Verisk Analytics, Inc. (VRSK)

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Verisk Analytics (VRSK)

Q3 2013 Earnings Call

November 06, 2013 8:30 am ET


Eva F. Huston - Chief Knowledge Officer, Senior Vice President and Treasurer

Scott G. Stephenson - Chief Executive Officer, President and Director

Mark V. Anquillare - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Group Executive of Risk Assessment


Timothy McHugh - William Blair & Company L.L.C., Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Manav Patnaik - Barclays Capital, Research Division

David Togut - Evercore Partners Inc., Research Division

William Clark - Keefe, Bruyette, & Woods, Inc., Research Division



Good day, everyone, and welcome to the Verisk Analytics Third Quarter 2013 Earnings Results Conference Call. This call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to Verisk's Senior Vice President, Treasurer and Chief Knowledge Officer, Ms. Eva Huston. Ms. Huston, please go ahead.

Eva F. Huston

Thank you, Julie, and good morning to everyone. We appreciate you joining us today for a discussion of our third quarter 2013 financial results. With me on the call this morning are Scott Stephenson, President and Chief Executive Officer; and Mark Anquillare, Chief Financial Officer. Following comments by Scott and Mark highlighting some key points about our strategic priorities and financial performance, we will open the call up for your questions. The earnings release referenced on this call, as well as the associated 10-Q, can be found in the Investors section of our website, verisk.com. The earnings release has also been attached to an 8-K that we have furnished to the SEC. A replay of this call will be available for 30 days until December 6, 2013, on our website and by dial-in.

Finally, as set forth in more detail in today's earnings release, I will remind everybody that today's call may include forward-looking statements about Verisk's future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance is summarized at the end of our press release, as well as contained in our recent SEC filings.

Now I will turn the call over to Scott Stephenson.

Scott G. Stephenson

Thank you, Eva, and good morning all. Before I launch into the financial results for this quarter, which were solid but shy of our longer-term objectives, I'd like to review several recent accomplishments. We are confident our long-term prospects remain excellent.

Over the years, you've heard us speak about running the business with a long-term prospective. Our view on this remains consistent. Recently, we put more emphasis on our innovation agenda, which has always been an underlying theme for how we have grown while delighting our customers. Our long-term management of the business and our determination to innovate are very well aligned. Innovation works over long cycles, and we will continue to invest in a thoughtful way to support new data analytics solutions for our customers, which will result in strong revenue growth over time.

We remain focused on our twin goals of organic growth through innovation and operating our business with efficiency and scalability. We were pleased to achieve several innovation milestones in the third quarter, including initial customer use of our pooled data initiative for healthcare, our first provision of Roof Insight reports using aerial imagery and the first sale of our new supply chain platform. While these initiatives are not revenue-generating in the quarter or materially in 2013, they are a good indication of future opportunity.

To delve a bit deeper into what these can mean, let me take as an example the new pooled data initiative to fight healthcare fraud, which Verisk Health launched in the third quarter. With some of the nation's leading healthcare payors joining as founding members, we built a database across payor information and analytics designed to combat the estimated $300 billion that America's healthcare loses annually to fraud, waste and abuse. This initiative will turn the identification of improper or elicit billing practices from an abstract view into an actionable one and save millions in claims dollars in the process. For the first time, healthcare payors will be afforded the same comprehensive view of suspect providers and schemes that has proved so successful for the property casualty industry through our claim search platform.

As another example, as the fourth quarter began, we announced the creation of the Verisk Climate division. Our customers in insurance and government and across the supply chain are increasingly voicing concern about the effects that climate volatility and environmental extremes are having on their operations and on their earnings. We formed the Verisk Climate division to introduce new weather and environmental analytics that will enable our clients to assess and plan for environmental impacts and to implement strategies to differentiate and grow their businesses despite those impacts. We and our customers will benefit as we create integrated solutions that directly leverage the data and platforms of our other Verisk operating units. While we manage the business with a long-term of view, we are mindful of the need to execute day to day, and we understand our progress toward our strategic objectives.

In the third quarter, our organic growth was a bit soft for 3 reasons: first, property claims activity was low relative to historic norms leading to moderated transaction volumes on our claims estimating platform for the property and casualty industry; second, our mortgage business continues to adjust downward toward historic norms with respect to the analysis of defaulted loans; and third, we made the decision to accept downward price adjustments in the Revenue and Quality Intelligence division of Verisk Health in order to achieve higher committed volumes with key customers on a multi-year basis.

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