Operator: Good day everyone and welcome to the Verisk Analytics Fourth Quarter 2012 Earnings Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Verisk's Senior Vice President, Treasurer, Corporate Finance, and Head of Investor Relations, Ms. Eva Huston. Ms. Huston, please go ahead.
Eva F. Huston - SVP and Treasurer, Corporate Finance and IR: Thank you, Steve, and good morning to everyone. We appreciate you joining us today for the discussion of our fourth quarter 2012 financial results. With me on the call this morning are Frank Coyne, Chairman and Chief Executive Officer; Scott Stephenson, President and Chief Operating Officer; and Mark Anquillare, Chief Financial Officer. Following comments by Frank, 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 10-K 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 March 28, 2013 on our website and by dial-in.
Finally, as set forth in more detail in today's earnings release, I will remind everyone 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 the future performance is summarized at the end of our press release as well as contained in our recent SEC filings.
And now I will turn the call over to Frank Coyne.
Frank J. Coyne - Chairman and CEO: Thank you, Eva, and good morning. In fourth quarter 2012 we delivered strong overall performance of over 18% total revenue growth and 26% diluted adjusted EPS growth. For the full-year total revenue growth was 15% and diluted adjusted EPS growth was 20%. Our consolidated organic revenue growth in the fourth quarter was 6.7%, reflecting strong growth in healthcare and good growth in insurance solutions, offset by weakness in mortgage. Excluding our historical mortgage business, organic revenue growth was 9.4% in both the quarter and for the year.
Profitability was strong within the EBITDA margin of over 45% in the quarter and for the year. Free cash flow is also strong increasing over 25% in 2012 even after our pension funding in the earlier part of the year.
In the fourth quarter our Risk Assessment revenue grew 5% after adjusting for the impact of the transfer of some revenue Decision Analytics in 2012 and also grew 5% for the year, reflecting the value to our long standing insurance company customers of our industry-standard insurance programs and property specific data.
In Decision Analytics for the quarter our revenue grew almost 30% and our insurance solutions grew about 10% even as transactional claims activity related to Sandy and other storms was captured under existing contracted customer minimum. Our healthcare solutions continue their excellent organic growth growing revenue about 28% organically in the quarter. Total healthcare revenue growth was almost 90% including the contributions MediConnect continues to make. In the quarter we generated over $70 million in revenue from our healthcare business.
In financial services, we continue to be pleased that Argus’s performance has been on target and our future expectations we meet on-track. Within our mortgage tools we are seeing recent trends continuing. Our origination related revenue continues to grow ahead of the origination market while our overall mortgage revenue declined although slightly less than we expected it to when we talked to you last quarter. We will continue to face challenges in mortgage in 2013 as the forensic business moves back towards normalized level, but overall, our business is now more diverse in both customer and solution set. We remain disciplined in our use of capital and are focused on delivering shareholder returns. In 2012, we spent about $800 million on acquisitions, primarily MediConnect and Argus. We find the results of our acquisitions encouraging and believe our shareholders should be pleased by this use of capital as evidenced by strong initial results and strategic fit.
Our share repurchases remained moderated in the quarter at $35 million as we continue on the path to meet our commitments to our debtholders. Total repurchase activity in 2012 was $163 million. We continue to be active and looking at M&A, but also continued to maintain our discipline, focusing on assets with a true strategic fit, a strong financial model and an appropriate valuation in relation to future growth prospects.
In this quarter, and more importantly for the full year 2012, we had strong financial results. The ongoing experience, knowledge and dedication of our employees across our enterprise position us well for 2013. You've also seen the announcement last week that I will be transitioning the CEO role to Scott Stephenson in April. I am pleased to continue to serve on the Board as Non-Executive Chairman. Scott has been a key member of our management team for over a decade and he is the right person to carry forward our culture of outperformance.
Now I'll turn it over to Scott for an update on some of our initiatives.
Scott G. Stephenson - President and COO: Thank you Frank very much. These are exciting times for Verisk and I'm really very pleased that we will have the continued guidance and counsel that Frank will be providing as Chairman of our Board.
As you all know, we have a strong team running our businesses on a day-to-day basis and you'll be hearing directly from many of them at our Investor Day on March 7. Our deep industry expertise has made us successful and will continue to help us enhance and develop new analytic and data driven solutions for our customers now and into the future.
Another driver of our success is our culture of innovation and continuous improvement. About a month ago our leadership team was together and we had a chance to talk about the ways we can continue to drive innovation and the analytic mindset throughout our 6,500 employees. Our teams are energized and we have a good crop of investment opportunities that we will be funding in 2013 and beyond.
For example, remote sensing and imagery is one of those. We are gathering images that can be used to identify risks beforehand and then quantify them afterward. Something else that we talk about a lot is the idea of the (N plus one) data set. At Verisk today we have about 5 PB of data, which definitely qualifies us a big data shop. Our creativity in analyzing these data to develop new solutions will allow us to make our individual proprietary data assets into new data sets by combining them with other data sets.
If there are N data sets in the world, we can have more insight by creating (N plus one). If our customers have N data sets, we can create more insight by creating (N plus one), always looking to add more value.
With that let me turn it over to Mark to cover some of the financial results in more detail.
Scott G. Stephenson - President and COO: Thanks Scott. As you've heard, we are pleased with our performance for both the fourth quarter and full year 2012. In the fourth quarter we delivered 18.2% total revenue growth and 6.7% organic revenue growth. For fiscal year 2012 total revenue growth was 15.2% and organic revenue growth was 7.3%.
Excluding our historical mortgage business, our revenue growth organically in the quarter and full-year was 9.4%. For the fourth quarter our Decision Analytics segment revenue delivered 28.7% growth of which 7.9% was organic excluding the acquisitions of MediConnect, Argus and Aspect Loss Prevention as well as the transferred revenue were the mortgage appraisal tools. As a reminder in 2012 we transferred revenue related to mortgage appraisal tools from Risk Assessment property specific revenue category into Decision Analytics financial services revenue category.
Going forward in 2013 we will discuss growth rates in appraisal tools revenue is a part of Decision Analytics. Within Decision Analytics our insurance category revenue grew 9.6% in the fourth quarter and 9.3% organically excluding the acquisition of Aspect Loss Prevention. We continued good growth in our catastrophe modeling solutions in the quarter and finished 2012 at 95% market share for public property catastrophe bond modeling. We also saw growth from our loss quantification solutions.
As discussed in our third quarter call, we did not expect to see a bump in growth due to Sandy because many of our customers were below minimum contracted claims volumes and that would be the case. Claim solutions delivered good growth. Our underwriting solutions continue to add strong growth.
In financial services, which includes both Argus and the mortgage business revenue grew 41.8% in the quarter. Argus is an excellent business and we remain pleased with the performance since the acquisition in the third quarter which is exceeded our estimates provided at the time of the acquisition. After adjusting for the acquisition of Argus and the transfer of the mortgage appraisal tools from Risk Assessment into this revenue category, the fourth quarter revenues declined 19.6%. For all of 2012 revenues declined 11.3%, a result that was slightly better than our expectations as discussed with you last quarter. Consistent with recent trends, mortgage origination tools grew nicely in the quarter and reflected the growth in the mortgage origination market, but revenue from forensic solutions declined in the quarter by more than offsetting that. And thinking about the mortgage portion of financial services for 2013, I believe it's possible we could see a similar decline to the 11% we saw in the full year 2012.
Healthcare continued strong revenue growth, 89.1% for the fourth quarter and 115% for 2012. Healthcare organic revenue growth was 28.5% in the fourth quarter and 36.2% for the full year. Our total revenue growth benefited from the second quarter addition of MediConnect, another acquisition that has performed strongly in 2012. The performance to-date validates our strategy of combining our revenue integrity and HEDIS reporting solutions with MediConnect to create a comprehensive solution RQI or revenue and quality intelligence. Organically, we continue to add and implement new customers and expand our relationships with existing customers. The 2011 acquisitions of Bloodhound and Health Risk Partners became part of our organic growth calculation in the third quarter.
As a reminder, we do have seasonality in our revenue and quality intelligence revenue. As you recall, we generally expect the first half of the year to be seasonally low with more revenue to come in the second half. This means for Verisk Health overall, the shape of our business is going to be in the 60%-ish with towards the second half of the year. Split across quarters can vary dependent upon customer needs. Also, it means margins are seasonally lower in the first half and as Verisk Health has scaled, you'll see that more in the Decision Analytics. If you are looking at quarters, I would also point out that the performance of MediConnect in the first quarter of 2012 includes $3 million or $4 million of overflowing revenue from 4Q 2011, which you should assume won't occur in 1Q of '13. The revenue from 1Q '12 was prior to our acquisition and disclosed in our filings. We continue to feel very good about our growth prospects in healthcare vertical.
Our specialized markets revenue grew 4.4% in fourth quarter with good growth from our weather and climate analytics and more modest growth from our supply chain solutions due to customer timing. The revenue category grew 8.3% for the full year.
Turning to Risk Assessment, for both the fourth quarter and full year 2012 we reported revenue growth of 2.9% and 5% after adjusting for the impact of the transfer we discussed earlier. Our industry-standard insurance programs grew 5.8% in the quarter, reflecting our 2012 invoices and strong growth in our premium leakage solutions.
Beginning in the fourth quarter we have included the actuarial services and statistical agency categories as a part of the industry-standard programs as they are closely tied to and built as a part of our same customer invoices. Our property specific information revenue declined 6% in the quarter as reported, but excluding the transfer grew 2.6%. Our customers have received and begun paying their 2013 invoices which are modestly higher than 2012.
EBITDA for the fourth quarter was $189.6 million as outlined in Table 3 of our press release. EBITDA increased 19.4% for the quarter and our EBITDA margin was 45.6%, reflecting good expense management. We produced $695.9 million of EBITDA for the full year with margins of 45.4%, including a $13 million decline in pension expense due to freeze versus 2011 or an 80 bps margin benefit.
The margins in Decision Analytics were 40.3% in fourth quarter 2012 versus 40.7% in fourth quarter 2011. Full-year margins were 39.8% flat with 2011, we continue to see a mix shift that impacts margins as our faster growing businesses had not yet scaled for the margins of our more mature businesses.
In the quarter, our Risk Assessment margins were 55.4% versus 51.7% in fourth quarter of 2011. For the full-year Risk Assessment margins were 54.6% up from 51% in the prior year. We benefited by about 180 bps in margin due to the lower pension cost related to the freeze of our plan. Our business continues to show scalable profitability but we also continue to invest in developing new solutions.
We continue to see opportunities for investing in future growth and as you remember those creates some near-term pressure on margins. In 2013 we expect to invest in remote imagery and touchdown our next-generation platform for catastrophe modeling and unified healthcare platform, I mean several interesting data initiatives. We expect that the investments which we primarily reflected in the Decision Analytics segments will be weighted more towards the first two quarters of 2013 and could impact the P&L in those periods by about $10 million to $15 million in total which would also have some impact on lower margins. However, these are very positive long-term initiative and rest assured we’re very happy to build and invest behind these promising opportunities because they will ultimately grow EBITDA and cash flow over the long-term. We expect our corporate margins will be impacted more modestly if at all for full-year 2013 as our incremental EBITDA margins from existing solutions offset investment.
Our interest expense was $5.9 million in the fourth quarter and $18.7 million for the full-year versus the respective periods in 2011. This increase was due to the higher debt balances related to our acquisitions. We ended fourth quarter with the total debt of $1.5 billion and had repaid all but $10 million of our revolver borrowings.
Our reported effective tax rate was 29% for the quarter and 36.6% for the full-year. We have been actively working on our tax planning strategies and we are awarded by the benefits resulting from this effort. The lower tax rate in the quarter contributed about $0.07 to EPS. We received a favorable state private letter ruling, which contributed about $0.04 in EPS for prior years and about $0.01 for 2012. We do expect this ruling to reduce our taxes in 2013 and future years by about $2 million annually. We also saw another $0.02 one-time benefit due to additional successful tax initiatives. For 2013 as we think about the tax rate around 38% seems to be the right level for using your models.
Coming down to the net income line, we focus on adjusted net income and non-GAAP measure, which we define in the current period as net income plus acquisition related amortization expense less income tax impact on that amortization. Our adjusted net income increased 27.1% to $108.7 million for the quarter. Full-year adjusted net income grew 19% to $361.3 million. Adjusted EPS on a fully diluted basis was $0.63 for the quarter, an increase of 26%. This included about $0.07 related to the tax benefits discussed earlier. Full-year adjusted EPS was $2.10, up 20% from 2011. The average diluted share count was 171.9 million shares in the quarter and 171.7 million shares for the full year. On December 31, 2012 our diluted share count was 172.2 million shares.
In the quarter we purchased about 715,000 shares for $34.8 million. For fiscal year 2012 we repurchased 3.5 million shares for $162.6 million, an average price of $46.57. At quarter end we had about $144 million left under our authorization. As we discussed the last couple of quarters, we moderated our buyback program after acquiring Argus to ensure that we meet our deleveraging commitments. Our share repurchase program has been successful to date, generating annualized IRRs of about 25%. For 2013 we anticipate at a minimum buying shares to offset dilution.
Turning to our balance sheet as of December 31, our cash and cash equivalents was about $90 million. Total debt, both short-term and long-term totaled $1.5 billion reflecting that was borrowed to fund the Argus acquisition which closed on August 31st. Today our incremental debt capacity is over $800 million and will grow with our EBITDA and free cash flow.
Also in December 2012 we made a purchase for $27 million of technology and service (indiscernible) underlying a longstanding product as our agreement with the vendor came to an end. I'm pleased to report that our debt to pro forma EBITDA at December 31st was two times reaching our steady-state leverage rate well ahead of our stated (2012) goal of second half of 2013. This is down from the pro forma ratio of 2.35 times at the time of the Argus acquisition. As we have stated before we are willing to temporarily go above our long-term target of two times debt-to-EBITDA to take advantage of unique opportunities because our free cash flow is strong and allows us to delever quickly.
Free cash flow in 2012 which we define as cash from operation plus capital expenditures was $388.5 million an increase of about $81.1 million or 26.4% versus 2011. This increase was despite the funding of our pension which we have mentioned previously. Excluding the impact of our pension funding, net of tax benefit and certain year-over-year timing items our free cash flow is up about 19%.
Our capital expenditures were about 5.2% – revenue for full-year 2012. Free cash flow represented 55.8% of EBITDA for 2012 reflecting improved conversion rate compared to the 51.8% in 2011 despite the $72 million pension fund. As we think about capital spending for 2013, we are expecting a $115 million for the full-year. This includes the capital related to some of the initiatives I discussed earlier as well as the consolidation of our data centers into two primary locations. The special projects are approximately $20 million of that total capital spend, so you would see the steady state CapEx close to 95 in 2013. Overall, our business is performing very well, and we have a nice mix of growth from multiple verticals and continue to invest in the future.
With that I will ask the operator to open up the line for questions.
Operator: David Togut, Evercore Partners.
David Togut - Evercore Partners: Within Decision Analytics the healthcare organic growth was significantly higher for the fourth quarter than what would've been implied by your outlook on the third quarter call, what deferred from your expectations from late October, early November and is the rate of growth we saw in the fourth quarter sustainable going forward?
Mark V. Anquillare - EVP and CFO: This is Mark. Let me just give you a quick overview. I think we continue to feel very optimistic about healthcare. It's a combination of new customers as well as growth and penetration with an existing. So, as we think about the overall health of healthcare seeing a combination both increased penetration as well as new is healthy and reassuring. So, all I can tell you with regard to some interpretation from the quarter is, I think what we tried to do is be realistic and our healthcare assets continue to perform very well.
David Togut - Evercore Partners: And just a follow-up, Mark, related to your comments regarding pension expense. You called out $13 million reduction for 2012. What should we expect for 2013 and beyond? Is pension expense going to come down again this year?
Mark V. Anquillare - EVP and CFO: So, what we did back on March 1 of 2012, we froze our pension so that was really kind of a one-time decline because we now have it in essence I know it's off our book, but the actual increased liability is gone. So, we should find steady state into the future as long as discount rates remain relatively unchanged and the stock market doesn't need to do anything wild that would affect our asset value. So, I would suggest basically flat into the future.
David Togut - Evercore Partners: Then you called out a modest increase in 2013 invoices for Risk Assessment. Can you bracket what modest means from a pricing standpoint this year?
Mark V. Anquillare - EVP and CFO: Well, I think what we've always tried to do is really focus on our insurance customers as a whole and we don’t want to think of Risk Assessment industry-standard as a silo. So we've commented on kind of inflationary type of increases there with the focus more on the overall insurance customer and growth there and we do anticipate increasing growth or increasing organic growth in insurance across the board, but I wouldn’t attach too much to the Risk Assessment.
David Togut - Evercore Partners: Got it. Just a final housekeeping question. You called out a 38% tax rate assumption for 2013, which would be up from the 36.6% last year despite the tax benefit you expect this year. So I'm curious, why would the tax rate go up given the tax benefits that you are seeing in 2013?
Mark V. Anquillare - EVP and CFO: Yes, so what we tried to call out and identify it, some of that tax planning strategy had the benefit of a look back, so we gained some benefit looking back from 2007 to 2011 and we got to pick that up in the quarter and we get about a $2 million benefit going forward, so what you see is a normalization of that amount. And the look back is about $0.04, if that helps you.
Operator: Andrew Jeffrey, SunTrust.
Andrew Jeffrey - SunTrust Robinson Humphrey: Mark, just to clarify, did you make some comments about full-year reported Healthcare revenue growth? I think I may have missed what you said.
Mark V. Anquillare - EVP and CFO: So full year 2012?
Andrew Jeffrey - SunTrust Robinson Humphrey: 2013, sorry, looking forward.
Mark V. Anquillare - EVP and CFO: I think we feel again we feel the opportunity is promising. We feel good about the growth there, but I don't think we are going to give any specific numbers around healthcare.
Andrew Jeffrey - SunTrust Robinson Humphrey: I wasn’t sure if you had specifically quantified anything. And with regard to the investments in Decision Analytics in 2013, you mentioned there kind of front-end loaded, so I guess this is kind of a two-pronged question; should they be somewhat linear in the first couple of quarters. And then Scott how long do you think the payback is on some of these initiatives. But it seems like this is the first time you are calling out and specifically quantifying investments in the specific initiatives and really giving us a clearer sense of timing and magnitude?
Scott G. Stephenson - President and COO: So, let me ask Mark to just address the pace of the investments and then I will come back and talk about our background and talk about payback.
Mark V. Anquillare - EVP and CFO: I think one of the things that we feel good about is as we look for innovation across our businesses we had people step up with some interesting opportunity. So we obviously want to invest quickly around good long-term prospect. I would tell you that it's probably a little bit more first quarter than second quarter but not by much.
Scott G. Stephenson - President and COO: And with respect to payback you really have to differentiate among the things that we are talking about, so some of them are for efficiency and those are going to kick in relatively sooner so, for example, the consolidation of our data centers down to two primary data centers. It's the kind of thing that should be paying off even as we do, so that’s a ‘13, ‘14 kind of an item. Some of the things we are doing that are essentially clipping more value into existing product platforms, should also have relatively faster payback, I mentioned in my remarks upfront making use of remote imagery. Basically, what we are doing is bringing more data into existing solutions, data which our customers have very clearly indicated they like access too. So, again, there you've got categories where the paybacks are pretty quick. Some of the other things we are doing are kind of replatforming existing solutions where we are creating a much more comprehensive environment in which our customers can do their work, their decisioning work, and those are going to be a little bit longer. Those might be more kind of 3-ish, five-year kind of windows, even though benefits will start to occur closer to today, but the profile of the revenue is probably going to be a little bit further out. In all cases, we think we are talking about very strong value proposition. And I just want to comment on, again, kind of following up what both Frank and Mark said. I mean it's really great actually the fact that our existing businesses are generating very substantial organic growth opportunities. I mean it's coming from within the businesses. We are definitely asking for investment. We are definitely asking for emphasis on growth and organic growth, but it's really encouraging to see the quality of the thinking and the scale of the opportunities that's coming from our existing units.
Andrew Jeffrey - SunTrust Robinson Humphrey: And one last one if I may, should we expect to see the insurance theme within Decision Analytics bounce back into double-digit organic revenue growth in '13 all else being equal?
Mark V. Anquillare - EVP and CFO: I'm not sure I'm going to quantify, but let me qualify. I think we are feeling good about an increased level of organic growth in insurance across the board. So, I'm talking about both the Risk Assessment as well as the category of insurance inside of Decision Analytics. So, I think the answer is yes to your question.
Operator: Eric Boyer, Wells Fargo.
Eric Boyer - Wells Fargo Securities: Could you help us – just remind us again the potential runoff you talked about in Q3 for your mortgage business? And then within the forensic piece, can you help us understand the nature of those contracts? Are they multi-year deals?
Mark V. Anquillare - EVP and CFO: So let me first talk about the mortgage question. When we last got together I think what we were talking about was two things. On the front-end when we're talking about underwriting and kind of the inlet that's focused on applications, that's both refinances and originations. We continue to grow nicely and really kind of ahead of market trends. On the back end we continue to see a more than offsetting drop off and at third quarter we had talked about potentially the full year being down as much as 12% to 15%. I think we came in at about 11%, so just somewhat back. One of the things that we benefited from and now kind of seeing the downside from was in that forensic review is all these defaults hit the industry, people started to use our services in a material way. Remember using our services helps mortgage insurers, as an example recent coverage and pushback that obligation to the lender. The business when we bought was rather small and it grew nicely during the time and we've kind of gotten back to the point where we said it went up dramatically and it's kind of coming down and we just tried to quantify what the back end looks like. So we kind of gave the ranges to how big that drop could be, and that kind of is consistent with what we continue and what we said even into '13 where we said that it could be down as much as 11% again. I think the second part of your question was about the contracts?
Eric Boyer - Wells Fargo Securities: Right.
Mark V. Anquillare - EVP and CFO: Here it's a little bit different, it's more transactional so you do contract for multiyear with either a mortgage lender or a mortgage insurer and you get integrated so you are tightly integrated – you are tightly embedded inside their processes but it is transactional. So, there is no guarantee minimums there is nothing that would guarantee an amount, it's just – you are the source when they choose to run that type of analytic.
Eric Boyer - Wells Fargo Securities: And then just back on that the mortgage runoff again. If you were down like your projected 11% in ‘13, would you kind of be back to that that rate before you saw the spike in activity?
Mark V. Anquillare - EVP and CFO: I’d need to actually kind of work through details but I believe that we are getting back to that normalized level maybe a little bit of – we are still above where we were back at that day, because we have grown the business, we have more customers. One thing I want to let you know and we talked about this, we used to have what was a couple very big concentrated customers a level and nature of the solutions now is much more spread across customers and products. So the quality of the revenue is improved as we think about kind of into the future.
Eric Boyer - Wells Fargo Securities: Then finally, just on the overall margin, you talked about the investment in Decision Analytics in the first half, but then it may not have much an overall impact to the overall margin. Is it fair kind of assume a flattish type margin for ‘13 overall for the corporate EBITDA margin?
Mark V. Anquillare - EVP and CFO: I think we try not to give real specifics but I think there is probably, I think we tried and talk about the investment kind of offsetting the scale, so I think we should be around there.
Operator: Bill Warmington, Raymond James.
William Warmington - Raymond James: First of all, congratulations to Scott on the promotion to CEO and then also congratulations to Frank on taking Verisk from a mono line private company to a diversified $9 billion public company?
Frank J. Coyne - Chairman and CEO: Thanks, Bill. I had a lot of help.
William Warmington - Raymond James: Now, there has been talk in the industry about you guys developing an all-claims fraud database for healthcare similar to the ISO Claims database for insurance, and I'd like to ask if you could give us some color on that and also some thoughts on that opportunity in healthcare versus insurance?
Scott G. Stephenson - President and COO: So, we are working on that. It's extremely important for us in the healthcare space and it's not something that actually we're going to put a lot out in the public about right now, Bill, because it's a very critical thing that we are doing and it's very proprietary to us. I will say that it builds upon two strengths that we've got inside of the Company. One is the fact that we already aggregate claims data on the P&C side, so there is a methodology there that we can reference; and secondly, we are already aggregating medical claims in the P&C domain, and it's really quite obvious that streaming together medical claims from the P&C domain with the formal healthcare space is actually a very powerful thing to do that has not been done before. With respect to who it is that's coming into our approach and the rate at which they are coming into our approach, I mean that really is kind of we're right in the middle of all that Bill and we're really not sharing very much about that right now because it is so critical and sensitive. But I will say that it is an idea that seems intuitive for the healthcare space.
William Warmington - Raymond James: And then, of course, I couldn't not ask a question related to mortgage. So I just wanted to ask one as a clarifying question on 2013 when we talk about the 11% decline. That's for the combined forensic and origination, is that…?
Mark V. Anquillare - EVP and CFO: That's correct.
Scott G. Stephenson - President and COO: That's correct.
William Warmington - Raymond James: Correct, okay. And then your thoughts in terms of your ability to offset the decline in the forensic piece with increased penetration on the front end.
Scott G. Stephenson - President and COO: Well, I mean, basically, the work that we're doing is to look at all of the lines of service that we provide and to think about which of them are most valuable to our customers and which of them can be grown the most. And actually, there are some lines of service that haven't even really been very much a part of the business previously then in 2013 we expect to do some merging. So it's even a little more nuanced, Bill, than just front end, back end. It's also sort of multiple ways in which we can serve the originator.
William Warmington - Raymond James: Got it. And then one housekeeping question, just the share count exiting the quarter.
Mark V. Anquillare - EVP and CFO: I think, exiting the quarter, give me one second, Bill, I referenced it. I want to just give you the exact number. So exiting the quarter we had 172.2 million shares.
Operator: Tim McHugh, William Blair.
Timothy McHugh - William Blair & Company: Firstly I want to ask about the catastrophe modeling. Can you elaborate a little more on the strength there and how sustainable is that as we go into next year, I mentioned that comps are much tougher after the improvement you have seen this year?
Scott G. Stephenson - President and COO: I’m sorry I didn’t’ actually understand the point you are making there at the end about the comps?
Timothy McHugh - William Blair & Company: Just the comparison, I mean it had such a strong year, can you continue to grow on top of that.
Scott G. Stephenson - President and COO: Within our own experience, alright, that means you are referring the market. Yes, catastrophe modeling is a very important discipline inside of the PNC space and it is going to remain one. Something to understand about it is that there are multiple ways that set of services growth, one way is by modeling new combinations of perils and geographies, and it's we are considerably far away from all perils and all meaningful geographies being modeled. And so there is growth there. One of the investments we are making to replatform what we do is actually inside of what we do on the catastrophe modeling side. And fundamentally what that’s about is taking the discipline from being aimed at making a portfolio kinds of decisions, carriers working on their reinsurance with their reinsurers and vice versa all of that will continue to be the case, but it's also about taking the same modeling capabilities and actually applying them on a risk by risk basis in the underwriting process for the primary carrier. And that also is going to represent some growth. And so there are just a number of things which are involved and I just want to help everybody to understand that, it's actually a very multi-dimensional thing that goes on there. So, we really believe that it's a category with lags over a long period of time. And we believe that we have a very leading position, you may have noticed that we had a very, very disproportionately high share of all the cat bond issuances in 2012. We think that in many ways, that's the purest form of competition in the cat modeling space representative of who has the best science and technology.
Timothy McHugh - William Blair & Company: Then Argus, can you talk about it? It seems like just even on a sequential and year-over-year basis at least what I can back into the run rate of revenue for that business. It seems like it picked up a fair amount this past quarter or at least it was better than I expected. Is that – is there anything special going on there or was it just kind of the ongoing growth of that business?
Scott G. Stephenson - President and COO: You want to go ahead, Mark?
Mark V. Anquillare - EVP and CFO: Well, let me just – I think what we've seen is let's do full-year, kind of a pro forma basis I think we saw greater than 20% growth at Argus. I think we see them delivering and you are right the actual results for the four months that we own them was greater than what we originally advised. Scott, let me turn it back over to you.
Scott G. Stephenson - President and COO: Yeah. Just, it's – I'm going to almost repeat myself what I was saying about cat modeling. What Argus does is multidimensional and it's important that you understand that. So, the business has historically been aimed at aggregating data to understand the credit card product line. There is a big opportunity to try to understand demand deposits and other products, which come from the retail banks. There is a geographic expansion dimension and then there is also moving from – focusing primarily on product design and pricing considerations also to – because of the data that are part of what the supply that Argus receives. There is also a big opportunity to move into looking at issues of fraud and so again, please just understand it as being very multidimensional, and essentially what's going on is a number of those themes are active. They were active in the fourth quarter of 2012, and they'll remain active going forward.
Operator: Andrew Steinerman, JPMorgan.
Andrew Steinerman - JPMorgan: I wanted to talk about the status of the unified healthcare technology platform. What has been accomplished? What still has to be accomplished? And how does that lift healthcare organic growth?
Scott G. Stephenson - President and COO: Yeah. So it's something that we're very focused on. We review this very routinely with the business unit, and we're pleased with where we stand overall. We have customers who are live, being served with the unified platform, powering our solutions on the back end. That is particularly true in the payment accuracy part of what it is that we do. Next up and importantly for us is having the same unified platform hooked up to and supporting our solutions in the Enterprise Analytics division of what it is that we do. Ultimately, it will be all of Verisk Health. But Enterprise Analytics is up next, and that's a 2013 deliverable. And where we have activated customers against the platform, we and they have both been very, very pleased with the results.
Andrew Steinerman - JPMorgan: And it lifts revenues when you do that, right?
Scott G. Stephenson - President and COO: Say again?
Andrew Steinerman - JPMorgan: Does it affect revenues?
Scott G. Stephenson - President and COO: Yeah, I mean, the primary benefit of what we're doing there is that we create access to our data stores for all of our existing solutions as well as the next one that we develop. And because of that, in effect, what we'll be able to do is to say to an existing customer – and I think you all know how important cross-selling is to our growth. What we will be able to say to an existing healthcare customer as, because you are already contributing data you are essentially already in our environment. So, if you want to turn on another solution the cost and time to do that is extremely negligible. And we believe that that’s going to help accelerate cross selling.
Operator: Manav Patnaik, Barclays.
Manav Patnaik - Barclays: Just a quick follow-up on the Argus side, I guess you gave us sort of what the pro forma full-year revenue look like, can you maybe give us some color on how the margins perform there. I think you had given us the first half margins at the time of acquisition. Was it somewhat similar to that, better any color on that front?
Mark V. Anquillare - EVP and CFO: I mean the margins that you saw in the first half was just part of our filing that continued into the four months where we owned and I think very similar to lot of the various products that you have a wonderful brand with some real value add to the customers that will ultimately provide leverage and scale as a growth. So, we feel good about the margins then they are very strong and consistent we saw in the first half.
Manav Patnaik - Barclays: And is Argus I guess for the early stages I think as you have discussed some acquisitions, still is roughly going to be I guess the way to put is more standalone company, like is there I was thinking trying to think looking forward of any cross sell opportunities between Argus and the rest of the businesses.
Scott G. Stephenson - President and COO: It is more standalone though it's not entirely standalone, for a couple of reasons. One is we are at the enterprise level looking to integrate substantially all of our data assets and so what we should have the opportunity to do then is to make observations about consumer credit, consumer demand deposits, the personal line side of the insurance space even potentially healthcare, make integrated observations in order to, for example, do an even more comprehensive job of rooting out fraud. And so I think Argus has a big data shop in and of itself have something powerful to contribute on that front and then I would also say that we are certainly exploring maybe individual product level opportunities where Argus observations about consumers might be able to be tied into work that we are doing particularly on the P&C side as it relates to fraud fighting. So, but the shape of the P&L I think will be substantially based upon the customers and the product sets that Argus has.
Manav Patnaik - Barclays: Mark, if I may, on the mortgage side, what sort of origination estimate are you using for the market in your numbers?
Mark V. Anquillare - EVP and CFO: So, we are looking back. We typically focus on the MBA forecast, Mortgage Bankers Association forecast. If that was your question is, I'll make sure?
Manav Patnaik - Barclays: Yeah. No, fair enough. So, that's what's baked in and I guess just related to that in terms of the overall segment and just your thoughts on sort of strategically, it seems like that's the least set of all the businesses and it has been a drag for a couple of years now on overall growth. Just strategically, how you view that unit?
Scott G. Stephenson - President and COO: Well, I'll say a couple of things. The first one is that we apply ourselves to making the mortgage business and a distinctive Verisk-like business just as we do with everything we do, which means always trying to infuse it with higher-level analytics, with more proprietary data and a robust stream of new solutions. So we don't take any different approach in terms of the running of the business nor will we take a different approach. What I would also say is that we're just always alert to thinking about the shape of our whole portfolio. We try not to think of anything as being sacred but always putting things to the test of; is there value? Is there increasing value? What's the nature of the external market that we face, etc.? So in that sense, mortgage is always being reviewed in the same way that the whole business is always being reviewed, and we don't ever turn off that part of the thought process.
Operator: Kelly Flynn, Credit Suisse.
Kelly Flynn - Credit Suisse: First question relates to your comments about industry-standard business, Risk Assessment overall as well. I just want to clarify what you said because, Mark, some of your comments tailed off a bit at the end. Are you saying you expect growth for industry-standard to accelerate in 2013 at kind of an inflationary rate, which would mean a few hundred basis points of acceleration would be reasonable? I mean, I know you don't want to give guidance, but pulling together everything that you said, is that kind of the right picture?
Mark V. Anquillare - EVP and CFO: No, net me just make sure. I'll say it again. I said that we expected the industry-standard program, the invoices are out, and they grew at an inflationary pace. There was an increase. It was an increase, just inflationary kind of similar path. The point that I was making was that we just don't look at interest end driven programs at the silo, we are interested in doing is making sure we sell more to in both our relationship broadly across Risk Assessment and Decision Analytics to our insurance customer and we do see an increase in growth rate across the total relationship as we think about ‘13.
Kelly Flynn - Credit Suisse: And then another question I have it relates to G&A and your comments about investments. Another way to look at this, your G&A was down a couple of million sequentially. First of all why was that and how should we think about that line item in the model next year, layer in investments?
Mark V. Anquillare - EVP and CFO: Well I think one thing you do need to factor into this is the pension freeze that we talked about the $13 million is a combination of cost of goods, because those people working on product, but it's also about the people that are providing support functions and remember if you think about pension lot of those people are in fact retired. So that affects the SG&A overall. I’d condemnably expect SG&A to grow slightly slower than the top line, we would expect leverage and scale there.
Kelly Flynn - Credit Suisse: And then for Argus, I know we have touched down a couple of times in the call, but just to ensure accuracy and can you actually give us the revenue number that Argus generated in the quarter?
Mark V. Anquillare - EVP and CFO: I think that is…
Eva F. Huston - SVP and Treasurer, Corporate Finance and IR: You can parse that out of the cave, let me just give you the specific number. Alright just in the right page.
Kelly Flynn - Credit Suisse: Okay.
Eva F. Huston - SVP and Treasurer, Corporate Finance and IR: $16.7 million in the fourth quarter.
Kelly Flynn - Credit Suisse: Then I might be able to calculate this too, but I'm not positive. As far as the growth rate, the pro forma growth rate for Argus, I think you just said a few questions back Mark it was more than 20%?
Mark V. Anquillare - EVP and CFO: That's correct.
Kelly Flynn - Credit Suisse: Are we able to get any more detail on that? I mean was it – can you give us the exact number or can we calculate it from what you've disclosed?
Mark V. Anquillare - EVP and CFO: I mean I think it's little bit above 20%. I think we said at the time of the acquisition that we kind of saw mid-teens growth in the future. We still feel good about that.
Kelly Flynn - Credit Suisse: So when you say above 20%, it's close to 20%. It's not like above 20%, could be 40% or anything like that?
Mark V. Anquillare - EVP and CFO: I think that's right, yeah.
Operator: Suzanne Stein, Morgan Stanley.
Brian - Morgan Stanley: This is Brian in for Suzie. Do you have any sort of government exposure and is sequestration at all an issue here?
Scott G. Stephenson - President and COO: Yeah. Not very much at all, a very, very de minimis and the effect would be just negligible on the P&L, if it did occur. I mean, we mostly through our weather related analytics we do a fair amount of work on earth orbiting satellites et cetera. Apparently, these are more considered to be critical programs, but the real point is just the absolute amount of business we do there is so small that it just won't have much of an effect.
Brian - Morgan Stanley: Just from a pipeline – from an acquisition pipeline standpoint, can you comment generally on any sort of plans for increased activity in healthcare or any other verticals that you may be kind of focusing on?
Scott G. Stephenson - President and COO: Well, we remain very active in the marketplace overall. Our team is constantly proactively engaging with companies that potentially fit with our strategy. Absolutely no difference in approach from where we've been for years and years and years now. Just a general point I would make is that as we have diversified our business, as we moved into new market segments, etc., we've just given ourselves a broader playing field. And we're just going to continue to pursue it. You've seen a fair amount of M&A activity in the healthcare space from us, and there's certainly no reason to expect that that would change, but we've got our headlights out there against the whole business.
Operator: James Friedman, SIG.
James Friedman - Susquehanna Financial Group: It's such an exciting time for the company, Frank and Scott. I wanted to follow up on some of your preliminary comments about the N plus 1 initiative that you made at the outset. I know you're going to go into this in more detail next week, but if you could just share with us in a minute or so what specific end markets you envision addressing with those initiatives?
Scott G. Stephenson - President and COO: Well, we've talked a lot about the fact that we feel the need to be very deep in whatever vertical markets we're serving, because it is really, really important that we be intimate with our customers. In fact, N plus 1, as it relates to our data sets, is interpreted in several ways. It means that we are one layer further than our competitors. It means that we're one layer further than any one customer. It means that we're one layer further than the data assets that we've got today in terms of what we're building towards in the future. So, it's a lot of – it has a lot of different dimensions to it like that. Unless we are intimate with our customers, we don't actually know what N is, so we don't know that we are at the N plus one level and so that's just by way of saying that we are in four domains right now as you know, the P&C market, the healthcare market, supply chain and financial services and we'll talk about this more at Investor Day, but we've got plenty of distance to run inside of those marketplaces and we would not claim that we've achieved the very greatest amount of intimacy that we can with all of our customers, that's good work that we are still engaged in. So, that's all by way of saying that while we are always asking questions about the shape of the business and where are we in terms of the markets that we serve, we have a great deal of focus on going further inside of the segments that we already serve and I think you can expect to continue to see that from us.
James Friedman - Susquehanna Financial Group: Thank you for that context and then I have some pension related question maybe for Mark or Eva with regards to the pension just so I understand that the freeze is on current or is it current or new employees with the pension – the movement in the pension is occurring?
Mark V. Anquillare - EVP and CFO: So, just to give you a feel. We've gone through a couple of iteration of freezes, but back in March that was put in place across the entire Verisk enterprise. So, there is nobody accruing any additional benefit related to pension. Obviously, what anybody earned in past is obviously theirs, but there is no more benefit accruing.
James Friedman - Susquehanna Financial Group: So, should we expect significant movement in 2013 as we had in 2012?
Mark V. Anquillare - EVP and CFO: No, what happens is we received the benefit and what we would expect now is it would be generally flat going forward as long as discount rates and market results are how the assets are invested don't change materially. So, we would expect a flatness to that cost which is negligible these days.
Operator: Eric Boyer, Wells Fargo.
Eric Boyer - Wells Fargo Securities: Mark, just a quick follow-up on that lower tax rate for '13, is that something that's sustainable going forward or should we expect the tax rate to kind of move back up again?
Mark V. Anquillare - EVP and CFO: No. We feel that is a sustainable rate in light of these tax planning strategies we've taken on.
Operator: This concludes the Q&A portion of today's call. I'll turn the call back over to Frank Coyne.
Frank J. Coyne - Chairman and CEO: Yes. Thank you and thanks to all for joining us today for our fourth results. We appreciate your support and I thank you for helping Verisk reach its current stature in the public market. This will be my last earnings call as I transition to solely a Board role effective April 1. It has been an honor to serve our 6,000 employees, our customers, and our investors as CEO and I look forward to continuing to be a part of Verisk through my role as Chairman. Thank you very much and have a good day.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.