. They also mention efforts to coordinate and partner with other teams within the company, but not necessarily to tie the businesses together. They also mention partnering with institutions in Europe to deliver value through existing distribution networks.

The speaker discusses the strong market for catastrophe bonds and the factors driving it, such as increased risk and the desire for diversification among investors. The company benefits from this market through their extreme event business, which provides models and risk assessments for investors and issuers. Additionally, the hard insurance market and increasing sophistication of portfolio management in the industry present opportunities for the company's modeling capabilities.

The speaker discusses how their company is focused on supporting the development of the insurance market, particularly in the area of insurance-linked securities. They also mention that they do not forecast subscription revenue growth, but rather give a medium-term target range for total revenue growth. The main drivers for growth include investment in products, customer engagement, and industry expertise, while potential headwinds include attrition and industry consolidation. It is noted that pricing trends in the non-life insurance market are expected to moderate.

Lee Shavel discusses how a normal market may affect subscription and transactional revenue growth in the future. He challenges the notion that the market is becoming more normal, citing ongoing inflation and increased risk in the industry. He also mentions the importance of their products and services in maintaining operational efficiency and making good underwriting decisions. Shavel believes that generative AI will play a key role in this, as it allows for a focus on the underwriting decision rather than data gathering. He concludes by stating that these challenges will exist regardless of market conditions.

The speaker believes that our main chance for success lies in taking advantage of our opportunities. The operator then ends the call, stating that there are no more questions and thanking the participants for their involvement. The call is now over and participants can disconnect.

This summary was generated with AI and may contain some inaccuracies.