The paragraph is an introduction to Verisk's Fourth Quarter and Full Year 2024 Earnings Results Conference Call. The call, hosted by Verisk's Head of Investor Relations, Stacey Brodbar, includes discussions from Lee Shavel, the President and CEO, and Elizabeth Mann, the CFO. The earnings release, quarterly earnings presentation, and 10-K are available on Verisk's website, and a replay of the call will be accessible for 30 days. The call may include forward-looking statements, and there are disclaimers about potential differences between actual and anticipated performance, with more details in SEC filings. Reconciliations of non-GAAP financial measures are also provided in the company's 8-K and earnings presentation online.

The paragraph discusses Verisk's strong fourth-quarter results, including 11% subscription growth and double-digit profit growth, driven by organic constant currency revenue growth of 8.6%. This growth was partially aided by storm-related activities, though overall transactional revenues slightly declined. The quarter capped a solid year aligned with investor expectations, showing OCC revenue growth of 7.1% and adjusted EBITDA growth of 9.9% for 2024, with a margin expansion that led to 16% EPS growth. Lee Shavel highlights the predictability and effectiveness of Verisk's growth strategy, with further financial details to be provided by Elizabeth.

The paragraph outlines Verisk's successful implementation of three key initiatives to drive growth and profitability. In 2023, the company enhanced its go-to-market strategy by collaborating with an outside consultant, aligning sales territories, revising compensation plans, integrating products, and optimizing pricing. These efforts, particularly in the Extreme Events business, led to improved client relationships and contract renewals. Additionally, Verisk focused on strategic dialogues with industry leaders to gain deeper insights and expand opportunities with ecosystem participants. As Verisk enters 2025, the energized sales teams plan to further improve through cross-business collaboration.

The paragraph discusses successful strategies in strengthening client connections, leading to stronger renewals and sales, particularly among large clients. In 2025, the approach is expanding to include more clients and creating new opportunities, such as for the anti-fraud sector, by utilizing tools like the ClaimSearch platform. This has improved efficiency in state fraud bureaus and generated cost savings. Additionally, the company is investing in innovation, using strong free cash flow to enhance existing and develop new solutions, exemplified by the Core Lines Reimagine project. In 2024, the company introduced tools like the Actuarial Hub and Future of Forms to drive efficiency and quicker market responses.

The paragraph discusses the improvements made to the ISO Forms Library, including a better search function and bulk download capabilities. It also mentions the introduction of 13 new modules in 2024 and more planned for 2025. The Extreme Events business has developed accurate predictive models, specifically upgrading the California wildfire model for recent events, estimating losses between $28 billion to $35 billion. There are plans to update the U.S. severe convective storm model. The company is investing more in integrating data across various functions and focusing on creating interconnected systems based on client feedback. This aligns with their strategy to transform from a siloed to a more integrated organization, addressing client needs for improved information flow.

Verisk is leveraging its unique position to create innovative solutions like Verisk Augmented Underwriting, which combines property data, software capabilities, and catastrophe modeling to optimize risk assessment and portfolio management. This solution automates evaluations, improving pricing and coverage decisions. Verisk is expanding its claims ecosystem, adding 21 new partners to enhance connectivity and streamline operations. They plan further growth in their anti-fraud business, adding partners to better combat fraud, waste, and abuse. Additionally, Verisk sold a nonstrategic asset, Atmospheric and Environmental Research, as part of its active portfolio management strategy.

The paragraph discusses Verisk's response to the wildfires in Southern California, highlighting their support for clients in the insurance industry. They provide AI-enabled tools to aid claims adjusters and restoration contractors, enhancing efficiency and accuracy in claims processes. Verisk also has survey teams assessing wildfire impacts in real-time to improve their models, which aim to stabilize the insurance market. Despite industry losses, positive trends in premium growth and profitability are seen for 2024, encouraging the adoption of advanced data and technology solutions. The paragraph concludes with a transition to Elizabeth, who will discuss financial results and guidance for 2025.

Elizabeth Mann reported that the company's fourth-quarter consolidated revenue reached $736 million, an 8.6% increase from the previous year, driven by growth in both Underwriting and Claims. Income from continuing operations rose by 12%, while diluted GAAP earnings per share increased by 15%, attributed to strong performance and lower share count. On an organic constant currency (OCC) basis, Underwriting and Claims revenues grew by 7% and 12.7% respectively. For 2024, the company achieved a 7.1% OCC revenue growth, following an 8.7% increase in 2023. Subscription revenues, which account for 82% of total revenue, grew 11% on an OCC basis in the fourth quarter, fueled by growth in subscription-based businesses and conversion from transactional contracts. The company's investment in the Core Lines Reimagine initiative is yielding positive outcomes and strong client renewals.

In the Extreme Event Solutions business, the enhanced go-to-market strategy is contributing to new customer acquisitions and strong renewals. There is significant sales growth in advanced analytics and weather applications for property estimating solutions, while pricing and bundling strategies boost the anti-fraud business. However, transactional revenue saw a 1.1% decrease due to a shift to subscription models and some attrition in the insurtech auto segment, though hurricane-related activities somewhat mitigated this decline. Despite foreign exchange headwinds, adjusted EBITDA grew by 13.5% in the quarter, with a margin of 54.1%, highlighting the impact of revenue growth and cost management. For the entire year of 2024, adjusted EBITDA margins were 54.7%, reflecting core operating leverage, cost discipline, and self-funded investments for future growth.

The paragraph discusses the financial performance of a company, highlighting minimal impact from foreign currency translation on annual results. Net interest expenses rose to $35 million due to higher rates from new senior notes. The company plans to refinance a $500 million maturity due in June 2025 as its leverage is slightly below its target range. The effective tax rate increased slightly due to timing and tax impacts from asset dispositions, though the full-year tax rate decreased due to certain discrete items. Adjusted net income for the quarter rose 11.6%, driven by revenue growth, margin expansion, and a lower share count, though partially offset by higher interest and tax expenses. Full-year adjusted EPS grew by 16.3%, reflecting operational growth and a lower tax rate, while cash flow from operating activities and free cash flow saw small increases due to interest payment timing and prior-year items.

In 2024, Verisk's free cash flow increased by 11% to $920 million, a company record. The company returned $355 million to shareholders through repurchases and dividends, marking the third consecutive year of surpassing $1 billion in shareholder returns. The Board approved a 15% dividend increase and an additional $1 billion in share repurchase authorization. For 2025, Verisk anticipates consolidated revenue between $3.03 billion and $3.08 billion, reflecting organic constant currency revenue growth of 6% to 8%. The adjusted EBITDA is expected to be in the range of $1.67 billion to $1.72 billion, with a margin improvement up to 55.8%. Expected expenses include $250 million to $270 million for depreciation and amortization of fixed assets, $65 million for intangible amortization, and an increased interest expense of $145 million to $165 million due to higher debt and interest rates. The guidance factors in the divestiture of AER and assumes current economic conditions persist.

The company expects its tax rate to rise to a normalized level of 23% to 25%, up from 22.6% in 2024, which included one-time tax benefits. This results in anticipated adjusted earnings per share between $6.80 and $7.10. They plan capital expenditures of $245 million to $265 million, focusing on organic investment. Further guidance details are available in their earnings slide deck on their website. Lee Shavel emphasized the company's unchanged strategic priorities, focusing on consistent growth, high ROI investments, and shareholder returns. The company sees an opportunity to invest in data and technology for the insurance industry, aiming to provide value at a lower cost than individual insurers. The call was opened for questions, starting with Toni Kaplan from Morgan Stanley, who inquired about price realization and customer pushback amidst strong subscription growth.

In the paragraph, Lee Shavel discusses their strategy for price increases, emphasizing a value-driven approach. By delivering more value to clients and effectively communicating this through sales efforts, they've successfully implemented price increases. Key initiatives include the Core Lines Reimagine investments and improvements in the Extreme Events and Claims businesses, which have enhanced client perception of value. As a result, clients are more willing to accept higher prices, feeling that they receive greater value in return.

The paragraph discusses the impact of value-driven pricing on a company's subscription business, highlighting it as a key factor in their strong performance. This pricing strategy is considered a long-term change that will continue to deliver results in 2025 and beyond. Brendan Popson from Barclays inquires about the transition to subscription-based models and its benefits for 2025 and the future. Elizabeth Mann responds by detailing the effects of contract conversions, particularly their impact on the anti-fraud business with targeted clients. She notes that while some specific impacts will last through the first half of the next year, the general move toward subscription models is expected to provide ongoing benefits as customers recognize their value. The paragraph concludes with the mention that transaction revenue in the quarter was boosted by elevated storm activity.

In the paragraph, Elizabeth Mann discusses the impact of storms on the company's revenue, noting that the revenue impact from recent storms did not reach their threshold for significant impact, similar to Hurricane Ian's impact in 2022. The business has grown enough that such impacts are less significant. She indicates that recent storms, Helene and Milton, are not expected to significantly affect 2025. While not forecasting exact storm impacts, they assume a standard level of storm activity. In another discussion, Lee Shavel responds to Surinder Thind's question about the insurance industry in California. He highlights the financial strain on insurers due to L.A. wildfires and the consequent shift towards the state as the primary insurer, affecting revenue and industry activity in the state.

The paragraph discusses the changing risk environment in California, particularly concerning pricing in the insurance market. It highlights that California recently began allowing forward-looking models for pricing, and the first wildfire model has been submitted as a basis. This change aims to provide stability and adequacy in pricing as carriers assess if they are appropriately compensated for risks. The paragraph anticipates seeing results unfold by 2025 while recognizing the incentive to remain in the California market due to its scale. Additionally, it emphasizes the significance of catastrophic risk modeling and demand for expertise in understanding higher risk areas in the real estate market. The operator then introduces Kelsey Zhu from Autonomous Research, who asks about the potential impact on revenue growth based on historical premium growth and pricing contributions, noting a trend of elevated premium growth leading into 2025.

Elizabeth Mann discusses the company's revenue sources, noting that 20% to 25% comes from premium growth-related contracts, emphasizing that client perception of value is crucial for pricing discussions. She acknowledges strong pricing input and stresses the importance of long-term client relationships. Faiza Alwy from Deutsche Bank asks about transaction revenues, considering challenging comparisons as they look to 2025. Mann confirms storm impacts are mostly transactional, with minimal subscription involvement, and mentions challenges with comps due to contract conversions and auto activity, particularly in Q1.

The paragraph discusses various financial aspects and guidance for 2025. It highlights that the insurtech segment is expected to remain weak, and the sale of AER, a transactional business, will impact nominal revenue. Transactional growth is typically lower in the first quarter due to seasonality, such as less weather activity affecting property estimating solutions and a less active ILS market. Elizabeth Mann addresses questions from Andrew Steinerman about the financial guide, confirming that share buyback activity is assumed for 2025. Interest expenses are highlighted as a headwind, with a significant increase due to the 2024 refinancing already impacting the fourth-quarter run rate. Additionally, an increase in depreciation and amortization (D&A) for 2025 is mentioned, though specific drivers are not detailed.

The paragraph discusses the factors influencing the company's revenue guidance, which has a range of 6% to 8%. It highlights transactional volumes as a significant variable and mentions potential customer attrition, particularly in California, which could impact revenue on the lower end. On the higher end, upside potential could come from the successful rollout and adoption of new products planned for 2025. These products include XactXpert in property estimating, Discovery, Liability Navigator, Whitespace in Specialty Business Solutions, and Augmented Underwriting. The company is monitoring these factors to determine the impact on revenue.

The paragraph discusses factors influencing business variability, such as weather events, government and regulatory activities, economic conditions, interest rates, and foreign exchange rates, while maintaining a positive outlook on business momentum. In response to a question about mergers and acquisitions (M&A), Lee Shavel mentioned that the pipeline for opportunities remains consistent, with ongoing engagement in exploring options, although values in the M&A space remain high.

The paragraph describes the company's strategy of expanding its ecosystem by integrating new businesses that add value to the industry and the company's overall operations. This approach offers opportunities to better understand how these businesses fit within the broader organization and improve value propositions for clients. The company continues to identify valuable companies in the industry and aims to deliver enhanced value to clients. During a Q&A, Lee discusses rolling out 13 modules in 2024, which have improved price realization, and plans to introduce more in 2025, potentially further enhancing price realizations. Saurabh Khemka adds that the modules will provide customers with enhanced insights from proprietary databases.

The paragraph discusses upcoming enhancements in a company's offerings, such as adding a commercial auto module to Executive Insights and expanding the ISO Experience Index across all commercial lines by 2025. Additionally, new modules for the Future of Forms and ratings reimagining initiatives are planned. Elizabeth Mann addresses pricing realization, noting that many large customers have multiyear contracts, so the pricing benefits from the new modules will be gradual rather than a one-time increase. During a Q&A, Jeffrey Meuler questions how the company will maintain momentum despite some headwinds, noting an exit rate of 11% organic constant currency growth. Elizabeth Mann acknowledges the subscription strength across the businesses but does not provide specific details on addressing the headwinds.

In the fourth quarter, the company benefited from technical factors like contract conversions and an easier year-over-year comparison. They are pleased with pricing realization and client value recognition. In response to a question about extending contract durations, Elizabeth Mann and Lee Shavel explained that while there hasn't been a significant change, the company has seen a gradual trend toward longer contracts as clients seek price certainty. This change offers economic incentives and greater predictability, and it is seen as an evolution, not a drastic shift, in their business.

The paragraph features a discussion about a company's strategic and financial outlook. It starts with an observation that longer-term contracts indicate a stronger strategic relationship and greater client confidence. This relationship allows the company to focus on improving client efficiency and effectiveness. During a Q&A session, Jason Haas from Wells Fargo asks about the performance of the company's marketing business in the fourth quarter and expectations for 2025. Elizabeth Mann responds that the insurance customer segment showed strong growth, with positive expectations for the next year, although other sectors remain muted. Russell Quelch from Redburn Atlantic inquires about the company's capital expenditures (CapEx) being below the prior guidance for 2024 and notes the increase in CapEx guidance for 2025. Elizabeth Mann addresses this, leaving room for potential project delays and comments on free cash flow growth expectations for 2025.

In the paragraph, the speaker discusses their cautious approach to spending and investments, noting some project timelines have been pushed to 2025, and investments are also being made in operational expenses. They express satisfaction with achieving double-digit free cash flow growth for the year and indicate confidence in future growth, as evidenced by a planned dividend increase. In response to a question about the impact of California wildfires on their business, Elizabeth Mann explains that while these events have industry-wide effects, their direct numerical impact is hard to quantify. She also clarifies that their property estimating solutions business, which supports repair efforts, is less affected by wildfires compared to geographically concentrated events like hurricanes.

The paragraph discusses a company's limited financial relationship with the federal government, noting that less than 1% of its total revenues come from federal contracts. The company is closely watching policy changes from Washington but currently sees no direct impact from tariffs or trade orders. Their work primarily involves improving efficiency, automation, and risk management within the insurance industry, which benefits both the industry and policyholders. The federal government's involvement in insurance regulation is minimal due to the state-based regulatory system. The paragraph concludes the call, indicating no further questions from participants.

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