Verisk Analytics, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; quarterly figures below are unaudited. Unless noted, amounts are in millions of dollars.
Business context
Verisk provides data analytics and decision-support solutions, primarily to the property and casualty insurance industry. More than 81% of 2022 revenue came from subscription or long-term agreements, generally paid in advance. The company sold its environmental health and safety business in March 2022 and Financial Services in April 2022. Its Energy business was classified as discontinued operations in 2022 and sold on February 1, 2023; reported continuing-operation results exclude Energy.
Financial results and liquidity
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Revenue | $2,497.0 | $2,462.5 | Up 1.4%; up 5.8% excluding recent acquisitions, businesses held for sale and dispositions |
| Income from continuing operations | $1,042.1 | $607.1 | Increase partly reflects disposition gains and a lower effective tax rate |
| Net income attributable to Verisk | $953.9 | $666.2 | Includes an $87.8 loss from discontinued operations in 2022 |
| Diluted EPS | $6.00 | $4.08 | Continuing-operations diluted EPS was $6.55 versus $3.72 |
| Operating cash flow | $1,059.0 | $1,155.7 | Down 8.4% |
| Capital expenditures | $274.7 | $268.4 | About 8.1% of revenue |
| Interest expense | $138.8 | $127.0 | Up $11.8, reflecting higher borrowing and rates |
| Debt, excluding finance leases and certain adjustments | $3,740.0 | $3,310.0 | Year-end borrowings increased |
Continuing-operations revenue was driven by Insurance, which generated $2,437.0, up 10.4% (5.8% excluding acquisitions and dispositions). Underwriting and rating revenue rose 11.5%, and claims revenue rose 7.8%. Insurance segment EBITDA was $1,303.0, versus $1,265.2; its EBITDA margin declined to 53.5% from 57.3%.
Reported consolidated net income margin was 41.7%, versus 24.7%. The company reported a 65.7% consolidated EBITDA margin, versus 47.3%; this non-GAAP figure was materially boosted by gains on business sales and is not representative of recurring operating performance. Verisk reported $354.2 of other operating income in 2022, largely reflecting disposition gains, compared with a $134.0 loss in 2021.
Year-end cash and cash equivalents were $112.5 on the balance sheet. Management separately reported $296.7 of cash and cash equivalents plus available-for-sale securities, inclusive of cash in assets held for sale. Verisk cited prepaid subscriptions and access to credit facilities as sources of liquidity, and said it expected sufficient funds for working capital, capital expenditures and growth. Current liabilities exceeded current assets, including $1,392.9 of short-term debt and current maturities. After year-end, Verisk repaid $990.0 on its syndicated facility, plus the $125.0 bilateral term loan and $275.0 bilateral revolving borrowing; the company reported up to $995.6 of syndicated facility availability following repayments.
Fourth-quarter snapshot
Unaudited Q4 2022 revenue was $630.4, compared with $630.3 in Q4 2021. Income from continuing operations was $215.8, while net income attributable to Verisk was $61.2, reflecting the discontinued-operation loss. Q4 diluted EPS was $1.37 from continuing operations and $0.39 overall.
Material changes, outlook and risks
- Portfolio reshaping: The 3E environmental health and safety sale generated $575.0 in proceeds and a $450.8 gain. Financial Services sold for $498.3 net cash proceeds; Verisk recorded a $73.7 impairment and a $15.6 sale loss. The Energy sale closed after year-end for a stated $3,100.0 purchase price, subject to customary adjustments, plus up to $200.0 of contingent consideration.
- Unusual discontinued-operation items: Energy’s 2022 results included a $303.7 impairment, partly offset by a $75.9 deferred tax benefit. Energy reported $537.3 of 2022 revenue and an $87.8 net loss from discontinued operations.
- Capital allocation: Verisk repurchased $1,662.5 of common stock in 2022 and paid $195.2 in dividends. A further $3.0 billion repurchase authorization was conditioned on closing the Energy sale.
- Management commentary: Management emphasized recurring revenue, organic Insurance growth, product development, customer penetration and selective acquisitions. No quantitative forward-year revenue or earnings guidance is provided in the supplied filing text.
- Market conditions: Management discussed inflation and rising interest rates, elevated catastrophe losses, insurer underwriting pressure, and restrained insurer marketing spending, which may affect demand for certain marketing and auto underwriting solutions.
- Key risks: About 69% of revenue came from U.S. P&C primary insurers. Other disclosed risks include losing access to data sources, privacy regulation, cyber incidents, customer consolidation, competition, acquisition and divestiture execution, and interest-rate and foreign-exchange exposure. A 1% rate change was estimated to alter annual pretax interest expense by about $13.9 at year-end borrowing levels.
- Contingencies: The filing describes an ERISA class action, ongoing DOJ and SEC inquiries involving the former Financial Services business, and multiple data-privacy lawsuits. Verisk said it could not reasonably estimate potential liability for the matters discussed. It also agreed to indemnify TransUnion for certain losses tied to the DOJ inquiries.
- Controls and audit: Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor excluded specified 2022 acquisitions from the internal-control assessment.
Important facts for investors to verify
- Reconcile recurring Insurance growth and margins with the unusually large disposition-related gains included in reported 2022 profitability.
- Review post-sale Energy proceeds, final purchase-price adjustments, contingent consideration and the use of proceeds to reduce debt or repurchase shares.
- Assess debt maturities, variable-rate exposure and liquidity after the disclosed post-year-end repayments.
- Track organic Insurance growth and the effects of inflation, catastrophe activity and insurer marketing budgets on claims, underwriting and marketing solutions.
- Monitor the status and potential financial impact of the DOJ/SEC inquiries, indemnification obligations and privacy and ERISA litigation.