All right. Good morning, everyone. Welcome again. From the day, before we get into some questions around the business.
Thanks a bunch, Scott, and thanks everyone here for joining and being inside with us here on what looks to be another beautiful day in New York. Yes, we are just fresh off of our Investor Day last Thursday. If you haven't seen it yet, I encourage you to look at the slides as a great intro for Verisk. I would say the three main takeaways. I'll start with the financials because you know, this group cares about that.
From a long-term financial targets, we essentially reiterated long-term financial targets for the next three years that are consistent with the ones that we stated three years ago and, you know, over-delivered on for the past three years, and so we have consistent targets going forward. How we're gonna get there is probably gonna be a little bit different in a changing environment. That takes me to the second point. The theme that you heard really throughout our business presentations, as you've noted, AI is obviously a hot topic and a hot question in info services these days. From our perspective, we see it as an opportunity, not a threat. AI is useless without quality data to train on.
We believe that we house the largest, most comprehensive, most granular, most meaningful data set in the industry or for the industry, and for ways that we spent, you know, three or four hours articulating last week, we believe that is difficult to replicate, that still puts a great obligation on us to continue to modernize, to invest, to make that data accessible to the industry in new ways of working, and potentially to partner with others to do that, and we're committed and excited to doing that.
Got it. It's very helpful. I have a few follow-ups on the Investor Day, but maybe if we go back a few, a couple of weeks before that, you know, you guys reported Q4 earnings a few weeks ago, and, you know, the results were, I think, better than expected, at least from, you know, the street view, particularly, I think, on the underwriting OCC revenue growth. Maybe can you talk about the trends that you saw during the most recent quarter and some of the key assumptions underpinning your guidance for 2026?
Yeah. Yes. As we move from Investor Day and the long term, the strategic positioning for Verisk, to just some of the near-term quarter-in, quarter-out, there have been some headwinds on near-term revenue. The primary driver of that really being kind of the light weather season that actually the U.S. experienced over the past year. That is the primary driver for the headwind. Even despite those, that will persist into the first quarter because of the momentum dynamics in the business. That said, there were some real areas of strength in the fourth quarter. There was our catastrophe and risk solutions did very well.
The catastrophe models, both from a new subscription and new customer standpoint, as well as it was the fourth quarter, yet another quarter of very strong securitization market. As a reminder, the securitization market tends to be the most active in the second quarter of the year, followed by the fourth, so that strength is probably not likely to continue in the first quarter, though it may show up again for us in the second quarter. There were some other areas of strength in our subscription businesses, the life business, the specialty business solution that we talk about, and actually some good transactional outcomes on our property data side. There were some pockets of strength in the business, even despite the weather headwinds.
From what I highlighted, some of that may or may not recur in the first quarter. Taken all that together, we said at the time that we expect the first quarter to be the trough, both in terms of reported dollar revenue and growth rates, as opposed to the fourth quarter. That said, you were asking about opinions under assumptions underpinning 2026. You know, we're excited for 2026. Obviously, we reiterated our, we gave the specific guidance range and reiterated our long-term targets, so we expect it to be another year, yet again, in line with the long-term targets. There are gonna be some headwinds in the first quarter, maybe into the second, into the first half.
Going forward from there, we continue to see strong opportunity.
Got it. Now, I guess going back to the Investor Day, I think, you know, at least on the underwriting side, you discussed some of the results of like your Core Lines Reimagined program and how that has transformed your underwriting solutions business. Can you maybe go over what has changed over the last few years in your Core Lines and how you believe that, you know, division is sort of positioned going forward?
Yeah. We're really excited about it. The Core Lines Reimagined program is kind of our marquee reinvestment in our largest business, which is our forms, rules, and loss cost business in the underwriting subsegment. That business goes back over 50 years to a consortium of the U.S. insurance industry who were contributing data to help build the insurance forms and the loss costs, the actuarially designed averages for what should be what is an expected loss across 32 different lines of business and a number of different sublines and regulatory filings in 50 states. We asked ourselves about five years ago what should that business look like today in a modern data-first environment, technology-enabled environment?
We came up with all the things we needed to do, which we put under the umbrella of Core Lines Reimagined. Now, there were 20 different projects going on in there and 20 different work streams, which involved everything from. Well, starting before we started Core Lines Reimagined, we had moved the entire proprietary database to the cloud throughout the late 2010s. We were now based on the cloud. What could we do with this dataset? We were gonna make it easier for customers to contribute data to us. We were gonna speed the refresh and the analysis cycle on that data, and we were gonna completely revolutionize the way that customers interacted with that data and consumed the content from us. If you think of the before era was at.
Well, way back when we used to mail people 300-page circulars. Before Core Lines Reimagined, we had at least evolved to kind of PDFs that were downloaded from the web. You know, even five years ago, that was pretty antiquated. We've moved it to a much more, you know, workflow agnostic way for the customer to access our data. If they still wanna download PDFs, and there are still customers that do that's okay. For those who are moving into the, you know, moving with technology, you can get it via API, you can get it plugged into whatever policy administration system you have. You can imagine, so it's just a next step of that, of okay, you can have your agentic AI talk to it.
Those are the modernizations that we've been doing. We've been going through it line of business by line of business, and we've launched now over 40 modules on a single platform. The end of the scope of that investment will finish by the end of this year, but we continue to see wide open opportunity for how we can continue to make it more easy and now more enabled for customers to interact with that content.
Got it. On the claim side, you know, one of the topics we thought that was interesting from the day was your expansion of your partner ecosystem and your goal is to continue adding new partners in the coming years. Maybe could you give a few examples of the types of partners you've added to the claims ecosystem and how that helps better serve your customers?
Yeah. We're super excited about this, and I'm super excited. I had a chance to spend some time in it in the last six months. I was serving as interim president of the claims business. We now have a fantastic new president, Steve Cotter, who just joined us at the Investor Day. I got a chance to see kinda firsthand what some of those partnerships mean and look like, and how important we are to the partners that are working with us. I'm gonna give you two examples 'cause the power of the ecosystem really applies in the two largest businesses in claims. Starting with the property and restoration solutions business, they have had...
They've had a history of partners, but we've significantly expanded it over the last three years. They now have 140 ecosystem partners on the system. As I said, we were at the conference for that business. Elevate was in February near Salt Lake City. I saw that, but the best example I see of an ecosystem partner is one where so the idea of the ecosystem is it's bringing new capabilities to customers that vastly increases what they can do on our platform. So one great example is a tool that turns a photo scan of a room directly into an estimation, like a sketch, an architectural sketch, off of which they build the estimate. So you can have
You know, property is damaged, you know, with a tree falling on the roof. You can have the adjuster and the contractor who are gonna do the work. They go on site. They take an iPhone scan of like, here's, you know, there's the broken window and the wall damage. And it will automatically turn it into a sketch. We now have AI-based tools. Our newest, but we've talked about the different evolutions of that from machine learning and rules-based tools to XactAI, which can then automate that photo of like, here are the contents of the room, and here are some pop-up options for how much those cost from a replacement value perspective.
we have XactAI, which is an agentic AI tool to turn that sketch directly into an estimate for review by the individual.
Got it. Got it.
Actually, that's just one example, but I'll let you move on.
Cool.
You can ask me afterwards for the example in the anti-fraud space, which is very cool also.
Yeah. I guess if we take a step back here and kind of move to more broader insurance industry dynamics, I mean, one of the main questions we get from investors is around, you know, net written premium growth and how that has an impact on Verisk's organic constant currency revenue growth. You know, as we move from maybe a harder market in the last, you know, few years to, you know, some people say soft market, some people say more normalized growth, can you just talk about, you know, the different puts and takes there, the overall health of the industry, and how you would expect the changes in premium growth to, you know, translate to demand and overall revenue growth, at Verisk?
Yeah. The good news is we think the health of our end market and our industry is very strong. That's always a good thing for us. The insurance industry had in the call it early twenties, 2021, 2022, severe challenges on profitability, which is what led to the very high premium growth environment as they needed to re-achieve profitability in their books. They now I think broadly speaking, most would say they've achieved, you know, rate adequacy, meaning they're charging enough for the policies that they wanna write, and they're moving to a world where they wanna grow. They wanna do more business, they wanna write more policies, and that makes them more competitive on the premiums that they're writing.
If you wanna be more competitive on premiums, then you wanna price most accurately, and you wanna make sure you have the best data and analytics to figure out what's the right price to charge for the premium that you're bidding. You don't wanna charge too much or you're gonna get competed against. You don't wanna charge too little or you're gonna be writing unprofitable policies. Ongoing need for data and analytics in this environment. More specifically, I know a number of people have focused on the stat we've quoted. 20%-25% of our revenues are on a contract that has an input from the premium growth of that carrier. That was set up many years ago when we separated out.
We became an independent company, no longer owned by the industry, and we set a pricing model for some of those products where we would grow as the insurance industry continued to grow. We think that's a good thing because at the end of the day, it ties us to a healthy, growing market and gives us an input from growth, from premium growth, which we continue to see growing at the mid-single digits. It doesn't need to be at the double-digit premium growth that it's been over the last year or two. The final point I'll say, even those contracts, the premium growth is an input. It is not the sole determinant of that growth, and that's how we've achieved the consistency and stability of revenue growth that we have over time.
Got it. That's helpful. Yeah, we'll talk about some of the different moving parts on sort of the claims and transaction revenues next. I guess, you know, subscription organic constant currency revenue growth continues to be, I think, a bright spot for the company. Pretty healthy, high single-digit growth in recent quarters. Could you maybe talk about what's been driving that growth between, you know, pricing, new logos, new products with existing clients and the different puts and takes there?
Yeah. Thanks. Well, yes, we're very proud of our subscription growth. We've, you know, generally done in the high single digits range. I think the investor day, the three-year average of it was 8.4%. It's been good. We think that's a testament of the value that we're bringing to our customers. Excuse me. I think some of it is the impact of the Core Lines Reimagined investment and reinvestment that we talked about. We were able to show our customers, you know, significant investment and significant value and efficiency opportunities for them in interacting with content that they'd worked with for several years. All of a sudden, they could get it much more easily.
They could work with it in much more easy ways, and they themselves were saving a lot of time. That was basically monetized through price. I mentioned at the investor day that we over-delivered on our pricing targets. We had previously targeted kinda three to four percentage points average pricing growth over that three-year cycle. We delivered a little north of five. That's coming in on those subscriptions as we're seeing greater traction with customers. It's also coming from greater market greater go-to-market and sales and customer engagement.
Finally, there's also a slide in our investor deck that shows our product penetration by size of customer, and you can see there an inflection in the growth rate, so the number of products per customer, accelerated during that time period.
Yeah. Makes sense. I guess on the claims side, I mean, you touched on this a little bit during your discussion around guidance and the shape of the year. Just wondering if we can kind of, you know, maybe click into that a little bit more and talk about how we should think about the trajectory of claims revenue in, you know, throughout 2026, given some of the, you know, different moving parts, the impacts from the storms of, you know, two years ago, combined with lower weather from last year and how that all, you know, kinda fits in.
Yeah. There's no question the claims business has some tough headwinds. You know, everyone was expecting them in the fourth quarter. Those definitely continue into the first quarter to first half of the year, as the prior year had, you know, fairly elevated weather in the first half and continued. There was still, one year ago now, there was still work and reconstruction being done in the aftermath of Hurricanes Helene and Milton. Tough comps in claims from that time a year ago. There was also very strong subscription growth across the portfolio. I think we had double-digit subscription growth in the first quarter of 2025. We love to do that. It's part, you know, part of the strong growth that you've seen. We'll do that anytime we can.
we did say at the time that you know, we didn't expect double digits to be the long-term subscription growth rate. that also presents a tough comp around the business.
Mm-hmm. Got it. You know, if we kinda go over to, like, the go-to-market selling environment, I think your sales commentary as of late has been pretty positive. I think even if we go back to the Q3 earnings call, you guys were talking about, you know, surpassing your quota for the second straight year at that time of the year. Maybe can you just discuss the overall go-to-market approach, across the business and, you know, the overall state of the selling environment, and any highlights, you know, from the investor day as well. I know that was part of the discussion too.
Yeah. We go to market. We have a sales force in each of the different respective businesses that focuses kind of specifically product by product, and then supported by kind of a large customer, a client strategy group, and supported by, you know, Lee has talked a lot about strategic engagement with the C-suite and with major customers. It's not just him, it's, you know, all the way. Our business leads are very actively involved with customers. A ton of customer outreach. I think, you know, continued opportunity, and may even be an area of investment, to expand, you know, expand some of our sales force or some of our coverage.
You know, we've focused over that last three years with Lee's focus on the senior level strategic engagement, starting with our top customers. We think there's more opportunity, and we can bring more and better coverage to kind of the mid-tier, maybe, you know, customers 26 to 50, 26 to 100 are very active customers. We think we can see more engagement there.
Got it. Then, you know, I guess more broadly, shifting over to kind of, you know, industry competitive dynamics, how do you feel about just your positioning across, you know, the key areas of the business, whether it's, you know, the core P&C underwriting, property estimating business, you know, the cat modeling, auto side? I guess, what in your mind sets Verisk apart from, you know, competitors? Then also, are there specific areas where you may be looking to improve your offering suite to, you know, bolster your competitive position in other parts?
Yeah. Look, I think Verisk is unique and the way I like to think about it, I mean, the whole is and can be greater than the sum of the parts. As we have different competitors, they compete with, you know, individual parts of our business. We don't see anybody that has the breadth of data that we have across our business. So we think that gives us an opportunity to be differentiated even in each of those individual competition areas. One great example is property data. We focus on property data in the form of you know, the forms, rules, and loss cost business covers property. The anti-fraud business covers property.
You know, our underwriting data and analytics solutions has the world's leading commercial property database for insurance purposes, which is different from ones for, you know, real estate or valuation purposes. The catastrophe modeling business at the end of the day is really about property risk primarily. Obviously our property and restoration solutions business spends a lot of time going in there, getting hands-on, you know, being deeply involved in property repair. That gives us a uniform view around properties. Candidly, historically, I'm not sure we invested too much time in really bringing all of these data sets together.
As we focus on it and as the ability to invest and work with data becomes more efficient with AI, we think we can bring differentiated insights at the property level that, say, a competitor in our catastrophe and risk solutions business or a competitor in our property and restoration solutions business couldn't do on their own.
Yeah. Well, that's a great segue because it wouldn't be an Info Services Fireside Chat without AI questions. Can you talk about just the different, you know, risks and opportunities with AI across the business? You know, when we think about it internally, do you see it as more of a, you know, efficiency driver or revenue growth driver? Just how you see it, you know, impacting the business more broadly.
Yeah. We see it first and foremost as a revenue growth driver. The opportunity to create new products quickly and to bring them to market and the ease with which our customers can interact with our data will only drive usage over time, we believe. Now, there's an adoption rate for the insurance industry and remember this is a very heavily regulated industry, so the regulators also need to be comfortable. There needs to be auditability and traceability of analyses being done. We think we actually have a differentiated ability to work with the regulators and kind of those relationships to help people get comfortable with the use of the data.
Primarily revenue and product opportunity. Will we use it internally for efficiencies? Absolutely. We think we can drive, you know, our own internal operational efficiency with it. We already are fortunate to start off with pretty high margins, so it's not like we have huge pockets of people doing inefficient and manual analyses. You know, it's more that it will take the insight that we have and enable it to be more effective and get more quickly at data patterns, insights, building new products, and things like that.
For us, the efficiency gains we think will be significantly repurposed and reinvested into the business to focus on the revenue growth opportunities we were talking about, and all of it would be netted together in the expected margin expansion opportunity of 25-75 basis points annually.
Got it. Then just as a follow-up, I mean, just on like the data side, right, 'cause that's a big question that we do get from investors is around proprietary data and how it's differentiated in terms of warding off some of these threats. So maybe you can talk about how, you know, you believe your data is differentiated. I know you guys put some numbers around it at the Investor Day. Then maybe talk a little bit more about those industry dynamics given like regulatory considerations with the industry, you know, such that in our view gives you guys a healthy moat versus AI, but would love to hear your thoughts on it.
Yeah. Look, the heart of our data moat would be the contributory data, which is contributed to us by the industry. I think we said in there we have over 2,000 data sets contributed to us by industry participants. It's not just that they kind of, you know, download it to us and somebody else could come in and like digitally ingest all of that. It comes to us in, you know, wildly different formats and completely not uniform architectures and underlying projections. Like, for example, when we were at the Investor Day, we were talking about the property that we were in was a hotel, and, you know, hypothetically it could have been underwritten by three different carriers.
One of them would classify it as a hotel. One would classify it as a hotel with a conference center. One would classify it as a mixed use entertainment building. They each might underwrite the policy with three different deductible levels, and then they each put on their own limitations, endorsements, coverage levels. Those three policies, same underlying asset are not at all uniform. You couldn't have some big tech provider you know ingest all of that and decide what was the loss cost, what is the average, like, how do you uniform on those policies? That's the big part of it.
I think we said another 20% of our revenues is based on proprietary data that we generate and build in-house, you know, based on our industry insights and based on, you know, in some cases, physical field reps going on-site and inspecting buildings, at the invitation usually of our clients. That is also difficult to replicate. Then there's other elements that are proprietary analytics that are built on the underlying data set. If you don't have the data, you can't. I guess you can make the analytic, but it wouldn't spit out a meaningful answer without the data to build or train it on.
Got it. I guess we move on to capital allocation. You know, on Q4 earnings, you guys announced, and I think recently completed that $1.5 billion accelerated share repurchase plan. I was wondering if you could maybe talk about, you know, your broader capital allocation strategy here, you know, as we think about the near term and then as well over the course of, you know, the medium term on what, you know, you guys, the guidance you kinda gave at your Investor Day.
Yeah. I think our primary priority for capital allocation is organic investment in the business. We continue to see a ton of opportunity and have been, you know, investing on the CapEx side to continue to build that out. Second is selective M&A, and then third is return of capital to shareholders. I think at the Investor Day, we had a slide that over the past three years, of our capital generated for shareholders, I think 15% of it went to the organic investment, 10% on M&A, and 75% on return of capital to shareholders. You know, that's probably a reasonable balance. I don't know that it's gonna be exactly like that going forward, but some breakdown like that.
Got it. I guess on the M&A front, I mean, what are you know, when you talk about selective M&A, what types of, you know, assets are you guys typically looking for? Is it, you know, capability, you know, expansion, geographic expansion? How do you guys sort of view the M&A market and what you're sort of looking for?
Yeah. I would say our M&A strategy focuses on three priorities. The first is either acquiring new or enhancing our own proprietary datasets. We are a data-first company, and that will be kind of our first priority on M&A. The second priority is on expanding our knowledge of, you know, different or growing emerging risk areas or moving into new customer segments. Particularly the customer segment can refer to international expansion, which we've had some international acquisitions, or it can get us positioned into new and growing areas within the insurance industry. The important thing to know is that from a customer standpoint, we serve the insurance industry, but the carriers are not our only customer type.
I think today it's about 70% of our revenue coming from carriers, but there's a ton of interesting growth in brokers, reinsurers, managing general agents, claims professionals, like independent adjusters. As the carriers change their business model and in some cases outsource or create independent providers for different parts of their business, like you can think of the MGA trend as one like that creates new opportunities for us to service those pockets, and we can continue to do some of that organically, or we may make acquisitions that puts us into new parts of the business. Then finally, the third priority of those is you know, efficiency, automation, and workflow tools for our clients.
Essentially, that is kind of almost a delivery mechanism for probably something with strength in the first two.
Got it. I guess before we get to our last question, I just wanted to just sneak one in on margins. You know, when we look at the medium-term guide, you guys reiterated your targets for what it is, 25-75 basis points of margin expansion. I think, you know, over the last cycle, there was some outperformance, but for this cycle you talked about, you know, really kind of being in that range given you will be, you know, investing back into the business. Can you maybe talk about some of those top, you know, investment priorities for the company over the medium term?
Yeah, happy to. In the prior three-year cycle, we had a margin target, at least for I think two of those three years, that was sort of agreed, you know, stated before the Investor Day. We had a more aggressive expansion target, in part to deliver on that. Now, we think we've delivered. We think we have demonstrated that we can be efficient, you know, efficient growers. We're gonna take the opportunity to invest in the business. It is primarily on projects like the Core Lines Reimagined, you know, AI tooling for our, you know, for the full employee base as that continues to expand, could be a cost.
There is something we're investing in and we'll get efficiencies out of as well. Yeah, I mentioned the sales force and expanding coverage. That could be an area that we might invest more in.
Got it. Just to wrap up here, you know, if we were to be back sitting here 12 months from now and discussing, you know, what a successful year it was for Verisk, what would be, you know, the top three things you would point to that you would have achieved throughout 2026 that would make it successful?
Yeah. I think two or three things. One is we would like to see the adoption curve for AI in the insurance industry continue to expand, and for us to be, you know, active participants in that and to drive growth from some of our new and AI-enabled products. I think that's probably first and foremost. Obviously, you know, we are not gonna control the weather, but you know, we do think, you know, from a transactional environment standpoint, we could start to see more normalization of that growth.
Finally, in our catastrophe and risk solutions business, we have a major product launch midyear, and so we're excited to bring Synergy Studio to market, and have the client receptivity of the real enhanced capabilities of that tool.
Got it. Well, Elizabeth, thank you very much. I think we'll call it there. We will have PayPal CFO coming up in about five minutes.
Okay.
Thank you very much.
Thank you so much, Scott.
Awesome. Take care.
Appreciate it.
Yeah.
Thank you all.