Verisk Analytics: Pricing Upside and Resilient Demand Amid P&C Insurance Industry Profitability Woes

We maintain our $220 fair value estimate for wide-moat Verisk Analytics VRSK following healthy third-quarter 2023 results that track our full-year top-line growth and profitability expectations. The U.S. P&C insurance industry is facing profitability pressure amid inflation headwinds and higher insurance losses, however, demand for most of Verisk’s solutions remains robust. We believe this reflects the mission-critical and defensive nature of Verisk’s data and analytics capabilities that are integral for optimal underwriting and claim assessment outcomes. As insurers look to improve internal efficiencies and offset hefty insurance losses, we view Verisk as well placed to benefit from accelerated digitization tailwinds. At current prices, Verisk shares trade in line with our unchanged fair value estimate.

Verisk’s top-line growth of 11% during the third quarter, or 10% excluding inorganic growth, reflects benefits from like-for-like pricing tied to above-average net written premium growth, lower client attrition and industry consolidation, and transactional revenue strength stemming from higher auto insurance shopping activity. The firm’s investments in product innovation are bearing fruit via improved retention of property estimating contractor clients, uplift from conversion of anti-fraud tools to subscription bundles, and strong demand for life insurance policy administration software. These demand drivers during the quarter more than offset weakness in marketing solutions as insurance providers pulled back on advertising spending and go-to-market efforts amid poor profitability.