Q3 2023 Verisk Analytics Inc Earnings Call

Good day, everyone and welcome to the various <unk> third quarter 2023 earnings adult Coffee conference call.

Call's being recorded currently all participants are in listen only mode. After today's prepared remarks, we will conduct a question and answer session, where we will limit participants to one question. So that we can allow every once a extra question.

We will have further instructions for you at that time.

Opening remarks, and introductions I would like to turn the call over to <unk> head of Investor Relations Ms. Stacy bought a bar is broadband. Please go ahead.

Thank you Cheryl and good day, everyone. We appreciate you joining us today for a discussion of our third quarter 2023 financial results on the call today are Lee Shave Oldbury, President and Chief Executive Officer, and Elizabeth Mountain Chief Financial Officer.

The earnings release referenced on this call as well as our traditional quarterly earnings presentation.

<unk> 10-Q can be found in the investors section of our website <unk> Dot 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 on our website and by dialing.

As set forth in more detail in today's earnings release, I will remind everyone. Today's call may include forward looking statements about <unk> future performance, including those related to our financial guidance actual performance could differ materially from what is suggested by our comments today information about the factors that could affect future performance is contained in our region.

Our SEC filings.

Finally, I'd also like to remind everyone that the financial results for recent dispositions are included in our consolidated GAAP results are excluded from all organic constant currency growth figures. A reconciliation of reported an historic non-GAAP financial measures discussed on this call is provided in our 8-K and today's earnings presentation.

Posted on the investors section of our website <unk> Dot com. However, we are not able to provide a reconciliation of projected adjusted EBITDA and adjusted EBITDA margin to the most directly comparable expected GAAP resolved because of the unreasonably high effort and unpredictability of estimating certain items that are.

Lou did from projected non-GAAP, adjusted EBITDA and adjusted EBITDA margin, including for example tax consequences acquisition related costs gains and loss from dispositions and other nonrecurring expenses the effect of which may be significant and now I'd like to turn the call over totally shameful.

Morning, and thank you for participating in our third quarter earnings call I am pleased to be here today to update you on the progress our team at <unk> is making on driving strategy and translating it into strong growth and value creation for our clients and shareholders alike. Elizabeth will provide the financial detail, but in summary, we delivered another strong quarter.

Our results marked by solid organic revenue growth across most of our businesses healthy margin expansion and double digit profit growth, we have confidence in our ability to deliver on both our 2023 guidance and the longer term objectives, we communicated back in March at Investor Day.

The industry environment within which we are operating is marked by some deep challenges in <unk>.

<unk> carriers are dealing with the crosscurrents of inflation and higher losses, which are both negatively impacting industry profitability.

In fact, a M best data for the first six months of 2023 points to $24 5 billion net underwriting loss for the U S property and casualty insurance industry running well ahead of the pace of the full year 2022, which experienced net underwriting losses of $26 9 billion a.

A M best notes that personal lines, specifically homeowners is the primary driver of these declines.

In reaction to this backdrop carriers are exiting markets and key catastrophe prone states dropping certain lines of unprofitable business and laying off portions of their workforce.

Carriers are also raising rates to attempt to cover rising inflation and losses driving net written premium growth up nine 7% for the first six months of 2023.

In response to this environment virus is partnering closely with our clients to address their most pressing concerns including high value solutions that can deliver high return on investment for our clients and.

And we are including our clients earlier in the innovation process to ensure we are delivering the right solutions with simple implementation improving the success rate and pace of uptake of new solutions.

One of the key tenants of our strategy is to elevate the strategic dialogue with our clients and to become their trusted data and analytics and technology partner.

During the third quarter, we engaged with clients on several occasions and at a variety of venues.

The various insurance conference in London.

This year, we have combined several virus events to make it easier for clients to explore the many ways, we can add value and increase the efficiency of their operations.

In London for example, we combined events focused on underwriting claims specialty insurance in extreme event modeling into a singular client centric experience featuring various solutions.

We delivered one of two keynote presentations and the entire virus senior operating committee was in attendance demonstrating our commitment to our customers at all levels.

Our solutions Gallery featured various solutions as well as the solutions of our ecosystem partners and we held 35 concurrent educational sessions.

We wrapped up with the CEO dinner with attendees that represented carriers brokers and managing general agents at a group discussion around common challenges faced by the entire insurance value chain.

Enterprise wide risk management is top of mind for many in London as our clients are managing extremely large and complex portfolios of risk spanning multiple classes of business and insurance markets all over the world.

To address this pressing need.

We recently introduced enterprise exposure manager this solution as a joint development effort between specialty business solutions and extreme events to bring to the market our cloud native and scalable solution that enables insurers and reinsurers to make more informed business decisions by offering a comprehensive view of risks that exist.

Across large property portfolios.

As we engage with our customers at these events and in the many one on one meetings, we have posted throughout the year. There were a few consistent themes that we hear in these conversations.

First is digital transformation with represents a massive opportunity for the global insurance market, our clients aspire to modernize their platforms improve systems integrations lower expenses and improve operational efficiency and we are partnering with them on this journey.

Various because introducing solutions that drive operational efficiency for some of their most people and paper intensive processes.

For example, within our casualty business, we recently launched discovery navigator and are seeing solid early success discovery navigator combines artificial intelligence and machine learning various contributory data and years of clinical and legal expertise to immediately identify and extract key.

Medical data points from unstructured records, which are part of bodily injury claims.

Pending on the complexity of the case the number of medical pages involved in a bodily injury claim can range from hundreds to thousands.

Various has automated the organization review and summary of these complex unstructured documents, allowing insurers to adjust negotiate and settle more claims in less time.

Discovery navigator easily integrates into our customers' workflows through API or online options and delivers up to a 90% time savings and 95% accuracy for an average 10 X ROI for clients.

Additionally, discovery navigator is a widely versatile tool that is driving innovation and can be used in combination with other virus solutions like liability navigator delivering workflow automation decision support and overall efficiency for clients.

The need for deeper data insights is also something we hear regularly from from customers.

Inflation trends during the past year have underscored the need for accurate up to date and granular data insights to inform underwriting risk management reinsurance and claims decisions.

No company is better positioned to meet this need then virus with our comprehensive and proprietary data assets. For example, our various property estimating solutions are designed to meet these challenges head on with a comprehensive set of tools based on timely proprietary data, enabling our customers to make the most accurate estimate.

As possible on their first attempt.

This reduces the risk of over in underpayments, while improving cycle times key.

Key to this process is exact expert our recently introduced rules engine that assists estimators and avoiding unwarranted cost in their estimates.

We also enable our customers quality assurance teams that evaluate the data from the entire process ensuring that the claim payment will be correct for the first time.

Finally, generative AI remains a frequent topic with clients, both its transformative potential and the risk that it brings.

We believe Jenny I can deliver efficiency was embarrassed and in client facing solutions, starting first in our underwriting and life businesses, where we are actively exploring new product development as well as enhancements to existing solutions, we are increasing our investment and leaning into generative AI as our clients recognize that by.

Partnering with various they can invest in this we can invest in this advanced technology on behalf of the industry more efficiently than any one customer can do on their own.

We also intend to do so while maintaining our focus on fairness and value centric governance.

On the theme of investment I want to provide a progress report and update on our core lines re imagine project. We were about one third of the way complete and what is likely a five year journey to modernize our forms rules and loss costs and related solutions.

We've made progress modernizing our internal processes like our ratemaking operation to enable and efficiently scale innovations in current and new solutions, we are expanding our industry, leading contributory database by adding new data contributors and by increasing the quality of our collected data and we are working on enhancing.

The recency of our data in our analytics.

On the customer facing side, we are in market with new proprietary analytics and workflow tools. For example, we have launched executive and client insight reports designed for the senior leadership of our clients across two of our largest lines of insurance, namely homeowners and business owners with plans to expand into other law.

<unk> lines over time.

Just this month, we also launched our legislated monitoring application in the new platform for select clients. This new cloud native application transforms what was previously a document based paper trail for tracking thousands of insurance related legal regulatory and legislative developments into a data driven modern digital.

Monitoring an efficiency tool with an improved customer interface.

Legislative monitoring is the first of a series of new features that will be launched over the next several years on the platform overall.

Overall customer feedback on the re imagine private project has been quite positive, including on the custom analytics and legislative monitoring application I mentioned before and there is excitement for future advances within core lines. This excitement is driving more constructive value driven conversations with our clients as we partner with them.

Long their digital transformation journey.

We are making these investments to deliver increased value for our clients through enhanced underwriting accuracy and efficiency.

With that I'll hand, it over to Elizabeth to review our financial results.

Thanks, Lee and good day to everyone on the call.

I am pleased to share that <unk> delivered strong third quarter financial results on a consolidated on GAAP basis revenue was $678 million up 11% versus the prior year and income from continuing operations was $187 million up 13% versus the prior year, reflecting.

Unknown Executive: Good day, everyone, and welcome to the Verisk Third Quarter 2023 earnings result conference call. This call is being recorded. Currently, all participants are in listen only month.

Unknown Executive: After today's prepared remarks, we will conduct a question and answer session where we will limit participants to one question so that we can allow everyone to ask the question. We will have further instructions for you at that time.

Strong growth across both underwriting and claims.

Diluted GAAP earnings per share from continuing operations were $1.29 up 23% versus the prior year.

Stacey Brodbar: For opening remarks and introductions, I would like to turn the call over to Verisk Head of Investigation, Ms. Stacey Brodbar. Ms. Brodbar, please go ahead. Thank you, Cheryl, and good day, everyone. We appreciate you joining us today for a discussion of our third quarter 2023 financial results. On the call today are Lee Shavel, there's President and Chief Executive Officer and Elizabeth Mann, Chief Financial Officer. The earnings release reference on this call, as well as our traditional quarterly earnings presentation and the associated 10 key revenue can be found in the investor section of our website, Verisk.com.

This quarter's reported results included a $19 million litigation reserve expense associated with an indemnification for an ongoing inquiry related to our former financial services segment, which was sold in April 2022.

Moving to our organic constant currency results adjusted for nonoperating items as defined in the non-GAAP financial measures section of our press release, our operating results demonstrated strong and broad based growth from most of our businesses aided by some in period transactional benefits in the third quarter OCC revenues.

Stacey Brodbar: The earnings release has also been attached to an AK that we have furnished to the SEC. A replay of this call will be available for 30 days on our website and by dial in. As set forth in more detail in today's earnings release, I will remind everyone today's call may include forward looking statements about Verisk's future performance, including those related to our financial guidance. Actual performance could differ materially from what is suggested by our comments today.

Grew nine 4% with growth of eight 3% in underwriting and 12, 2% in claims.

Our subscription revenues, which comprised 80% of our total revenue in the quarter grew nine 3% on an OCC basis with growth in almost all our subscription based solutions.

More specifically on the drivers of growth in subscription revenues during the quarter. We experienced the continued benefit on certain of our revenues from the stronger net premium growth in 2021, which is currently reflected in some of our contract pricing as well as a lower level of attrition and consolidation across the industry.

Stacey Brodbar: Information about the factors that could affect future performance is contained in our recent SEC filings. Finally, I'd also like to remind everyone that the financial results for recent dispositions are included and are consolidated in gap results, but are excluded from all organic constant currency growth figures. A reconciliation of reported and historic non-gap financial measures discussed on this call is provided in our AK and today's earnings presentation posted on the investor section of our website, Verisk.com.

Within property estimating solutions, our efforts to expand the ecosystem and drive new innovations like exact experts are paying dividends through higher level higher levels of customer retention for our contractor customers.

Stacey Brodbar: However, you're not able to provide a reconciliation of projected adjusted EBITDA as adjusted EBITDA margin is a most directly comparable expected gap result because of the un reasonably high effort and unpredictability of estimating certain items that are excluded from projected non-gap adjusted EBITDA and adjusted EBITDA margin. Including, for example, tax consequences, acquisition related costs, gains in loss from dissisitions and other non-recurring expenses, the effect of which may be significant.

In anti fraud, we saw underlying strength in the business with growth augmented by the continued benefit from the conversion to subscription from previously transactional customers through our claims essentials bundle.

And finally within extreme events solutions, we are benefiting from strong renewals and new customer wins.

Our transactional revenues, representing 20% of total revenue in the third quarter grew 10, 2% on an OCC basis.

Lee Shavel: And now I'd like to turn the call over to B. Shavel.

The largest contributor to growth was again from our auto solutions driven by better than expected shopping activity by consumers and the continued benefit from the large non rate action deal with the national insurer that we previously communicated.

Lee Shavel: Good morning and thank you for participating in our third quarter earnings call. I am pleased to be here today to update you on the progress our team at Verisk is making on driving strategy and translating it into strong growth and value creation for our clients and shareholders alike. Elizabeth will provide the financial detail, but in summary, we delivered another strong quarter of results marked by solid organic revenue growth across most of our businesses, healthy margin expansion and double digit profit growth. We have confidence in our ability to deliver on both our 2023 guidance and the longer term objectives we communicated back in March at investor day.

Our trends track consistently with the recent J D power data, which pointed to a 12% increase in shopping activity for auto insurance in the third quarter as customers continue to respond to rate increases.

That said, we will begin to anniversary the elevated shopping activity in the fourth quarter. So we are expecting that growth to moderate.

In addition to gains in auto our transactional revenue growth also benefited from double digit growth from life insurance solutions as we are seeing strong customer demand from in for incremental services.

Lee Shavel: The industry environment within which we are operating is marked by some deep challenges. Insurance carriers are dealing with the cross currents of inflation and higher losses, which are both negatively impacting industry profitability. In fact, AMBest Data for the first six months of 2023 points to a 24.5 billion net underwriting loss for the US property and cashier insurance industry, running well ahead of the pace of the full year 2022, which experienced net underwriting losses of 26.9 billion.

And within our property estimating solutions business, we saw strong transactional growth generated by our expanded set of distribution partners within our ecosystem.

And from elevated weather events, although not to the level of a large scale catastrophe.

In fact, according to various X P. C. S data the third quarter of 2023 had 73 days out of 92 that included a P. C. S event in the U S.

Lee Shavel: AMBest notes that personal lines specifically homeowners is the primary driver of these declines. In reaction to this backdrop, carriers are exiting markets in key catastrophe-prone states, dropping certain lines of unprofitable business, and laying off portions of their workforce. Carriers are also raising rates to attempt to cover rising inflation and losses, driving net written premium growth up 9.7% for the first six months of 2023. In response to this environment, Verisk is partnering closely with our clients to address their most pressing concerns, including high value solutions that can deliver high return on investment for our clients.

And 'twenty two 'twenty three is on track to become a new high for catastrophe frequency likely to bypass 2021 which was the highest year on record to date.

Moving now to our adjusted EBITDA results OCC adjusted EBITDA growth was 11, 8% in the third quarter, while total adjusted EBITDA margin, which includes both organic and inorganic results was 54% up 70 basis points from the report.

Lee Shavel: And we are including our clients earlier in the innovation process to ensure we are delivering the right solutions with simple implementations, improving the success rate and pace of uptake of new solutions. One of the key tenets of our strategy is to elevate the strategic dialogue with our clients and to become their trusted data and analytic and technology partner. During the third quarter, we engaged with clients on several occasions and at a variety of venues, including the Verisk Insurance Conference in London.

<unk> results in the prior year.

This margin rate reflects core operating leverage from the strong revenue growth and cost discipline across the organization.

As we've said in the past the margin rate in any given quarter. It can be influenced by revenue mix and timing of spending. So we think it's best to look at our margins on a trailing 12 month basis, which in the third quarter were 53, 3% up 150 basis points over last year's level.

Continuing down the income statement net interest expense was 29 million for the third quarter compared to 34 million in the prior year.

Lee Shavel: This year, we've combined several Verisk events to make it easier for clients to explore the many ways we can add value and increase the efficiency of their operations. In London, for example, we combined events focused on underwriting, claims, specialty insurance, and extreme event modeling into a singular, client-centric experience featuring Verisk solutions. I delivered one of two keynote presentations and the entire Verisk Senior Operating Committee was in attendance demonstrating our commitment to our customers at all levels.

The current level of net interest expense reflects lower year over year debt balances as we paid down our revolving credit facility as well as higher interest on cash balances.

Our reported effective tax rate was 25% compared to 24, 2% in the prior year quarter.

The year over year change in the tax rate is related to the $19 million litigation reserve expense that we mentioned earlier, partially offset by higher stock compensation benefits in this quarter versus the prior year's period.

Lee Shavel: A solutions gallery featured Verisk solutions as well as the solutions of our ecosystem partners and we held 35 concurrent educational sessions. We wrapped up with a CEO dinner with attendees that represented carriers, brokers, and managing general agents at a group discussion around common challenges based by the entire insurance value chain. Enterprise-wide risk management is top of mind for many in London as our clients are managing extremely large and complex portfolios of risk spanning multiple classes of business and insurance markets all over the world.

Going forward, we expect the tax rate for the full year 2023 to be near the high end of the originally guided range of 23% to 25%.

Adjusted net income increased 17% to 221 million and diluted adjusted EPS increased 27% to $1 52 for the third quarter 2023. These.

These changes reflect organic growth in the business contributions from acquisitions and a lower average share count this.

Lee Shavel: To address this pressing need, we recently introduced Enterprise Exposure Manager. This solution is a joint development effort between specialty business solutions and extreme events to bring to the market a cloud-native and scalable solution that enables insurers and re-insurers to make more informed business decisions by offering a comprehensive view of risks that exist across large property portfolios.

This share count reflects the impact of our $2 $5 billion accelerated share repurchase plan that we entered into in March as well as an additional $50 million worth of share repurchase that we completed in the third quarter.

Regarding the share count you can see that while our weighted average diluted shares outstanding declined seven 7% year over year. It was essentially flat sequentially.

Lee Shavel: As we engage with our customers at these events and in the many one-on-one meetings we have hosted throughout the year, there are a few consistent themes that we hear in these conversations. First is digital transformation, which represents a massive opportunity for the global insurance market. Our clients aspire to modernize their platforms, improve systems integrations, lower expenses, and improve operational efficiency, and we are partnering with them on this journey. Verisk is introducing solutions that drive operational efficiency for some of their most people and paper intensive processes.

From a cash flow perspective on a reported basis net cash from operating activities decreased 11% to $250 million.

Free cash flow declined 9% to $196 million.

The decline in both cash flow metrics is a function of the fact that prior year cash flow metrics include the results from previously divested businesses.

Well as a favorable cash tax impact in the prior year from the sale of our environmental health and safety business.

Lee Shavel: For example, within our casualty business, we recently launched the Discovery Navigator and are seeing solid early success. Discovery Navigator combines artificial intelligence and machine learning, Verisk's contributory data, and years of clinical and legal expertise to immediately identify and extract key medical data points from unstructured records, which are part of bodily injury claims. Depending on the complexity of the case, the number of medical pages involved in a bodily injury claim can range from hundreds to thousands.

Adjusted for these items, both cash flow metrics increased year over here during the third quarter.

We are very pleased with our robust year to date performance our guidance for 2023 remains unchanged. We now expect revenue to be towards the high end of our range of $2 63 to $2 six 6 billion.

Adjusted EBITDA is still expected to be between $1 three nine to 1.43 billion adjusted EBITDA margin in the 53% to 54% range and adjusted EPS in the range of $5 50 to $5 70.

Lee Shavel: Verisk has automated the organization, review, and summary of these complex unstructured documents allowing insurers to adjust, negotiate, and settle more claims in less time. Discovery Navigator easily integrates into our customers' workflows through API or online options and delivers up to a 90% time savings and 95% accuracy for an average 10X ROI for clients. Additionally, Discovery Navigator is a widely versatile tool that is driving innovation and can be used in combination with other Verisk solutions like liability navigator, delivering workflow automation, decision support, and overall efficiency for clients.

A complete listing of all guidance measures can be found in the earnings slide deck, which has been posted to the investors section of our website there is dot com.

We do want to remind you that the fourth quarter of 2022 included $6 million in revenue associated with hurricane in as well as the tax benefit associated with the divestiture of wood Mackenzie.

And now I will turn the call back over to Lee for some closing comments. Thanks Elizabeth.

In summary, we are excited about our business momentum and the opportunity ahead are motivating purpose is to partner with our clients and building resilience for individuals communities and businesses globally. The combination of our focused business model deep customer relationships and strategy to deliver value for clients to improve decision, making and operate.

Lee Shavel: The need for deeper data insights is also something we hear regularly from customers. Inflation trends during the past year have underscored the need for accurate, up-to-date, and granular data insights to inform underwriting, risk management, re-insurance, and claims decisions. No company is better positioned to meet this need than Verisk with our comprehensive and proprietary data assets. For example, our Verisk property estimating solutions are designed to meet these challenges head on with a comprehensive set of tools based on timely proprietary data, enabling our customers to write the most accurate estimates possible on their first attempt.

Efficiency is a formula that will also deliver value to our shareholders through growth and returns. We continue to appreciate the support and interest in <unk> given the large number of analysts we have covering us we ask that you limit yourself to one question with that I'll ask the operator to open the line for questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Lee Shavel: This reduces the risk of over-and-under payments while improving cycle times. Heated this process is exact expert, our recently introduced rules engine that assists estimators in avoiding un-warranted costs in their estimates. We also enable our customers' quality assurance teams that evaluate the data from the entire process ensuring that the claim payment will be correct the first time.

We will pause for just a moment to compile the Q&A roster.

Okay.

Your first question comes from the line of George Tong with Goldman Sachs. Your line is now open. Please go ahead.

Hi, Thanks can you talk a little bit about what youre seeing with insurance marketing budgets.

Especially in the current rate and inflation environment, if you're seeing any sort of a pullback.

Lee Shavel: Finally, generative AI remains a frequent topic with clients, both its transformative potential and the risk that it brings. We believe Gen AI can deliver efficiency within Verisk and in client-facing solutions, starting first in our underwriting and light businesses where we are actively exploring new product development, as well as enhancements to existing solutions. We are increasing our investment in leaning into generative AI as our clients recognize that by partnering with Verisk, we can invest in this advanced technology on behalf of the industry more efficiently than any one customer can do on their own. We also intend to do so while maintaining our focus on fairness and value-centric governance.

From insurance carriers.

Yes. Thank you George I appreciate the question. So the short answer is yes, I think that the dynamic that we're that we're observing is that because of the loss environment and the frustration of that the insurers are the carriers generally have had in getting.

Rate increases to compensate them for the increased risk and the increased replacement costs driven by by replacement right. Now they are focused on achieving profitability off of their existing existing books and that has resulted in a lower level of <unk>.

Lee Shavel: On the theme of investment, I want to provide a progress report and update on our core lines re-imagined project. We are about one-third of the way complete in what is likely a five-year journey to modernize our forms, rules, and lost costs and related solutions. We have made progress modernizing our internal processes like our rate-making operation to enable an efficiently scale innovations in current and new solutions. We are expanding our industry-leading contributory database by adding new data contributors and by increasing the quality of our collected data. And we are working on enhancing the the recency of our data in our analytics.

Advertising by the carriers as they are kind of working with their existing book. We have seen is Elizabeth described a lot of shopping activity, but that is consumer driven and as a response to the higher rates that almost everyone is experiencing right. Now you know the consequences of that for them for us is that in our various marketing solutions.

Business, we have seen declines within that business because of lower overall advertising spend by the carriers as a as a function of this environment.

Okay very helpful. Thank you.

Lee Shavel: On the customer facing side, we are in market with new proprietary analytics and workflow tools. For example, we have launched executive and client insight reports designed for the senior leadership of our clients across two of the largest lines of insurance, namely homeowners and business owners, with plans to expand into other large lines over time. Just this month, we also launched our legislative monitoring application in the new platform for select clients. This new cloud-native application transforms what was previously a document-based paper trail for tracking thousands of insurance-related legal, regulatory and legislative developments into a data-driven, modern, digital monitoring and efficiency tool with an improved customer interface.

Next question please line Manav.

Patnaik from Barclays Capital. Your line is now open.

Thank you I guess I'll just ask the question around the guidance that was maintained in this quarter. It came in I think you know above at least our expectations.

And probably yours correct me, if I'm wrong, there, but you know if if the subscription growth stays steady like it usually does.

Are you implying that the transaction piece you know it could see some material declines.

Would love any help with just trying to bridge that.

Yeah. Thanks, Thanks, very much manav.

On the guidance, where we're very proud of our results year to date, we've given full year guidance you know in order to bring additional transparency and Ann for folks to see how the business is going we did update that mid year after seeing significant shifts in the environment.

Lee Shavel: Legislative monitoring is the first of a series of new features that will be launched over the next several years on the platform. Overall, customer feedback on the reimagined project has been quite positive, including on the custom analytics and legislative monitoring application I mentioned before, and there is excitement for future advances within core lines. This excitement is driving more constructive value-driven conversations with our clients as we partner with them along their digital transformation journey. We are making these investments to deliver increased value for our clients through enhanced underwriting accuracy and efficiency.

But our full year guidance does imply revenue growth of approximately 8% to 9% on a reported basis Ah that's above our long term targets.

As we look at the fourth quarter or no specific comments on the fourth quarter other than what I highlighted which is to remind that the growth comparisons do get tougher in the fourth quarter due to the storm revenue in the <unk> and the tax benefit there.

Elizabeth Mann: With that, I'll hand it over to Elizabeth to review our financial results. Thanks, Leigh, and good day to everyone on the call. I am pleased to share that Veris delivered strong third quarter financial results. On a consolidated and gap basis, revenue was 678 million, up 11% versus the prior year. An income from continuing operations was 187 million, up 13% versus the prior year, reflecting strong growth across both underwriting and claims. Deluted gap earnings per share from continuing operations were $1.29, up 23% versus the prior year.

Line of Alex Kramm with UBS. Your line is now open.

Yes, Hey, good morning, everyone. Just a Lee you keep on talking about the strategic dialogue you have with customers.

At a high level.

It sounds like some of this stuff is resonating I guess I'm curious are you actually measuring success in any way yet or is this too early I mean, what should we be looking for larger outsourcing deals or or maybe again, specifically like any revenues that you're tracking that you can already talk about.

Thank you Alex happy to address that I think we have seen a.

Elizabeth Mann: This quarter's reported results included a 19 million dollar litigation reserve expense associated with an indemnification for an ongoing inquiry related to our former financial services segment, which was sold in April 2022. Moving to our organic constant currency results adjusted for non-operating items as defined in the non-gap financial measures section of our press release. Our operating results demonstrated strong and broad-based growth from most of our businesses, aided by some in period transactional benefits.

A clear benefit in a variety of areas. So you know one in first.

And first is that engaging at that strategic dialogue and I, probably have had over a dozen of the client CEO meetings and one thing that we focus on in that is understanding their broader enterprise challenges within this environment and Theres also a folk.

On what is what is various doing for us and where are there areas that we are helping others that we can help them and specifically in a number of those conversations we've identified our products existing products that we have that can be particularly helpful. In this environment.

Elizabeth Mann: In the third quarter, OCC revenues grew 9.4% with growth of 8.3% in underwriting and 12.2% in claims. Our subscription revenues, which comprised 80% of our total revenue in the quarter, grew 9.3% on a no-CC basis, with growth in almost all our subscription-based solutions. More specifically, on the drivers of growth and subscription revenues, during the quarter, we experienced the continued benefit on certain of our revenues from the stronger net premium growth in 2021, which is currently reflected in some of our contract pricing.

And I would say, our what we have done to help carriers analyze their existing rate adequacy, and where there may be opportunities to improve their rates are in there in their auto book or in other parts of their business.

<unk> opened up some channels that before where our bottoms up approach may have run into an obstacle within the organization, but when given the opportunity to describe the strategic benefit the financial benefit we're getting more top down support and I've seen that take place.

Elizabeth Mann: As well as a lower level of attrition and consolidation across the industry. Within property estimating solutions, our efforts to expand the ecosystem and drive new innovations like exact experts are paying dividends through higher level, higher levels of customer retention for our contractor customers. In the anti-fraud, we saw underlying strengths in the business with growth augmented by the continued benefit from the conversion to subscription from previously transactional customers through our claims essentials bundle.

In a number of clients. So I think that's that's one the second is in understanding areas emerging areas, where they are facing.

Either challenges or interest in new technologies and opportunity to <unk>.

<unk>, what we are doing in some of our projects like core lines re imagine what we're doing in generative AI to tailor them to what we know has strategic resonance for those clients has been helpful. And so I think as we have been investing in a number of generative AI applications.

Elizabeth Mann: And finally, within extreme event solutions, we are benefiting from strong renewals and new customer wins. Our transactional revenues, representing 20% of total revenue in the third quarter, grew 10.2% on a no-CC basis. The largest contributor to growth was again from our auto solutions, driven by better than expected shopping activity by consumers, and the continued benefit from the large non-rate action deal with a national insurer that we previously communicated. Our trends track consistently with the recent JD power data, which pointed to a 12% increase in shopping activity for auto insurance in the third quarter, as customers continue to respond to rate increases.

That has been.

Specifically helped by getting insight and buy in from those levels I had one one dinner with the CEO said look Lee we could spend tens of millions of dollars on generative AI.

And I'm not sure what we'll be able to generate out of it but if you can develop a pilot and we can can benefit from that we would be happy to test that pilot as soon as you have it ready and I think that's a great. Great example of where we're able to substantiate that strategic dialogue and <unk>.

Elizabeth Mann: That said, we will begin to anniversary the elevated shopping activity in the fourth quarter, so we are expecting that growth to moderate. In addition to gains in auto, our transactional revenue growth also benefited from double-digit growth from life insurance solutions, as we are seeing strong customer demand for incremental services. And within our property estimating solutions business, we saw strong transactional growth generated by our expanded set of distribution partners within our ecosystem.

Slated into targeted product development at a faster rate than we would have before I think those are certainly benefits that we'll hope to begin to deliver additional growth for us in 2020 for supporting a supporting our core core business.

Your next question comes from the line of Greg Peters with Raymond James Your line is now open great.

Great Good morning, everyone.

Elizabeth Mann: And from elevated weather events, although not to the level of a large scale catastrophe. In fact, according to Varysk's PCS data, the third quarter of 2023 had 73 days out of 92 that included a PCS event in the US. And 2023 is on track to become a new high for catastrophe frequency, likely to bypass 2021, which was the highest year on record to date. Moving now to our adjusted EBITDA results, OCC adjusted EBITDA growth was 11.8% in the third quarter, while total adjusted EBITDA margin, which includes both organic and inorganic results, was 54%.

I will focus my question on.

Slide six of your Investor deck, where you breakout subscription and non subscription growth.

And I guess I'm going to come at the non subscription piece, where you call out auto underwriting property estimating and life insurance.

And clearly you're doing really well this year, but we're also dealing with some really unusual profitability challenges inside auto and property.

Would you expect that the non subscription organic growth rate.

Wood inversely correlated with sort of the underwriting cycle for your carrier partners or am I missing something.

Yeah.

Elizabeth Mann: Up 70 basis points from the reported results in the prior year. This margin rate reflects core operating leverage from the strong revenue growth and cost discipline across the organization. As we've said in the past, the margin rate in any given quarter can be influenced by revenue mix and timing of spending. So we think it's best to look at our margins on a trailing 12 month basis, which in the third quarter were 53.3% up 150 basis points over last year's level.

Well, let me. Thanks. Thanks for the question, Greg Let me, let me take a crack at that.

I think it's a little bit hard to draw that conclusion that transactional revenue is a is a combination of a couple of different areas. We've highlighted the mainland that contributed to the growth are the auto underwriting the shopping activity has driven that.

The the the property estimating solutions as a as a transactional component related to weather activity and then life a life on the incremental services.

So I'm not sure I would point it directly to an inverse correlation to the underwriting environment.

Elizabeth Mann: The current level of net interest expense reflects your lower year over year debt balances as we pay down our revolving credit facility, as well as higher interest on cash balances. A reported effective tax rate was 25% compared to 24.2% in the prior year quarter. The year over year change in the tax rate is related to the $19 million litigation reserve expense that we mentioned earlier, partially offset by higher stock compensation benefits in this quarter versus the prior year's period.

Your next question comes from Andrew Jeffrey with Securities. Your line is now open.

Thank you good morning, I appreciate you taking the question.

Elizabeth could could you give us an update on the state of two markets one, Florida, just an update on liquidations and how that's impacting your outlook for the fourth quarter and also California.

No Theres been I think Lee you referred to it in your prepared remarks, some disruption and especially homeowners underwriting in California, and some challenges that carriers are facing raising rates just wondering if there any updates on either of those areas as it pertains to the guidance and maybe the longer term outlook.

Elizabeth Mann: Going forward, we expect the tax rate for the full year 2023 to be near the high end of the originally guided range of 23 to 25%. Adjusted net income increased 17% to 221 million and diluted adjusted EPS increased 27% to $1.52 for the third quarter 2023. These changes reflect organic growth in the business, contributions from acquisitions and a lower average share count. The share count reflects the impact of our $2.5 billion accelerated share repurchase plan that we entered into in March, as well as an additional $50 million worth of share repurchase that we completed in the third quarter.

Yes. He Andrew this is Lee I know you directed that too Elizabeth, but we have Neil Spector, who runs our underwriting business for us and I think he's been been closest to that though so let me give him an opportunity to give you a read from what we're what we're seeing in those markets sure. Thanks, well first of all I I'm I'm sure you've seen the news that several large.

National carriers have kind of withdrawn.

Writing new business in both those markets due to the challenges however, in Florida, specifically, we haven't seen any additional liquidations and theres been no.

Reduction in the rating.

The ratings of the carriers that are there. So they're 10, there's still availability in that market of carriers and you may have seen recently a press release, we put out in the last quarter, showing how citizens, which is the state run Cninsure is leveraging some of our aerial imagery data to help with.

Elizabeth Mann: Regarding the share count, you can see that while our weighted average diluted shares outstanding declined 7.7% year over year, it was essentially flat sequentially. From a cash flow perspective on a reported basis net cash from operating activities decreased 11% to 250 million, while free cash flow declined 9% to 196 million. The decline in both cash flow metrics is a function of the fact that prior year cash flow metrics include the results from previously divested businesses, as well as a favorable cash tax impact in the prior year from the sale of our environmental health and safety business.

<unk> of properties in Florida.

So that that's really the.

Stable as far as you know between the last time, we reported and now Cal.

California, there's certainly challenges both in the amount of time it takes to get rates approved and also in what tools you're allowed to use in Florida as far as pricing goes in that those continue although you know the regulators in California are seriously looking at the potential to use more tools in the future to help.

Elizabeth Mann: Adjusted for these items, both cash flow metrics increased year over year during the third quarter. We are very pleased with our robust year-to-day performance. Our guidance for 2023 remains unchanged. We now expect revenue to be towards the high end of our range of 2.63 to 2.66 billion. Adjusted EBITDA is still expected to be between 1.39 to 1.43 billion. Adjusted EBITDA margin in the 53 to 54% range, and adjusted EPS in the range of 5.50 to 5.70.

Challenges like wildfire.

And I would add to that Andrew and I think that gives a great kind of current sense of where things are.

Neil and I were in Washington D. C last week meeting with a number of the trade associations just to understand how we can be helpful to the industry from a data perspective, and one thing that was that was very clear is that the Florida and California are both very engaged with the.

Industry.

To understand what steps could be taken to improve the health of those markets I think they understand the risk and the challenges. They obviously face some political pressure, but we've been encouraged by their openness to discussing how they can improve the market.

Elizabeth Mann: A complete listing of all guidance measures can be found in the earnings slide deck which has been posted to the investor section of our website, Verisk.com.

Elizabeth Mann: We do want to remind you that the fourth quarter of 2022 included $6 million in revenue associated with Hurricane Ian, as well as a tax benefit associated with the divestiture of Wood McKenzie.

Dynamic afford the carriers within each of those markets and that's an intense level of dialogue.

Could could ameliorate ameliorate some of the kind of the early pressures that we saw.

Lee Shavel: And now I will turn the call back over to Lee for some closing comments. Thanks Elizabeth.

Your next question comes from the line of Jeff Mueller with Baird. You May now go ahead.

Lee Shavel: In summary, we are excited about our business momentum and the opportunity ahead. Our motivating purpose is to partner with our clients in building resilience for individuals, communities and businesses globally. The combination of our focused business model, deep customer relationships and strategy to deliver value for clients to improve decision making and operational efficiency is a formula that will also deliver value to our shareholders through growth and returns. We continue to appreciate the support and interest in Verisk given the large number of analysts we have covering us.

Yes, Thanks, I would imagine we're at the time of year, where you're starting to send invoices on 24 pricing. So can you just talk through how you're thinking about it relative to the historical context, just given the cross currents.

Still elevated inflation, but maybe it's coming down the P&C insurance industry profitability challenges and then just not sure how things like core lines play into what pricing realization versus discrete op. So thank you.

Unknown Executive: We ask that you limit yourself to one question. With that, I'll ask the operator to open the line for questions. At this time, I would like to remind everyone in order to ask the question, press star, then a number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Yeah. Thanks, Thanks, Jeff for the question, obviously, we're looking at it.

It's still it's still early in the cycle.

I am not in a position to quote any any numbers or any thoughts on 'twenty four.

You know the data on 2022, while it is still being finalized it does show net written premium growth.

Well in an elevated level are around the eight slightly north of 8% that that has tapered from the 2021 growth, but still are still relatively high on a historical basis I think Leigh pointed to them. Both both of that environment, but also the fact that it is a function of the challenges in the design.

George Tongue: Your first question comes from the line of George Tongue with Goldman Sachs. Your line is now open. Please go ahead. Hi, thanks. Can you talk a little bit about what you're seeing with insurance marketing budgets, especially in the current rate and inflation environment. And if you're seeing any sort of a pullback from insurance carriers. Yeah, thank you, George. Appreciate the question.

I ought to move towards profitability that our that our carriers our customers are seeing.

And so we are we are balancing those two things because they go into the right.

Right the price pricing cycle for next year.

Lee Shavel: So, you know, the short answer is yes. I think that the dynamic that we're observing is that because of the loss environment and the frustrations that the insurers are the carriers generally have had in getting rate increases to compensate them for the increased risk and the increased replacement costs driven by by replacement. Right now, they are focused on achieving profitability off of their existing existing books. And that has resulted in a lower level of advertising by the carriers as they are kind of working with their existing book.

I think those are the two core elements one the of the impact of premium growth, which as we indicated remains remained strong.

As well as the value that we are creating particularly in core lines, where we've increased the number of data sets. We've increased the ability of our clients to utilize that data and so we certainly look to capture the value that we're creating for our clients there and all of those factor into our pricing our pricing.

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Your next question comes from the line of Russell quote with Redburn. Your line is now open.

Lee Shavel: We have seen as Elizabeth described a lot of shopping activity, but that is consumer driven and is a response to the higher rates that almost everyone is experiencing right now. You know, the consequences of that for us is that in our various marketing solutions business, we have seen declines within that business because of lower overall advertising spend by the carriers as a function of this environment. Very helpful. Thank you.

Russell are you there.

Russell Your line and then to the next question.

The next question comes from the line of Toni Kaplan with Morgan Stanley You May now go ahead.

Thank you.

Lee I was hoping you could talk about the M&A pipeline any areas of particular interest maybe technology, just given you highlighted that digital transformation theme earlier.

Just wanted to ask about sort of how what would be interesting and how you're seeing levels of of assets right now.

Manav Patnaik: Next question, please line of men of technique from Barclays Capitol. The line is now open. Thank you. I guess I'll just ask the question around the guidance that was maintained. I mean, this quarter came in, I think, you know, above at least our expectations and and probably yours correct me if I'm wrong there, but, you know, if the subscription growth they study like it usually does, are you implying that the transaction piece, you know, could see some material declines, just would love any help, but just trying to bridge that.

Thanks, Tony So the first thing that I would say is as hopefully as is evidenced by kind of what we what we have been doing has been a primary focus on our our internal operations and what we can accomplish with the core business and.

We were particularly focused on the growth objectives, we set the margin objectives that we've that we've said and we feel it's important coming after coming off a investor day that we are focused on demonstrating a what's the core franchise is able to deliver so in that regard and we are not <unk>.

Manav Patnaik: Yeah, thanks. Thanks. Thanks very much, Manav. On the guidance, we're, we're very proud of our results year to date. We've given full year guidance, you know, in order to bring additional transparency and and for folks to see how the business is going. We did update that made year after seeing significant shifts in the environment. But our full year guidance does imply revenue growth of approximately eight to nine percent on a on a reported basis.

Looking at any substantial large acquisitions that would be transformative. We obviously are entirely focused on insurance right now and so that's the on the the orientation. We do maintain active engagement on smaller mid size opportunities you know generally sub 100.

Manav Patnaik: That's above our long term targets. As we look at the fourth quarter, you know, no specific comments on the fourth quarter, other than what I highlighted, which is to remind that the growth comparisons do get tougher in the fourth quarter due to the storm revenue and the and attack benefit there.

Third million, where we feel there may be a high quality product that has gotten initial traction with the industry and where we can add substantial value by accelerating its adoption in many cases are our clients feel more comfortable with adopting a product when they know that.

Alex Kramm: Line of Alex Kram, will you be a line is now open.

Have the strength and the stability in our capabilities behind it or we can enhance that product by improving the data sat improving the efficiency of the technology, that's driving it and we've had success with that in a number of areas, probably most notably our acquisition of fast on the life side, which has.

Lee Shavel: Yeah, say good morning everyone. Just the Lee you keep on talking about, you know, the strategic dialogue you have with customers at a high level. And it sounds like some of the stuff is resonating. I guess I'm curious, are you actually measuring success in any way yet or is this too early? I mean, should we be looking for larger, I don't know, outsourcing deals or maybe again, specifically like any revenues that that you're tracking that you can already talk about.

It's been a.

A textbook case of of where we can add value in those areas. We continue to be excited about the marketing opportunity, even though as we mentioned in our earlier comments the advertising environment has been a headwind for that but we see broader appetite for those and we will look to continue to across all of our businesses to see where.

Lee Shavel: Thank you, Alex. Happy to address that. I think we have seen a clear benefit in a variety of areas. So, you know, one and first and first is that engaging at that strategic dialogue. And I probably have had over a dozen of client CEO meetings. And one thing that we focus on in that is understanding their broader enterprise challenges within this environment. And there's also a focus on what is what is various doing for us.

There might be a technology or a product or a data set that is that that is relevant. So I wouldn't say that there is anything in particular, we really arent aware of it across all of our businesses and we want to make certain that we don't Miss an opportunity to enhance one of our one of our businesses. If there is something that is truly additive.

Your next question comes from the line of Andrew <unk> with Jpmorgan. Your line is now open Hi, Elizabeth you pointed to the high end of the 2023 guidance range now being expected was that just for revenues or for other figures as well.

Lee Shavel: And where are their areas that we are helping others that we can help them. And specifically in a number of those conversations, we've identified products existing products that we have that can be particularly helpful in this environment. And I would say are what we have done to help carriers analyze their existing rate adequacy and where there may be opportunities to improve their rates in their auto book or in other parts of their business.

Then when I look at the high end for the 2023 revenue guide I get an implied revenue growth for the fourth quarter of plus 4% of question that would be as reported could you help us with the.

The counterparty OCC revenue growth implied in the fourth quarter.

Yeah. Thanks for the question Andrew.

That comment about the high end was specific and confined to revenues.

Lee Shavel: And that's opened up some channels that before where our bottoms-up approach may have run into an obstacle within the organization. But when given the opportunity to describe the strategic benefit, the financial benefit, we're getting more top-down support. And I've seen that take place in a number of clients. So, I think that's one. The second is in understanding areas, emerging areas where they are facing either challenges or interested new technologies and opportunity to guide what we are doing in some of our projects like core lines, reimagine what we're doing in generative AI to tailor them to what we know has strategic resonance for those clients.

And did not apply to the other line items.

And I'm not here to comment on our on the fourth quarter in specific.

Other than the points I made about the year over year comps.

Your next.

Question comes from the line of Jeff Silber from BMO capital markets. Your line is now open.

Thanks, so much I'm going to ask a question about 2024, but not a numbers question I'm, just curious compared to a year ago. What areas of your business are you feeling more confident about as we head into the next year and Conversely, what areas might be a bit more concerning for you than they were a year ago.

Yeah. Thank you. Thank you Jeff.

It's a.

An interesting question and.

Lee Shavel: And so I think as we have been investing in a number of generative AI applications, that has been specifically helped by getting insight and buy-in from those levels. I had one dinner with the CEOs that look, we could spend tens of millions of dollars on generative AI. And I'm not sure what we'll be able to generate out of it, but if you can develop a pilot and we can benefit from that, we would be happy to test that pilot as soon as you have it ready. And I think that's a great example of where we're able to substantiate that strategic dialogue and translate it into targeted product development at a faster rate than we would have before.

I would start off by saying that first at a high level I feel as though.

The strategic engagement that we've had has created a broader opportunities for us to advance in a number of businesses by more effectively.

And you, indicating the value to onto their enterprises. So I think that's certainly something that we feel feel.

Feel strongly about.

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In addition.

Our fuel confident about the core lines re imagine investments that we've made.

And our ability to deliver greater value to our clients over the next several years and to participate in in that.

I think that we are.

Lee Shavel: I think those are certainly benefits that we'll hope to begin to deliver additional growth for us in 2024 supporting our core business.

Also I am seeing.

In the in the in.

The property market and the focus around <unk>.

Profitability and opportunity to serve our clients more broadly I think the other thing that we would look at it is this year that we have benefited from is some higher level of transactional activity, particularly in the auto side with high levels of shop.

Greg Peters: The next question comes from a line of Greg Peters with Raymond James. The line is now open Greg. Great.

Lee Shavel: Good morning, everyone. I will focus my question on slide six of your investor deck, where you break out subscription and non subscription growth. And I guess I'm going to come at the non subscription piece, where you call out auto underwriting property estimating and life insurance. And clearly you're doing really well this year, but we're also dealing with some really unusual profitability challenges inside auto and property. Would you expect that the non subscription organic growth rate would inversely correlate with sort of the underwriting cycle for your carrier partners or am I missing something?

That has contributed to our growth rate and that may not be sustained into 2024. Similarly on the on the property side.

Some higher levels of activity there that have contribute to strong growth I think overall, we're really pleased with the growth that we generated in 2023, we had some had some tail winds we arent providing guidance on 2024 at this point, we have to step back and assess where we are and we will do that in the in the <unk>.

In the first quarter, but I think strategically and from a and from an investment standpoint, we're excited about where we're where we're investing.

Core lines generative AI investments that we're making in broadening our ecosystem and integrating other partners that add value to our to our customers and we will continue to work to.

Lee Shavel: Well, let me thanks for the question, Greg. Let me take a crack at that. I think it's a little bit hard to draw that conclusion. The transactional revenue is a combination of a couple different areas. We've highlighted the main ones that contributed to the growth. The auto underwriting, the shopping activity has driven that the property estimating solutions as a transactional component related to whether activity and then life, life on the incremental services. So I'm not sure I would point it directly to an inverse correlation to the underwriting environment.

Offset and mitigate any of the any of the transactional benefits that we've had in 2023.

Your next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.

Hi, Good morning, Thanks for taking my question wanted to ask a modeling one not not specific to fourth quarter of 'twenty three.

Not necessarily just wanted to ask.

It's been a little bit of a crazy one I think that that speaking to it lately a lot of moving parts, where the business sits today is there any how would you kind of describe the seasonality of transaction revenue is there.

Andrew Jeffrey: Your next question comes from Andrew Jeffrey, which was securities. Your line is now open Andrew. Thank you. Good morning. Appreciate taking the question. Elizabeth, could you give us an update on the state of two markets, one Florida, just an update on liquidations and how that's impacting your outlook for the fourth quarter. And also California. I know there's been I think we referred to it in your prepared remarks. Some disruption in especially homeowners underwriting in California and some challenges that carriers are facing raising rates. Just wondering if there are any updates in either of those areas as it pertains the guidance and the maybe the longer term outlook to.

If we're talking about 25 26 is there like a typical cadence that we should expect on the non subscription line given the.

The makeup.

The underlying businesses that comprise that thank you.

Yeah. Thanks, Thanks for the question Andrew.

The biggest component of the transaction revenue that has some seasonality to it. There's there's two that come to mind. One is the weather the weather related seasonality in property estimating solutions that on a long term historical basis tends to occasionally get a boost in the third quarter as a function of.

Neil Spector: Yeah, he Andrew, this is Lee, you know, I know you directed that to Elizabeth, but we have Neil Specter who runs our underwriting business for us. And I think he's been been closer to that. So let me give him an opportunity to give you a read from what we're seeing in those markets. Thanks. Well, first I'm sure you've seen the news that several large national carriers, you know, have kind of withdrawn writing new business and both those markets due to the challenges.

You know Atlantic Hurricanes.

Last year in 'twenty, two that happened to hit in October until in the fourth quarter. The other elements that you saw you saw last quarter the securitization market can sometimes.

That hits in the second quarter, primarily that's a relatively small part.

Neil Spector: However, you know, in Florida specifically we haven't seen any additional liquidations and there's been no reduction in the rating, the ratings of the carriers that are there. So they're 10, you know, they're still availability in that market of of carriers and you may have seen recently oppressed at least we put out in the last quarter showing how citizens, which is the state running sure is leveraging some of our aerial imagery data to help with evaluation of properties in Florida.

In our business the other elements of transactional revenue I don't necessarily have a seasonal pattern to the life insurance services. The auto underwriting product is more of a function of their their own markets.

The next question comes from the line of Heather Bosky with Bank of America. Your line is now open.

Hi, Thank you for taking my question I was hoping you could update us on your expense program, where you are today are there any other areas that you are identifying in terms of opportunity as we look forward.

Neil Spector: So that that's really stable as far as, you know, between the last time we reported and now California, there's certainly challenges both in the amount of time it takes to get rates approved and also in what tools you're allowed to use in Florida as far as pricing goes. And those continue, although, you know, the regulators in California are seriously looking at the potential to use more tools in the future to help, you know, with challenges like wildfire.

Yes.

Yeah, Heather thanks for the question.

Our our expense program as we as we highlighted in the past I think we said sort of over 90% of the benefit is is experienced in 2023. So I think all of those original set of actions. We think with the you know they've largely been action then are expressing themselves in that in the margin expansion that youre seeing today.

You know there is there is continued focus on cost efficiency at various.

Neil Spector: Yeah, and I would add to that Andrew. I think that that gives a great kind of current sense of where things are. Neil and I were in Washington DC last week meeting with a number of the trade associations just to understand how we can be helpful to the industry from a data perspective and one thing that was that was very clear is that the Florida and California are both very engaged with the industry.

And so we're looking in the future for opportunities.

Based on our global talent outsourcing program and based I. They swell on investments in internal efficiency that will play out over time like the ERP program that we've talked about.

And Heather I would say look we're very focused on the the margin objectives that we set at Investor day.

Neil Spector: To understand what steps could be taken to improve the health of those markets. I think they understand the risk and the challenges. They obviously face some political pressure, but we've been encouraged by their openness to discussing how they can improve the market dynamic for the carriers within each of those markets. And that's an intense level of dialogue that could ameliorate some of the early pressures that we saw.

I think we had a very good a good start and what we have delivered and have been realizing the benefits of that but it's a continuous process for us and we're always going to look for whereas we can achieve greater and greater efficiencies throughout the business and Elizabeth mentioned, several but as we have been able to make the business a more integrated business.

Just on insurance I think we've identified some areas, where we can improve both effectiveness and efficiency in the organization and we'll expect to be pursuing those in 2024 to continue that momentum.

Lee Shavel: Your next question comes from the line of Jeff Mueller with Baird. You may now go ahead. Yeah, thanks. I imagine we're at the time of year where you're starting to send invoices on 24 pricing. So can you just talk through how you're thinking about it relative to the historical context, given the cross-currents of still elevated inflation, but maybe it's coming down to P&T insurance industry profitability challenges. And then just not sure how things like core lines play into that pricing realization versus discrete upsell. Thank you. Yeah, thanks. Thanks, Jeff, for the question. Obviously, we're looking at it. It's still early in the cycle.

Your next question comes from the line of Seth Weber with Wells Fargo Securities. Your line is open.

Hi, Thanks, Good morning, and thanks for taking my question.

I was interested in your comment in the prepared remarks about incremental business on the life side I'm wondering if you could just unpack that a little bit and talk about customer appetite for more cross selling taking taking more solutions here in this environment. Thank you.

So Seth Thank you for the thank you for the question and.

I'm going to I'm going to ask Neil to talk about where we see incremental opportunities within that within the life. The life space is I think it's it's honorably clients, but also thinking about kind of the nature of their technology that low code no code approach and its applicability more on more broadly here in the industry, yes, thankfully so our solution in.

Lee Shavel: And I, you know, I'm not in a position to quote any numbers or any thoughts on 24. Or, you know, the data on 2022, while it's still being finalized, it does show net written premium growth, you know, still in an elevated level around the eight, you know, slightly north of 8% that that has tapered from the 2021 growth, but still still relatively high on a historical basis. I think Lee pointed to both that environment, but also the fact that it is a function of the challenges and the desire to move towards profitability that our carriers, our customers are seeing.

Life is a low code no code software platform that helps a life insurer from that policy administration distribution claims from our full lifecycle and.

What we've seen is even in the current environment there is a.

Huge need and the life industry and a modernized technology.

Yeah, they're they're behind P&C as far as modernization of systems and as Lee pointed out because our system is a low code no code, we have the opportunity to potentially lower the operating costs of deployed lines of business on our platform pretty substantially versus legacy solutions. So there's a strong in.

Lee Shavel: And so we are balancing those two things as we go into the rate, the price pricing cycle for next year. I think those are the two core elements. One of the the impact of premium growth, which is we indicated remains remains strong as well as the value that we are creating, particularly in core lines where we've increased the number of data sets, we've increased the ability of our clients to utilize that data. And so we certainly look to capture the value that we're creating for our clients there and all of this factor into our pricing or pricing considerations.

Sensitive for life insurers to move on to these more flexible and lower cost operating.

Environment.

We've also seen a huge need from our customers in support of their transformation and that has driven some of our.

Our service our transactional revenue for our existing customers because of their desire to have a support.

Russell Quelch: Your next question comes from the line of Russell Welch with Redburn. The line is now open. Russell, are you there?

Their implementation efforts.

Your next question comes from the line of surrender, then with Jefferies. Your line is now open.

Thank you Lee could you. Please discuss maybe the performance in the international business, maybe what's driving growth there.

Unknown Executive: Russell, your line.

Toni Kaplan: Your next question comes from the line of Tony Kaplan with Morgan Stanley. You may now go ahead. Thank you.

How that kind of differs from the U S and maybe even some product plans or how you expect it to grow further offering out there.

Yeah. Thank you surrender I'm going to I appreciate that yeah. We've been we've been pleased with the the international growth rates.

Lee Shavel: Lee, I was hoping you could talk about the M&A pipeline, any areas of particular interest, maybe technology, just given you highlighted the digital transformation theme earlier. I just wanted to ask about sort of how what would be interesting and how you're seeing levels of assets right now. Thanks. Thanks, Tony.

Across the across the organization I would put them into three.

Three categories, we first have our specialty business solutions, which is predominantly a london based addressing the the the Lloyd's where the excess and surplus market. There. They continued to have success in delivering.

Lee Shavel: So the first thing that I would say is as hopefully as is evident by kind of what we what we have been doing has been a primary focus on our internal operations and what we can accomplish with the core business. And we're particularly focused on the growth objectives that we've set, the margin objectives that we've set. And we feel it's important coming after coming off of investor day that we are focused on demonstrating what the core franchise is able to deliver.

Workflow.

In automation efficiencies through the software platform that they are have built in or integrating other components too. We think that's and delivers a lot of value to the participants in that in that market. So that's been additive to our onto our overall growth rate on the underwriting side, we have a.

Our life health and travel business.

That.

It has performed performed well, particularly coming off of the resurgence of of global travel post the pandemic. Since then it's kind of normalized but we continue to see opportunities for that to grow and I'm going to actually turn to marine Rod who has had several businesses of <unk>.

Lee Shavel: So in that regard, we are not looking at any substantial large acquisitions that would be transformative. We obviously are entirely focused on insurance right now, and so that's the orientation. We do maintain active engagement on smaller midsize opportunities, you know, generally sub 100 million where we feel there may be a high quality product that has gotten initial traction with the industry. And where we can add substantial value by accelerating its adoption, in many cases, our clients feel more comfortable adopting a product when they know that they have the strength and the stability and our capabilities behind it.

Lee Shavel: Or we can enhance that product by improving the data stat, improving the efficiency or the technology that's driving it. And we've had success with that in a number of areas, probably most notably our acquisition of fast on the life side, which has been a textbook case of where we can add value in those areas. We continue to be excited about the marketing opportunity, even though as we mentioned in our earlier comments, the advertising environment has been a headwind for that.

Nationally.

On the claims side to give you a sense of our experience there as well, but thank you Lee. Thank you Sir under for the for the question.

As I have mentioned in previous calls we had made decision within the international claims business to reorganize to unit splitting the U K and Europe about a year ago to drive more focus on growth and that.

Approach and the execution of the strategy has paid dividend.

Talking about the U K first which is growing with speed and focus under the leadership of Chris suffered and his team innovating on existing property.

The injury and auto or motor as we call it across the pond solutions and more recently there has been a focus on the anti fraud space within the U K.

On the European side under the leadership of <unk> showed in his team.

We had entered the bodily injury market through Germany, a couple of years ago through the acquisition of <unk> as a matter of fact I was just in Cologne, where we hosted a market event attended by over 70 customers, who showed greater support for the bodily injury solutions and product offering.

Lee Shavel: But we see broader appetite for those, and we'll look to look to across all of our businesses to see where there might be a technology or a product or a data stat that is relevant. So I wouldn't say that there is anything in particular. We really are aware of it across all of our businesses, and we want to make certain that we don't miss an opportunity to enhance one of our businesses if there is something that is truly ahead.

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As well as an appetite to engage more.

More.

Frequently with ferrous too on the motor side, where we have a few months back made the crude.

Acquisition on the on the motor side and that integration is proceeding well and delivering our plan and last but not least.

Andrew Steinerman: Your next question comes from the line of Andrew Steinerman with J.P. Morgan.

Elizabeth Mann: Your line is now open. Hi, Elizabeth. You pointed to the high end of the 2023 guidance range now being expected. Was that just for revenues or for other figures as well? And then when I look at the high end for the 2023 review guide, I get an implied review growth for the fourth quarter of plus 4% of question. That would be as reported, could you help us with the, you know, the counterpart, the OCC review growth implied in the fourth quarter?

We have or the <unk> acquisition.

And Scandinavia based out of Sweden that delivers technology solutions for the bodily injury space.

Finally from an operating model perspective, we are leveraging our position in multiple territories.

With single Finance human resources marketing legal as well as technology platforms and surrender just to kind of put it in context to the international revenues represent about 17% of our total as you probably would see in the investor presentation, and I think the right character a characteristic is that this is an opportunity for us to penetrate new markets.

Elizabeth Mann: Yeah, thanks for the question Andrew. That comment about the high end was specific and confined to revenues and did not apply to the other line items. And I'm not here to comment on on the fourth quarter in specific other than the points I made about the year over year comes.

It is a diverse as you can hear from a lot of the businesses. So we have a number of growth factors and I would end by saying our focus also on elevating our dialogue to.

To articulate the strategic value to our international institutions as part of our strategy as well. So we're happy with the progress that we're making we continue to see that as a substantial growth opportunity for us.

Jeffrey Silber: Your next question comes from the line of Jeff Silver from BMO Capital Market. Your line is now open. Thanks so much. I'm going to ask a question about 2024, but not a numbers question. I'm just curious compared to a year ago.

The next question.

Lee Shavel: What areas of your business are you feeling more confident about as we head into the next year and conversely, what areas might be a bit more concerning for you than they were a year ago? Thanks. Yeah, thank you. Thank you, Jeff. You know, it's a interesting question and I would start off by saying that first at a high level, I feel as though the strategic engagement that we've had has created broader opportunities for us to advance in a number of businesses by, you know, more effectively communicating the value to their enterprises.

From the lineup assays, so Bachelor of RBC. Your line is now open.

Thanks for taking my question you mentioned <unk>.

A couple of times.

So and you highlighted.

Improving existing products as well as launching new products using Jennie are my question. There was how should we think about the monetization of Jenny I wondering if you could give some anecdotal example of some products that are coming to the market. How should we think about monetization win back the awkwardness b.

Be charging more for Gen y and the last would be the timeline, how should we think about timeline for some of these product launches.

Yes, well. Thank you Ashish I'm. So let me give you a couple of responses to that so first you have to.

Lee Shavel: I think that's certainly something that we feel feel strongly about. We in addition, I feel confident about the core lines reimagine investment that we've made and our ability to deliver greater value to our clients over the next several years and to participate in that. I think that we are also seeing in the property market and the focus around profitability and opportunity to serve our clients more broadly. I think the other thing that we would look at in this year that we've benefited from is some higher level of transactional activity, particularly in the autoside with high levels of shopping that have contributed to our growth rate that may not be sustained into 2024. Similarly, on the property side, some higher levels of activity there that have contributed to strong growth. I think overall we're really pleased with the growth that we generated in 2023. We had some kill wins.

I have to say generative AI is something that is certainly relatively new and so there is a and developing aspect to this technology and its application and so there will be dimensions of this that we're still in the process of piloting and testing.

Let me refer you back to the comments that I made around <unk>.

Discovery navigator and what we are doing in the casualty space, where we are already utilizing.

Lee Shavel: We aren't providing guidance on 2024 at this point. We have to step back and assess where we are and we'll do that in the first quarter. But I think strategically and from an investment standpoint, we're excited about where we're investing, core lines, generative AI, investments that we're making in broadening our ecosystem and integrating other partners that add value to our customers. We'll continue to work to also mitigate any of the transactional benefits that we've had in 2020. Jeffrey.

And supporting from an actuarial standpoint from a ratings standpoint, the underwriting process that is specifically targeted to a line of business and that is is something that is on more of the front and that we are testing and developing in the in the first instance, that's something that we are monetizing with discovery navigator.

Andrew Nicholas: Your next question comes from the line of Andrew Nicholas for William Blair. Your line is now open. Hi, good morning. Thanks for taking my question. I wanted to ask a modeling one, not not specific to fourth quarter, 23 necessarily. Just wanted to ask, you know, the last half of the tape has been been a little bit of a crazy one. I think that speaking to it lightly, a lot of moving parts where the business is today is there any, how would you describe the seasonality of transaction revenue?

In the second instance, that's something that we hope to begin to deploy so that we can achieve efficiency and her overall coding and then the third instance, that's going to be something that hopefully we develop a product there's been a strong appetite and interest from our clients and so if we can deliver something that would be something we would hope to begin to to monetize you're in the 24 25 two.

Andrew Nicholas: Is there a, you know, if we're talking about 25, 26, is there like a typical cadence that we should expect on the non subscription line, given, you know, the makeup of the underlying businesses that comprise that. Thank you. Yeah, thanks.

Timeframe based upon what our product development is so arrange of that but it's a component of an an additional tool to a lot of the data and analytics work that we do.

Elizabeth Mann: Thanks for the question, Andrew. The biggest component of the transaction revenue that has some seasonality to it. There's there's two that come to mind. One is the weather, the weather related seasonality in property estimating solutions that on a long term historical basis tends to occasionally get a boost in the third quarter as a function of, you know, Atlantic hurricanes. Last year in 22 that happened to hit in October and fell in the fourth quarter.

At this time I would <unk>.

To remind everyone in order to ask a question Crestar and the number of lines on your telephone keypad.

Your final question comes from a line of pressure Crouch <unk> Presser per line is open.

Yeah, Thanks for a second background.

Sorry for the technology issues I was wondering if you could provide us with a growth rate for the extreme events physicians revenues in Q3, and you today and you made some brief comments and you're prepared remotes Elizabeth but can you expand on what trends you saw there in Q3.

Elizabeth Mann: The other element that you saw, you saw last quarter, you know, the securitization market can sometimes that hits in the second quarter primarily. That's a relatively small part in our business. The other elements of transactional revenue don't necessarily have a seasonal pattern to them. And the life insurance services, the auto underwriting product is more a function of their, their own markets.

What you're seeing so far in queue for and wondering what you ashamed for your <unk>.

And your four year gardens for Q4 in this business area.

Yeah.

Glad you're able to join US sorry, Uhm, we don't provide specific disclosure on the extreme that that's been this and certainly not <unk> sorry.

Heather Balsky: The next question comes from the line of Heather Balsky with think of America. Your line is now open. Thank you for taking my question.

Sorry, I can't comment on that.

Ladies and gentlemen that concludes today's call. Thank you all for Johnny you May now disconnect.

Lee Shavel: I think you can update us on your expense program where you are today. Are there any other areas that you're identifying in terms of opportunity as we move forward. Thanks. Heather, thanks for the question. Our expense program as we as we highlighted in the past, I think we sent sort of over 90% of the benefit is experienced in 2023. So I think of those original set of actions, we think we've, you know, they've largely been action than are expressing themselves in the margin expansion that you're seeing today.

A day.

Oh boy.

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Lee Shavel: You know, there is, there is continued focus on, on cross-efficiency at Barrisk. And so we're looking in the future for opportunities based on our, you know, global talent outsourcing program. And based, based well on investments in internal efficiency that will play out over time like the ERP program that we've talked about. And Heather, you know, I would say we're very focused on the margin objectives that we set at investor day. And I think we had a very good, good start and what we have delivered and I've been realizing the benefits of that.

Lee Shavel: But it's a continuous process for us and we're always going to look for where we can achieve greater, greater efficiencies throughout the business. It was a bit mentioned several, but you know, as we have been able to make the business a more integrated business focused on insurance, I think we've identified some areas where we can improve both effectiveness and efficiency in the organization.

Lee Shavel: And we'll expect to be pursuing those in 2024 to continue that.

Seth Weber: Your next question comes from the line of Seth Weber for Wells Fargo Securities. Seth, your line is open. Thanks good morning and thanks for picking my question. I was interested in your comment in the prepared remarks about incremental business on the life side. I'm wondering if you could just unpack that a little bit and talk about customer appetite for more cross-selling and taking more solutions here in this environment. Thank you. So, Seth, thank you for the question.

Neil Spector: And I'm going to ask Neil to talk about where we see incremental opportunities within the life space. I think it's not only clients but also thinking about kind of the nature of their technology, that low-code, no-code approach, and its absolute ability more broadly here in the industry. Yeah, thankfully. So, our solution in life is a low-code, no-code software platform that helps a life-insure from the policy administration, distribution claims from a full life cycle.

Neil Spector: And what we've seen is even in the current environment, there is a huge need in the life industry to modernize technology. There are behind PNC as far as modernization of systems. And as Lee pointed out, because our system is a low-code, no-code, we have the opportunity to potentially lower the operating costs of deployed lines of business on our platform pretty substantially versus legacy solutions. So, there's a strong incentive for life insurers to move on to these more flexible and lower-cost operating environments.

Neil Spector: We've also seen a huge need from our customers in support of their transformation, and that has driven some of our service or a transactional revenue for existing customers because of their desire to have us support their implementation efforts.

Surinder Thind: Your next question comes from a line of surrender thinned with Jeffries. Your line is now open. Thank you.

Lee Shavel: Lee, could you please discuss maybe the performance in the international business, maybe with the driving growth there, and how that kind of differs from the U.S.? And maybe even some product plans or how you expect it to further brought you offering out there. Yeah, thank you, surrender. I'm going to appreciate that. We've been pleased with the international growth rates across the organization.

Maroun Mourad: I would put them into three categories. We first have our specially business solutions, which is predominantly a London-based, you know, addressing the loids or the excess and surplus market there. They continue to have success in delivering workflow and automation efficiencies through the software platform that they have built and are integrating other components to. We think that's at delivers a lot of value to the participants in that market, so that's been added to our overall growth rate.

Maroun Mourad: On the underwriting side, you know, we have a life health and travel business that has performed well, particularly coming off of the resurgence of global travel post-the pandemic. You know, since then, it's kind of normalized, but we continue to see opportunities for that to grow.

Maroun Mourad: And I'm going to actually turn to Marina Rod, who has had several businesses internationally on the claim side to give you a sense of our experience there as well. Thank you, Lee. Thank you, Surrender, for the question. As I mentioned in previous calls, we had made decision within the international claim. Business to reorganize the units plitting the UK and Europe about a year ago to drive more focus and growth and that approach and the execution of the strategy has paid dividend.

Maroun Mourad: I'll talk about the UK first, which is growing with speed and focus under the leadership of Chris Sofford and his team, innovating on existing property, bodily injury and auto or motor as we call it across upon solutions and more recently there's been a focus on the end by fraud space. Within the UK, on the European side, under the leadership of Sam Rochelle and his team, we had entered the bodily injury market through Germany a couple of years ago through the acquisition of Actineo as a matter of fact, that was just in Cologne where we hosted a market event attended by over 70 customers who showed greater support for the bodily injury solutions and product offering as well as the appetite to engage more frequently with Verisk on the motor side, where we have a few months back made the crew acquisition on the motor side and that integration is proceeding well and delivering a plan.

Maroun Mourad: And last but not least, we have our Rivera acquisition and Scandinavia based out of Sweden that delivers technology solutions for the bodily injury space. And finally, from an operating model perspective, we are leveraging our position in multiple territories with single finance, similar resources, marketing, legal as well as technology platforms. And surrender, just to get a put it in context, to the international revenues represent about 17% of our total as you probably would see in the investor presentation.

Maroun Mourad: And I think the characteristic is that this is an opportunity for us to penetrate new markets. It is a diverse as you can hear from a lot of the businesses so we have a number of growth factors. And I would end by saying a focus also on elevating our dialogue to articulate the strategic value to international institutions as part of our strategy as well. So we're happy with the progress that we're making. We continue to see that as a substantial growth opportunity for us.

Ashish Sabadra: The next question comes from Alaina Ashish Sabatera with RBC. Your line is now open. Thanks for taking my question. I'll leave you mentioned Jenny. I a couple of times. So I was and you highlighted improving existing product as well as launching new products using Jenny. My question there was how should we think about the monetization of Jenny? I wonder if you could give some anecdotal example of some products that are coming to the market.

Ashish Sabadra: How should we think about monetization? Will that be offered as three or will you be charging more for Jenny? I and that last would be the timeline. How should we think about timeline for some of these product launches? Thanks. Yeah. Well, thank you Ashish. So let me give you a couple responses to that.

Russell Quelch: So, you know, first I have to say gender to the AI is something that is certainly relatively new and so there is a developing aspect to this technology and its application. And so there will be dimensions of this that we're still in the process of piloting and testing. But let me refer you back to the comments that I made around a discovery navigator in what we are doing in the casualty space where we are already utilizing.

Russell Quelch: AI, including some generative AI elements in that solution. And so generative AI is a component kind of similar to traditional AI or machine learning that is a tool to help our clients gather data, consolidate and interpret and then utilize data. So as it relates to discovery navigator, there are some generative AI elements that are included in that that we are in the process of monitoring by demonstrating the substantial ROI by improving the speed with which they can gather that data from a worker's comp claim through all of those medical records.

Russell Quelch: So that's in flight. We have other dimensions of that in certain businesses. The second example I would give is in utilizing generative AI from a coding perspective to improve efficiency is something that we have been exploring and testing and we think there are internal efficiencies for us in adapting some of that technology. And then finally, what is on the horizon that I referenced in speaking to our client engagement and their enthusiasm for us to developing a product is something that would be a co pilot in an underwriting context that utilizes our data sets, our experience in supporting from an actuarial standpoint, from a reading standpoint, the underwriting process that is specifically targeted to a line of business.

Russell Quelch: And that is something that is on more of the front end that we are testing and developing. In the first instance, that's something that we are monetizing with discovery navigator in the second instance. That's something that we hope to begin to deploy so that we can achieve efficiency in our overall coding. And in the third instance, that's going to be something that hopefully we develop a product. There's been a strong appetite and interest from our clients.

Russell Quelch: And so if we can deliver something that would be something we would hope to begin to monetize in the 24-25 timeframe based upon what our product development is. So a range of that, but it's a component of an additional tool to a lot of the data and analytics work that we do. At this time, I would like to remind everyone in order to ask a question, press star, and the number one on the telephone keypad.

Russell Quelch: Your final question comes from a line of Russell Cuouch with Redburn. Russell, your line is open. Yeah, thanks for circling background and sorry for the technology issues. I was wondering if you would provide us with a growth rate for the extreme events, solutions, revenues in Q3 and year-to-date. And you made some brief comments in your prepared remarks, but can you expand on what trends you saw there in Q3 and maybe what you're seeing so far in Q4 and wondering what you assumed in your four-year guidance for Q4 in this business area. Yeah, hey Russell, glad you're able to join us. Sorry, we don't provide specific disclosure on the extreme events business and certainly not quarterly. Sorry, I can't comment.

Unknown Executive: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Have a good day.