Q1 2024 Verisk Analytics Inc Earnings Call
Operator: Good day everyone, and welcome to the Verisk First Quarter 2024 Earnings Results Conference Call. This call is being recorded. Currently, all participants are in a 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 everyone to ask a question. We will have further instructions for you at this time. For opening remarks and introductions, I would like to turn the call over to Verisk's Head of Investor Relations, Ms. Stacey Brodbar. Ms. Brodbar, please go ahead.
Good day, everyone and welcome to the various <unk> first quarter 2024 earnings results Conference call. This call is being recorded.
Currently all participants are in a listen only mode.
After today's prepared remarks, we will conduct a question answer session, where we will limit participants to one question. So that we can allow everyone to ask a question.
We will have further instructions for you at this time.
For opening remarks sales reduction.
Speaker Change: I would like to turn the call over to various head of Investor Relations.
Stacey Jill Brodbar: Ms Stacy brodbeck.
Stacey Jill Brodbar: MS. <unk>. Please go ahead.
Stacey Jill Brodbar: Thank you, Operator, and good day, everyone. We appreciate you joining us today for a discussion of our first quarter 2024 financial results. On the call today are Lee Shavel, Verisk's President and Chief Executive Officer, and Elizabeth Mann, Chief Financial Officer. The earnings release referenced in this call, as well as our traditional quarterly earnings presentation and the associated 10Q, can be found in the investor section of our website, verisk.com. The earnings release has also been attached to an 8K that we have furnished to the SEC. A replay of this call will be available for 30 days on our website and via dial-in.
Stacey Jill Brodbar: Thank you operator, and good day, everyone. We appreciate you joining us today for a discussion of our first quarter 'twenty 'twenty four financial results on the call. Today are these shape, all embarrassed president and Chief Executive Officer, and Elizabeth <unk>, Chief Financial Officer.
Stacey Jill Brodbar: Earnings release referenced on this call as well as our traditional quarterly earnings presentation.
You did 10-Q can be found in the investors section of our website <unk> Dot com.
Stacey Jill Brodbar: The earnings release has also been attached to an 8-K that we have furnished to the SEC.
Stacey Jill Brodbar: A replay of this call will be available for 30 days on our website and by dialing I 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.
Stacey Jill Brodbar: I set this out 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. Information about the factors that could affect future performance is contained in our recent SEC filing. The reconciliation of reported and historic non-GAAP financial measures discussed on this call is provided in our 8K and today's earnings presentation posted on the investor section of our website, Verisk.com.
Stacey Jill Brodbar: 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 recent SEC filings.
A reconciliation of reported and 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.
Stacey Jill Brodbar: However, we are not able to provide a reconciliation of projected adjusted EBITDA and adjusted EBITDA margins to the most directly comparable expected gap result because of the unreasonable effort and high unpredictability of estimating certain items that are excluded from projected non-gap adjusted EBITDA and adjusted EBITDA margins, including, for example, tax consequences, acquisition-related cost, gain loss from dispositions, and other nonrecurring expenses the effect of which may be significant.
However, we are not able to provide a reconciliation of projected adjusted EBITDA and adjusted EBITDA margin to the most directly comparable expected GAAP result, because of the unreasonable effort and high unpredictability of estimating certain items that are excluded from projected non-GAAP adjusted EBITDA and adjust.
Stacey Jill Brodbar: EBITDA margin, including for example tax consequences acquisition related cost and loss from dispositions and other nonrecurring expenses the effect of which may be significant and now I would like to turn the call over to Alicia.
Stacey Jill Brodbar: And now I'd like to turn the call over to Lee. Thanks, Stacey. Good morning.
Lee M. Shavel: Thanks, Stacey. Good morning, and thank you for participating in this morning's call. 2024 is off to a solid start at Verisk as we are building upon the strong performance we delivered in 2023. Elizabeth will provide the detailed financials, but I am pleased to share that we delivered 6.9% organic constant currency revenue growth, with strong underlying subscription growth of 7.8% that was broad-based across most of our businesses. Our focus on cost discipline and operating efficiency produced strong double-digit organic constant currency adjusted EBITDA growth and healthy margin expansion, translating into 26% adjusted EPS growth.
Alicia: Thanks Stacy.
And thank you for participating in this morning's call 'twenty 'twenty four is off to a solid start at fair risk as we are building upon the strong performance we delivered in 2023.
Alicia: Elizabeth will provide the detailed financials.
Alicia: I'm pleased to share that we delivered 629% organic constant currency revenue growth with strong underlying subscription growth of 17, 8%.
Alicia: Broad based across most of our businesses.
Alicia: Our focus on cost discipline and operating efficiency.
Alicia: Produced strong double digit organic constant currency, adjusted EBITDA growth and healthy margin expansion translating into 26% adjusted EPS growth.
Lee M. Shavel: This quarter's performance was in line with our 2024 guidance. We are driving predictable and consistent growth by harnessing the power of our more integrated, insurance-focused company and executing against our strategy to partner with the insurance ecosystem to help all participants address their most pressing challenges. Our execution priorities are unchanged from those that we communicated to you a year ago at Investor Day. We are building on the progress that we made in 2023 as we continue to focus on three key things. 1.
Alicia: This quarters performance was in line with our 2024 guidance.
Alicia: Driving predictable and consistent growth by harnessing the power of our more integrated insurance focused company and executing against our strategy to partner with the insurance ecosystem to help all participants address their most pressing challenges.
Alicia: Our execution priorities are unchanged from those that we communicated to you a year ago at Investor Day.
Alicia: We are building on the progress that we made in 2023 as we continue to focus on lead key things.
Lee M. Shavel: Delivering Consistent and Predictable Revenue. Two, driving operating efficiency and profitability. And three, allocating our strong free cashflow with discipline and a focus on return on investment. I've spoken on this call many times about our efforts to engage with our clients on a more strategic level. To that end, in April, we hosted the Verisk Insurance Conference, or VIC, as it is affectionately known in the industry, which attracted a record number of attendees from across the global insurance ecosystem, including representatives from carriers, reinsurers, regulators, and our channel partners.
Alicia: One delivering consistent and predictable revenue growth to driving operating efficiency and profitability.
Alicia: Three allocating our strong free cash flow with discipline and a focus on return on investment.
Alicia: I have spoken on this call many times about our efforts to engage with our clients on a more strategic level.
Lee M. Shavel: The VIV is our flagship event where we strategically engage with all our ecosystem clients and partners through joint discussions and presentations as an integrated OneVeris. This year's event featured over 70 different educational sessions and panel discussions on some of the industry's top-of-mind issues, including fairness, generative AI, fraud, climate risk, rate adequacy, and social inflation. One of the best-attended sessions was a panel discussion about Florida property insurance that featured representatives from key market players, including carriers, regulators, legislators, and Verisk.
Alicia: And in April we hosted the various insurance conference, where Vic as it is affectionately known to the industry, which attracted a record number of attendees from across the global insurance ecosystem, including representatives from the carriers reinsurers regulators and our channel partners.
Alicia: <unk> is our flagship event will be strategically engage with all our ecosystem clients and partners can you Julian discussions and presentations as an integrated one bears.
Alicia: This year's event featured over 70 different educational sessions and panel discussions on some of the industry's top of mind issues, including fairness generative AI fraud climate risk rate adequacy in social inflation.
Alicia: One of the best attended sessions was a panel discussion about Florida property insurance and future Representatives from key market players, including the carriers regulators legislators embarrassed.
Lee M. Shavel: The discussion focused on lessons learned from the insurance crisis in this important and high-risk market and what other states can learn from this experience. The event also featured a solutions gallery that showcased many of our offerings covering risk, natural perils, commercial property, home, and auto, as well as several of our key technology ecosystem partners. The event generated strong collaboration ideas with our clients and partners, as well as leads for our sales team.
Alicia: The discussion focused on lessons learned from the insurance crisis in this important and high risk market and what other states can learn from this experience.
Alicia: The event also featured our solutions galleries that showcase many of our offerings covering risk natural perils commercial property human level as well as several of our key technology ecosystem partners.
Alicia: The event has generated strong collaboration ideas with our clients and partners as well as leads for our sales teams can.
Lee M. Shavel: It also builds upon the goals that we set last year to elevate the strategic dialogue with our clients and continue our path to serve as a data and technology partner to the global insurance ecosystem. At the Verisk Insurance Conference, our Extreme Events Division unveiled its latest innovation, Next Generation Models, or NGM, for insurers, brokers, and re-insurers. Verisk is the first firm to release its full suite of over 100 models across all perils and geographies into a next-generation financial modeling framework.
Alicia: It also builds upon the goals that we set last year to elevate the strategic dialogue with our clients and continued our path to serve as a data and technology partner to the global insurance ecosystem.
Alicia: During the various insurance conference are extreme events Division unveiled its latest innovation next generation models, where MGM for insurers brokers and reinsurers.
Alicia: <unk> is the first firm to release its full suite of over 100 models across all perils and geographies to a next generation financial modeling framework.
Lee M. Shavel: And these models are all now accessible via our Touchstone platform, as the rising cost of catastrophes and an increase in losses from frequency-driven perils such as severe convective storms have challenged the industry. Next-generation models provide a better quantification of uncertainty and enhanced capabilities to assess insured losses across the insurance industry more accurately. With next-generation models, our clients can make better financial assessments of loss potential and more accurately represent the risk to their policyholders, their businesses, and their partners.
Alicia: And these models are all now accessible via our Touchstone platform.
Alicia: The rising cost of catastrophes, and an increase in losses from frequency driven perils such as severe convective storms has challenged the industry.
Alicia: Next generation models provide a better quantification of uncertainty and enhanced capabilities to assess insured losses across the insurance industry more accurately.
Alicia: With next generation models, our clients can make better financial assessments of loss potential and more accurately represent the risk to their policyholders their businesses and their partners.
Lee M. Shavel: NGM also offers new advantages to support complex insurance policy structures and deal with new terms and conditions that previously went unmodeled. Clients can effectively manage risk, both at the portfolio and individual levels, using the NGN suite of models. MGM represents the next step in our journey towards a fully SAS native platform, underscoring our commitment to continuous investment in advanced data and technologies and capabilities on behalf of the industry. Next, I'd like to provide you with an update on our Corelines Reimagined program.
Alicia: And GM also offers new advantages to support complex insurance policies structures and deal with new terms and conditions that previously went on models.
Alicia: Clients can effectively manage risk booth at the portfolio and individual levels using the MGM suite of models.
Alicia: MGM represents the next step in our journey towards a belief SaaS native platform.
Alicia: Your scoring our commitment to continuous investment in advanced data and technologies and capabilities on behalf of the industry.
Alicia: Next I'd like to provide you with an update on our core lines in the imagine program as previously.
Lee M. Shavel: As previously mentioned, we are on a journey to digitize and enhance our central suite of industry-standard solutions to make our forms, rules, and lost-cost content easier to access, use, and customize, and provide much-needed updates and insights. We've made good progress in modernizing our internal systems and processes for digital-first content creation, enabling us to deliver new client-facing modules. We recently introduced filing intelligence, which is accessible on our new platform. This tool simplifies our filing delivery process by consolidating all necessary documents, forms, rules, and loss costs into one accessible interface. Eliminating the need for manual review and piecing together multiple documents.
Alicia: As we mentioned we are on a journey to digitize and enhance our essential suite of industry standard solutions to make our forums wounds and loss cost content easier to access us and customize and provide much needed updates and insights.
Alicia: Made good progress in modernizing our internal systems and processes for digital first content creation, enabling us to deliver new client facing modules.
Alicia: Our recently introduced finally intelligence, which is accessible on our new platform.
Alicia: This tool simplifies our filings delivery process by consolidating all necessary documents forms rules and loss costs into one accessible interface, eliminating the need for manual review and piecing together multiple documents.
Lee M. Shavel: Filing Intelligence digitally connects all documents related to each filing, streamlining the process for users, and ensuring seamless access to essential information. On the actuarial front, we recently added ActuarialHub to the new platform. Within the hub, clients can access new insights, such as the ISO Experience Index, the Lost Costs Activity Dashboard, and a new series of actuarial perspective articles. These resources offer deeper insights into our filings and data, empowering our clients to make quicker, well-informed decisions.
Finally intelligence digitally connects all documents related to each filing streamlining the process for users and ensuring seamless access to essential information.
Alicia: On the actuarial front, we recently added actuarial hub to the new platform.
Alicia: Within the hub claims can access new insights such as the ISO experience index.
Alicia: Loss cost activity dashboard, and a new series of actuarial perspective articles.
Alicia: These resources offer deeper insights into our filings and data empowering our clients to make quicker well informed decisions.
Lee M. Shavel: Looking ahead, we plan to launch additional customer-facing modules that will provide even more value to our clients by introducing new proprietary analytics, workflow tools, and insights to further streamline processes and enhance underwriting accuracy for our clients. Overall, we're excited about the progress of the Reimagine program. This initiative is already driving returns for Verisk as we are receiving positive client feedback and experiencing better price realization in contract renewal.
Alicia: Looking ahead, we plan to launch additional customer facing modules that will provide even more value to our clients by introducing new proprietary analytics workflow tools and insights to further streamline processes and enhanced underwriting accuracy for our clients.
Alicia: Overall, we're excited about the progress of the re imagine program. This initiative is already driving returns for various as we are receiving positive client feedback and experiencing better price realization and contract renewals.
Lee M. Shavel: Lastly, today is an important day as May 1st is officially Verisk Generative AI Day. Our technology teams from across our global offices and business units are gathered at our Jersey City headquarters to collaborate and share best practices and learnings on their work with Gen-AI for both customer-facing initiatives and internal efficiency. More specifically, all of our divisions have active Gen-AI pilots running, with many other areas in active development. And within our claims business, we have three solutions in production and available today for clients.
Alicia: Lastly, today is an important day as may 1st is officially various generative AIA.
Alicia: Our technology teams from across our global offices and business units are gathered at our Jersey City headquarters to collaborate and share best practices and learnings on their work with Gen AI for both customer facing initiatives and internal efficiencies more.
Alicia: More specifically all of our divisions have active journey II pilots running with many other areas in active development and within our claims business. We have three solutions in production and available today for clients.
Lee M. Shavel: Generative AI continues to be top of mind for our clients and is a topic of much discussion in my conversations with industry executives. One very promising application that I'm seeing is the use of generative AI to gather and pre-digest massive amounts of information to organize and distill it for the insurance profession, improving and focusing their expertise, not replacing it. This is a natural fit and opportunity for the work we do in curating and managing the needs of the global insurance industry to facilitate more effective and efficient work.
Alicia: <unk> AI continues to be top of mind for our clients and as a topic of must just much discussion and my conversations with industry executives.
Alicia: One very promising application that I'm seeing is the use of generative AI to gather and pre digest massive amounts of information to organize and distillate for the insurance professional improving and focusing their expertise not replacing it.
Alicia: This is a natural fit and opportunity for the work, we do ensure rating and managing the needs of the global insurance industry and for <unk>.
Alicia: It will take more effective and efficient workflows.
Lee M. Shavel: As we have done with other forms of advanced technology, Gen AI is an area where we can invest for the benefit of the industry at a lower cost of investment and ownership than any single client can do on their own. With that, I will turn it over to Elizabeth to cover the detailed financial review.
Alicia: We have done with other forms of advanced technology journey II is an area, where we can invest for the benefit of the industry at a lower cost of investment and ownership than any single client can do on their own.
Alicia: With that I will turn it over to Elizabeth to cover the detailed financial review.
Elizabeth Mann: Thanks, Lee, and good day to everyone on the call. I am pleased to share that Verisk delivered a solid first quarter in 2024. On a consolidated and gap basis, first quarter revenue was $704 million, up 8% versus the prior year, reflecting solid growth in underwriting and more modest growth in claims. Income from continuing operations was $219 million, up 12.9% versus the prior year, while diluted gap earnings per share from continuing operations were $1.52, up 19.7% versus the prior year.
Thanks, Lee and good day to everyone on the call I am pleased to share that <unk> delivered a solid first quarter of 2024.
Elizabeth: On a consolidated and GAAP basis first quarter revenue was $704 million.
Elizabeth: Up 8% versus the prior year, reflecting solid growth in underwriting and more modest growth in claims.
Elizabeth: Income from continuing operations was $219 million.
Elizabeth: Up 12, 9% versus the prior year, while diluted GAAP earnings per share from continuing operations were $1 52 up 19, 7% versus the prior year.
Elizabeth Mann: This level of EPS growth reflects strong revenue and profit growth combined with a lower effective tax rate and a lower average share count due to the large accelerated share repurchase program in 2023. Moving to our Organic Constant Currency results for the first quarter, adjusted for non-operating items as defined in the Non-Gap Financial Measures section of our press release. Our operating results demonstrated solid growth for most of our business. OCC revenues grew 6.9%, with growth of 7.8% in underwriting and 4.7% in claims.
This level of EPS growth reflects strong revenue and profit growth.
Elizabeth: With a lower effective tax rate and a lower average share count due to the large accelerated share repurchase program in 2023.
Elizabeth: Moving to our organic constant currency results for the first quarter adjusted for nonoperating items as defined in the non-GAAP financial measures section of our press release.
Our operating results demonstrated solid growth from most of our businesses.
Elizabeth: OCC revenues grew six 9% with growth of seven 8% in underwriting and four 7% in place.
Elizabeth Mann: This was an acceleration from the fourth quarter in both subsegments and was in line with our expectations and 2024 financial guidance. Our subscription revenues, which comprise 80% of our total revenue in the quarter, grew 7.8% on an OCC basis during the first quarter. We experienced broad-based growth across most of our subscription-based solutions, with strong renewals and expanded relationships with existing customers and solid sales of new solutions. The largest contributor to subscription growth was formed rules and loss costs.
Elizabeth: This was an acceleration from the fourth quarter in both sub segments and was in line with our expectation two.
Elizabeth: 2024 financial guidance.
Elizabeth: Our subscription revenues, which comprised 80% of our total revenue in the quarter grew seven 8% on an OCC basis during the first quarter.
Elizabeth: We experienced broad based growth across most of our subscription based solution with strong renewal and expanded relationships with existing customers and solid sales of new solutions.
Elizabeth: The largest contributor to subscription growth was formed Wilson Hong Kong.
Elizabeth Mann: We are benefiting from a stronger renewal cycle and improved price realization as we continue to modernize our platform and deliver more value and insights to our clients through our core lines of reimagined programs that Lee spoke about earlier. In anti-fraud, we experienced underlying strength in the business with growth augmented by the continued benefit from the conversion to subscription from previously transactional customers that we mentioned throughout 2023. Most of our clients have successfully completed this transition.
Elizabeth: We are benefiting from a stronger renewal cycle and improved price realization as we continue to modernize our platform and deliver more value and insights to our clients through our core lines re imagine program that we spoke about earlier.
Elizabeth: In anti fraud, we experienced underlying strength in the business with growth augmented by the continued benefit from the conversion to subscription from previously transactional customers that we mentioned throughout 2023.
Elizabeth: Most of our clients have successfully completed this transition and therefore, the benefit will continue to taper throughout 2024.
Elizabeth Mann: Therefore, the benefit will continue to taper throughout 2024. However, we are seeing a positive client response to our enhanced commercial lines property solutions, which have benefited from our expanded coverage as our database of commercial property records has grown by over 200% since 2020 and now has over 15.9 million records. Our transactional revenues, representing 20% of total revenue in the first quarter, increased 3.1% on an OCC basis, although it is a tough comparison versus the prior year, which benefited from the strong auto shopping activity and non-rate action activity.
Elizabeth: And within underwriting data solution, we are seeing a positive client response to our enhanced commercial lines property solution, which has benefited from our expanded coverage as our database of commercial property records has grown by over 200% since 2020, and now has over $15 9 million.
Elizabeth: Records.
Elizabeth: Our transactional revenue representing 20% of total revenue in the first quarter increased three 1% on an OCC basis.
Elizabeth: Reflecting a tough comparison versus the prior year, which benefited from the strong auto shopping activity and non rate actions activity.
Elizabeth Mann: During the quarter, we saw continued growth across our auto suite of solutions, though growth rates have moderated as we expected. Regarding Auto, due to recent changes in our data source, we have decided to discontinue our existing telematics offering.
Elizabeth: During the quarter, we saw continued growth across our auto suite of solutions the growth rates have moderated as we expected.
Elizabeth: Regarding auto due to recent changes in our data source, we have decided to discontinue our existing telematics offering.
Elizabeth Mann: The impact of this is immaterial in 2024 with less than a million dollars of revenue impact. We do not expect this to have any impact on the remainder of our audit. Our transactional revenue growth also benefited from double-digit growth within life insurance solutions as we saw strong customer demand for incremental services. And within our extreme events business, we saw better than expected transactional growth driven by securitization. This was offset, in part, by lower weather-related transaction volumes in property estimating solutions and the impact of the conversion to subscription within our anti-fraud business.
Elizabeth: The impact of this is immaterial in 'twenty 'twenty, four with less than $1 million of revenue.
Elizabeth: We do not expect this to have any impact on the remainder of our audit solution.
Elizabeth: Our transactional revenue growth also benefited from double digit growth within life insurance solution as we saw strong customer demand for incremental services.
Elizabeth: And within our <unk> business, we saw better than expected transactional growth driven by securitization.
Elizabeth: This was offset in part by lower weather related transaction volumes and property estimating solution.
Elizabeth: And the impact of the conversion to subscription within our anti fraud business.
Elizabeth Mann: Moving now to our adjusted EBITDA results, OCC adjusted EBITDA growth was 10.6% in the quarter, while total adjusted EBITDA margin, which includes both organic and inorganic results, was 54%, up 180 basis points from the reported results in the prior year. 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 useful to look at our margin on a trailing 12-month basis, which as of March 31st, 2024, was 53.9%, up 120 basis points over last year's level.
Elizabeth: Moving now to our adjusted EBITDA result.
<unk> adjusted EBITDA growth was 10, 6% in the quarter.
Elizabeth: While total adjusted EBITDA margin, which includes both organic and inorganic result was 54% up 180 basis points from the reported results in the prior year.
Elizabeth: As we said in the past the margin rate in any given quarter can be influenced by revenue mix and timing of spending.
Elizabeth: So we think it's useful to look at our margin on a trailing 12 month basis, which as of March 31, 2024. It was 53, 9% up 120 basis points over last year's level.
Elizabeth Mann: This level of margin expansion reflects the positive impact of sales leverage and cost discipline. We also experienced a modest margin benefit from non-operating items, including foreign currency changes, but this was largely offset by the impact of recent acquisitions. Our current margin rate also reflects continued organic investment for future growth, including our Reimagine program, the replatforming of key solutions in extreme events and property estimating, our new financial and human capital system, as well as exploration of advanced technologies like Gen AI.
Elizabeth: This level of margin expansion reflects the positive impact of sales leverage and cost discipline.
Elizabeth: We also experienced a modest margin benefit from non operating items, including foreign currency changes.
Elizabeth: But this was largely offset by margin impact from recent acquisition.
Elizabeth: Our current margin rate also reflects continued organic investment for future growth, including RV imagine program.
Elizabeth: We platforming of key solutions in extreme event and property estimating solution or.
Elizabeth: New financial and human capital system, as well as exploration of advanced technologies like Gen AI.
Elizabeth Mann: We remain confident in our ability to meet our margin expansion targets while strategically investing in future growth opportunities. Continuing down the income statement, net interest expense was $29 million for the first quarter, compared to $26 million in the prior year. The current level of net interest expense reflects interest income on lower cash balances than one year ago.
Elizabeth: We remain confident in our ability to meet our margin expansion targets, while strategically investing in future growth opportunities.
Elizabeth: Continuing down the income statement net interest expense was 29 million for the first quarter compared to $26 million in the prior year.
Elizabeth: The current level of net interest expense reflects interest income on lower cash balances than one year previously.
Elizabeth Mann: Our reported effective tax rate was 20.3% compared to 27.1% in the prior year quarter. The year-over-year decrease in the tax rate is primarily due to tax charges incurred in structuring the sale of our energy business last year, as well as certain discrete items that we do not expect to repeat in the remaining quarters of the year. We continue to believe that our tax rate for the full year 2024 will be in the 23 to 25 percent range, so there could be some quarterly variability related to employee stock option exercise activity.
Elizabeth: Our reported effective tax rate was 23% compared to 27, 1% in the prior year quarter.
Elizabeth: The year over year decrease in the tax rate is primarily due to tax charges incurred in structuring the sale of our energy business last year.
Elizabeth: As well as certain discrete items that we do not expect to repeat in the remaining quarters of the year.
Elizabeth: We continue to believe that our tax rate for the full year 2024 will be in the 23% to 25% range. So there could be some quarterly variability related to employee stock option exercise activity.
Elizabeth Mann: Adjusted Net Income increased 19% to $234 million, and Diluted Adjusted EPS increased 26% to $1.63 for the quarter. The increase is primarily driven by solid revenue growth, strong margin expansion, a lower effective tax rate, and a lower average share count. Our lower average share count reflects the impact of the large accelerated share repurchase program we completed in 2023 using the proceeds from the divestitures. This is partially offset by higher depreciation and amortization and higher net interest expense.
Elizabeth: Adjusted net income increased 19% to $234 million and diluted adjusted EPS increased 26% to $1 63 for the quarter.
Elizabeth: The increase is primarily driven by solid revenue growth strong margin expansion, a lower effective tax rate and a lower average share count.
Elizabeth: A lower average share count reflects the impact of the large accelerated share repurchase program. We completed in 2023 using the proceeds from the divestitures.
Elizabeth: This was partially offset by higher depreciation and amortization and higher net interest expense.
Elizabeth Mann: From a cash flow perspective, on a reported basis, net cash from operating activities increased 1.9% to $372 million, while free cash flow increased 4.2% to $317 million. Both cash flow metrics reflect the impact of our indemnification obligation related to our former financial services business, which we will accrue for in 2023. It is also important to note that the prior year cash flow figures still include the results of our previously divested energy business, so these growth figures understate the cash flow growth of our insurance-only business.
Elizabeth: From a cash flow perspective on a reported basis net cash from operating activities increased one 9% to 372 million, while free cash flow increased four 2% to $317 million.
Elizabeth: Both cash flow metrics reflect the impact of our indemnification obligation related to our former financial services business, which we accrued for in 2023.
Elizabeth: It is also important to note that the prior year cash flow figures still include the results of our previously divested energy business.
Elizabeth: So these growth figures understate, the cash flow growth of our insurance only business.
Elizabeth Mann: We are committed to returning capital to shareholders. During the first quarter, we initiated a $200 million accelerated share repurchase program, which was completed in April. Our $0.39 per share dividend was up 15% from the prior year.
Elizabeth: We are committed to returning capital to shareholders during.
Elizabeth: During the first quarter, we initiated a 200 million dollar accelerated share repurchase program, which was completed in April.
Elizabeth: Our 39 cents per share dividend was up 15% from the prior year.
Lee M. Shavel: We continue to have $1.4 billion in capacity remaining under our share repurchase authorization. We are pleased with our results for the first quarter and reiterate our outlook for 2024. More specifically, we continue to expect consolidated revenue for 2024 to be in the range of $2.84 to $2.9 billion. We expect adjusted EBITDA to be in the range of $1.54 to $1.6 billion and adjusted EBITDA margin in the 54 to 55 percent range.
Elizabeth: We continue to have one $4 billion in capacity remaining under our share repurchase authorization.
Elizabeth: We are pleased with our results for the first quarter and reiterate our outlook for 2024.
Elizabeth: More specifically, we continue to expect consolidated revenue for 2024 to be in the range of $2 84 to $2 9 billion.
Elizabeth: We expect adjusted EBITDA to be in the range of 1.54 to $1 $6 billion.
Elizabeth: And the adjusted EBITDA margin in the 54% to 55% range.
Lee M. Shavel: We expect our tax rate to be in the range of 23 to 25% and adjusted earnings in the range of $6.30 to $6.60 per share. 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. Now, I will turn the call back over to Lee for some closing comments. Thanks, Elizabeth.
Elizabeth: We expect our tax rate to be in the range of 23% to 25% and adjusted earnings in the range of $6 30.
Elizabeth: To $6 60.
Speaker Change: For sure.
Speaker Change: 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 <unk> Dot com.
Elizabeth: Now I will turn the call back over to Lee for some closing comments.
Lee M. Shavel: Thanks, Elizabeth. In summary, our execution priorities remain consistent with those communicated at investment. Continued focus on revenue growth, operating efficiency, and disciplined cash flow allocation. Following a strong 2023, we are pleased to see 2024 off to a strong start with implied growth of 7% in consolidated revenue and 9.5% in adjusted EBITDA at the midpoint of our 2024 financial guidance. Our focus on heightened strategic engagement with clients has strengthened relationships and fostered new product and business opportunities for the industry, where we can invest at scale to drive value for our clients, employees, and shareholders.
Lee: Thanks, Elizabeth in summary, our execution priorities remain consistent with those communicated at Investor Day continued focus on revenue growth operating efficiency and disciplined cash flow allocation.
Lee: Following a strong 2023, we're pleased to see 2024 off to a strong start with implied growth of 7% and consolidated revenue and nine 5% and adjusted EBITDA at the midpoint of our 2024 financial guidance, our focus on heightened strategic engagement with clients has strengthened.
Lee: Relationships and foster new products and business opportunities for the industry, where we can invest at scale to drive value for our clients employees and shareholders.
Lee M. Shavel: We continue to appreciate the support and interest in Verisk, 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,
Speaker Change: 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.
Speaker Change: Yes.
Operator: At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. Participants will be allowed one question each. If you would like to ask a follow-up question, we ask that you please press star one again to re-enter the queue. Your first question comes from the line of Andrew Steinerman with JPMorgan. Please go ahead.
Speaker Change: At this time I would like to remind everyone in order to ask a question Chris Star then the number one on your telephone keypad.
Speaker Change: Participants will be allowed one question each.
Speaker Change: So I'd like to ask a follow up question.
Speaker Change: Ask that you. Please press star one again to reenter the queue.
Lee M. Shavel: Thank you, Andrew. Good morning.
Speaker Change: Your first question comes from the line of Andrew Steinman with J P. Morgan.
Andrew William Jeffrey: Please go ahead, hi, highlight how would you assess the health of your clients, meaning the P&C insurance industry now versus three or really kind of six months ago, and how might that impact various this year.
Lee M. Shavel: I'd assess the strength of our client as being very solid. And I would say, in contrast to, I think, where we were two or three years ago, you are clearly seeing across the industry, and if you follow the quarterly releases of the property and casualty insurers, you are seeing very strong premium growth, which is a reflection of that hard market. And improving profitability, as reflected in stronger combined ratios for the business.
Andrew William Jeffrey: Thank you Andrew and good morning, I would assess the strength of our client as as being very solid and I would say in contrast to I think where we were.
Speaker Change: Two or three years ago.
Speaker Change: You are clearly seeing across the industry and if you follow the quarterly releases.
Speaker Change: Property and casualty insurers you are seeing them very strong premium growth, which is a reflection of that hard market and the improving profitability as reflected in stronger combined ratios for the business and so I think on the <unk>.
Speaker Change: Combination of that growth.
Speaker Change: Improved profitability on some reserve strengthening now beginning to offset some of the heightened cat losses that they've experienced has generally put them in a position where they are feeling positive about the outlook.
Speaker Change: Their ability to achieve better pricing and price adequacy from their standpoint on rates that are clearly our risks that they continue to face in terms of heightened catastrophic losses.
Speaker Change: Or cyber exposure or exposure to increasing casualty losses, but generally their financial position is stronger and that has won both the benefit for us because we do participate to some extent in their overall premium growth, but also I think importantly, as that that finance.
Lee M. Shavel: And so I think the combination of that growth, the improved profitability, and some reserve strengthening is now beginning to offset some of the heightened cap losses that they've experienced. But, generally, their financial position is stronger, and that has been both a benefit for us, because we do participate, to some extent, in their overall premium growth. But also, I think, importantly, that financial strength is making them more constructive and engaged in where they can be making investments to improve their business, whether it's on the underwriting side or it's on the efficiency and processing side.
Speaker Change: Strength is making them more constructive and engaged in where they can be making investments to improve their business, whether it's on the underwriting side.
Speaker Change: Or it's on the efficiency and processing front.
Speaker Change: Okay.
Operator: Your next question comes from the line of Jeff Mueller with Baird. Please go ahead.
Operator: Your next question comes from the line of Jeff Mueller with Bayer. Please go ahead. Yeah, thank you. So, Lee, that's all.
Speaker Change: Your next question comes from the line of Jeff Mueller with Baird.
Jeffrey P. Meuler: Please go ahead.
Jeffrey P. Meuler: Yes. Thank you so Lee that all sounds like the industry is going to start to lean in more on marketing and it seems like we've seen some signs that marketing spend is positively impacting following a challenging period, but you continue to call out headwinds in your marketing solution revenue. So maybe talk through that and if it's just a.
Jeffrey P. Meuler: Legged effect in a pipe as bill Thank you.
Lee M. Shavel: Yeah, thank you, Jeff. I think that's an accurate observation. I think we are beginning to see some early signs that marketing is picking up within the industry. However, there is a lag impact.
Bill: Yeah. Thank you, Jeff I think that's an accurate observation I think we are beginning to see some early signs that our marketing is picking up within the industry. There is a lag impact and so we will continue to look forward to hopefully seeing some of that translate into <unk>.
Bill: Our business there that is a small business. So it may not be discernible overall within our business, but we do think that's a positive trend I would also note that within that within that business. It is not entirely insurance for them for us that we're providing insights to some other legacy industries and so that may cause a.
Bill: It output, but I think your general observation is true.
Bill: Okay.
Operator: Your next question comes from the line of Ashish Sabadra with RBC Capital Markets. Please go ahead.
Lee M. Shavel: And so we will continue to look forward to hopefully seeing some of that translate into our business. However, that is a small business, so it may not be discernible overall within our business. But we do think that's a positive trend. I would also note that within that business, it is not entirely insurance for us that we're providing insights to some other legacy industries. And so that may cause a differentiated output. But I think your general observation is correct. Your next question comes from the line of Ashish Sabadra with RBC Capital Markets. Please go ahead. Thanks for taking my question. I wanted to focus on
Bill: Your next question comes from the line of Ashish Sibaja with RBC capital markets. Please go ahead.
Ashish Sibaja: Thanks for taking my question I wanted to focus on the solid sales of new solution.
Ashish Sibaja: The question there was thanks for providing some details on the journey accurate I was wondering if you could provide an examples of new solutions that are gaining traction and then at the Investor day. The New initiative was expected because the 850 to 200 basis point of incremental revenue growth going into 2025, and I was just wondering if you could call.
Ashish Sibaja: Rent on how Thats tracking.
Lee M. Shavel: Thank you. Thank you, Ashish.
Speaker Change: Thank you. Thank you Ashish, let me take the let me take the first first question such kind of referencing Investor day, and I'll, let Elizabeth add two to this.
Speaker Change: If he feels necessary, but what we outlined at Investor day was incorporated into our guidance in terms of where we felt we could achieve incremental revenue growth naturally we saw the performance in 2023, which was representative of the of achieving those those higher growth.
Lee M. Shavel: You know, let me take the first question, since you're kind of referencing Investor Day, and I'll let Elizabeth add to this if she feels necessary. But, you know, what we outlined at Investor Day was incorporated into our guidance in terms of where we felt we could achieve incremental revenue growth. Naturally, we saw the performance in 2023, which was representative of achieving those higher growth rates. We're really pleased in the first quarter to be able to similarly deliver strong growth on top of that.
Speaker Change: <unk>.
Speaker Change: We're really pleased in the first quarter to be able to similarly.
Speaker Change: <unk> deliver strong growth on top of that and so we have kind of a compounding effect and I think that reflects in large part the achievement of some of that revenue growth revenue growth upside. So I would look to the fact that we are are meeting and exceeding the guidance that we set at Investor day.
Lee M. Shavel: And so we have kind of a compounding effect. And I think that reflects, in large part, the achievement of some of that revenue growth upside. So I would look to the fact that we are meeting and exceeding the guidance that we set at Investor Day.
Elizabeth Mann: Yeah, I agree with Lee there. And I think in terms of examples of new products gaining traction, you've heard us talk about them on some of the recent calls, the Discovery Navigator, Product, and Claims, which is one that now uses Gen AI as well. We've talked about image forensics in the anti-fraud space and as well as a variety of innovations that we talked about in this call on our core products, including Coraline's Reimagined and the Next Generation Models. Yeah, and
Speaker Change: Yeah, I agree with Lee there.
Speaker Change: And I think in terms of examples of new products, gaining traction you know you've heard us talk about them on on some of the recent calls the discovery navigator product and claims which is one that does Ah now is Jenny I as well talked about image forensics are in the in the anti fraud space and as well as a variety of innovations that we talked about in this call.
Speaker Change: Our on our core products, including correlate imagine in the next generation models and extra but that's yes.
Lee M. Shavel: Thanks Elizabeth for kicking off the first part of the question. We talked with Jeff's question on some of the headwinds we're facing on marketing, but I would also say in terms of new product adoption, in our life insurance offering, we are seeing very strong uptake in that category with the applicability of the low no-code solutions to the life of business, in our specialty business solutions area where we have seen very strong adoption from some major industry players onto the white space platform, which is a new product that we are growing.
Speaker Change: Yes.
Speaker Change: Thanks, Elizabeth for kicking off the first part of the question.
Speaker Change: We talked with Jeff's question on some of the headwinds we are facing on marketing, but I would also say in terms of new product adoption in our life insurance offering we are seeing very strong uptake in that category.
Speaker Change: With the applicability of the low new code solutions to the life business with our specialty business solutions area, where we have seen very strong adoption. Some from some major industry players onto the white space platform, which is a new product that we are growing and so.
Lee M. Shavel: And so, as well as internationally, as we have been bringing our products into that market, we're seeing an uptake and very strong double-digit growth across those businesses internationally. And then finally, I would say that in terms of new product growth, we should never overlook the benefit or the uptake and receptivity that we are seeing with our existing product investments, as with Coraline's Reimagine and other areas that we have been investing in, similar to Lightspeed, where we have improved those products, we have increased the value to the customer, and we're integrating generative AI into a number of those products. And in a way, that is new product adoption in terms of being able to realize incremental value in our revenues for those products, and I think that is reflected in our overall revenue growth as well.
Speaker Change: As well as internationally as we have been bringing our products into that market, we're seeing the uptake and very strong double digit growth across those businesses internationally and then finally I would say I think in terms of new product.
Speaker Change: Growth, we should never overlook the benefit would be.
Speaker Change: The uptake in receptivity that we're seeing too.
Speaker Change: Our existing product investments as with core lines re imagine and.
Speaker Change: And in other areas that we have been investing in.
Speaker Change: Similar to Lightspeed, where we have improved those products, we have increased the value to the customer we're integrating generative AI into a number of those products and in a way that is new product adoption in terms of being able to realize incremental value in our <unk>.
Speaker Change: Revenues for those products and I think that is reflected in our overall revenue growth as well here.
Operator: Your next question comes from the line of Andrew Nicholas with William Blair. Please go ahead. Hi, good morning. This is Tom Rashad for Andrew. Um, I wanted to ask about
Operator: Your next question comes from the line of Andrew Nicholas with William Blair.
Speaker Change: Your next question comes from the line of Andrew Nicholas with William Blair.
Andrew Owen Nicholas: Please go ahead.
Tom Rush: Hi, Good morning. This is Tom rush on for Andrew.
Tom Rush: I wanted to ask about the pricing environment. It sounds like insurers are starting off the year.
Tom Rush: So I was wondering just kind of how the pricing environment how.
Tom Rush: How do you think about it this year relative to last year and then also as it relates to those contracts that are tied to prior year net written premium I'm, just kind of how you're thinking about those two this year. Thank you.
Tom Rush: Sure.
Lee M. Shavel: Thanks. Thanks, Rashaad, for the question. Yeah, you know, it's good context.
Speaker Change: Thanks, Roxanne for the question Yeah.
Tom Rush: It's good conduct you heard me talk about the industry and the relative strength in the industry as well as the hard market that we are in so as he highlighted for contracts that have a tie to net written premium growth, we're seeing generally positive tailwind.
Elizabeth Mann: You heard Lee talk about the industry and the relative strengths in the industry, as well as the hard market that we are in. So, as he highlighted for our contracts that have a tie to net written premium growth, we're seeing generally positive tailwinds in line, I would say, overall with last year. I think what's most important for us from a pricing standpoint is the increased engagement that we are having with our clients, and you're seeing the benefit of the investments that we're putting into our products. And those are driving for us strong, strong renewals, strong outcomes on price.
Tom Rush: In line I would say in line overall with with last year I think what's most important for us from a pricing standpoint.
Tom Rush: Is in the increased engagement that we're having with our ads and you're seeing the benefit of the investments that we're putting in are in our products and those are driving for us.
Tom Rush: <unk> strong renewal strong alcohol on the price of the conversation.
Lee M. Shavel: And Tom, I'd say that on that, we are... We see a receptive environment because I think the industry is doing well. We're seeing recognition of the value of the products. But I would also mention that with some of our efforts to improve our go-to-market strategy, we're seeing a more effective sales organization that is contributing to good outcomes on the pricing side as well. So I think we feel very positive about some of the changes that we put in place in 2024 as a function of a close examination of what we could be doing better. Your next question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead. Thank you. During the prepared remarks.
Speaker Change: And Tom I'd say that on that.
Speaker Change: We see a receptive environment, because I think the industry is doing well.
Speaker Change: We're seeing recognition of the value of the products, but I would also mentioned that I think with some of our efforts to improve our go to market strategy. We're seeing a more effective sales organization that is contributing to good outcomes on the on the pricing side as well. So I think we feel very positive about some of the changes that we put.
Speaker Change: In place in 2024 as a function of a close examination of what we could be doing better there.
Operator: Certainly. Thank you, Toni.
Operator: Your next question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead.
Speaker Change: The next question comes from the line of Toni Kaplan with Morgan Stanley.
Toni Michele Kaplan: Please go ahead.
Toni Michele Kaplan: Thank you.
Toni Michele Kaplan: During the prepared remarks, you mentioned, you're discontinuing the auto telematics offering I was wondering clearly it's it's not generating much revenue for you, but like was what what was what prompted us deciding to discontinue it was was the data not valuable was costly to maintain and just any.
Toni Michele Kaplan: Any color there.
Lee M. Shavel: And the short answer is, and first, you know, was a small financial impact for us. The simple answer is that the entities that were providing that data to us decided to discontinue collecting that data, and so there was really not sufficient analytical value in that without the data that was being provided. And, you know, I think it's fair to assume that it's a function of some of the media attention to collected car data. So that really was the simple reason.
Speaker Change: Certainly thank you Tony and.
Speaker Change: The short answer is in first.
Toni Michele Kaplan: A small.
Toni Michele Kaplan: A small financial impact for us.
Toni Michele Kaplan: The simple answer is that the.
Toni Michele Kaplan: The entities that were providing that data to us decided to discontinue collecting that data and so there was really not sufficient analytical value in that without the the data that was being provided and I think it's fair to assume that is a function of some of the some of the.
Toni Michele Kaplan: Media attention to collect connected car data so that really was the the simple reason it had been an area, where we felt it was worth investing we do believe in looking at broad datasets that are useful in evaluating driver risk, but I would emphasize.
Lee M. Shavel: It was an area where we felt it was worth investing. We do believe in looking at broad data sets that are useful in evaluating driver risk. But I would emphasize that while we have discontinued that operation, and it was immaterial from a financial standpoint, we do continue to serve auto insurers in a significant way with a wide variety of products, including our light speed auto, our coverage verifier, and damage assessment from a claims perspective.
Toni Michele Kaplan: While we have discontinued that operation was immaterial from a financial standpoint, we do continue to serve.
Toni Michele Kaplan: <unk> insurers in a significant way with a wide variety of products, including our light our lightspeed auto our coverage verifier.
Toni Michele Kaplan: Damage assessment from a claims perspective. So this is a very very substantial business for us and the discontinuation of the <unk>.
Lee M. Shavel: So this is a very, very substantial business for us, and the discontinuation of the Verisk data exchange will not have any impact on our legacy auto business. Your next question comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead. Hi, thank you. I wanted to talk about subscription growth. You mentioned the stronger
Toni Michele Kaplan: Of the various data exchange will not have any impact in our legacy auto businesses.
Operator: Your next question comes from the line of Faiza Alwy with Deutsche Bank.
Speaker Change: Your next question comes from the line of Phase are all week with Deutsche Bank.
Phase: Please go ahead.
Phase: Yes, hi, thank you.
Phase: Wanted to talk about subscription growth you mentioned, the stronger renewal looks like around the price realization.
Phase: But I'm curious if you think this level of subscription growth is you know isn't normal for this year and help us better understand some of the factors that can impact us.
Phase: I asked because there has been some quarterly variation.
Phase: Is there enough serious I'm curious if there's anything that you would highlight as we look ahead.
Elizabeth Mann: Yeah, Faiza, thanks for the question. In terms of quarterly variations, you know, there can always be minor puts and takes as things move from quarter to quarter, but nothing that we see at this point that would indicate, you know, significant quarterly changes. The drivers of strength for us this quarter have been, you know, really broad-based across the business. Forms, rules, and loss costs have been the largest driver for the largest business, and we talked about some of the trends benefiting it there.
Speaker Change: Yes. Thanks for the question in terms of quarterly variations you know there can always be minor puts and takes as things move from quarter to quarter, but nothing that we see at this point that would that would indicate a significant quarterly changes.
Speaker Change: The drivers of strength for us in this quarter have been really broad based across the business.
Elizabeth Mann: We've had strong strength in the anti-fraud business; I would call that both absolute strength, as well as benefiting from the conversion from transaction to subscription, and the extreme events business actually had strong subscription growth as well, just given the demonstrated value there and Faiza May.
Speaker Change: Throughout the last cost has been the largest driver as the largest business and we talked about some of the trends benefiting it there we've had strong strength a knee in the anti fraud business.
Speaker Change: I would call that both absolute strengths as well as benefiting from the conversion from transaction to subscription.
Speaker Change: And the extreme events business actually had strong subscription growth as well.
Speaker Change: Given the demonstrated value there.
Lee M. Shavel: And Faiza, maybe to add a little additional color, and we use this as an opportunity to say, you know, we've talked about the environment, we've talked about the benefit of engaging as partners with our leading clients, which I think has helped us on that front, probably most primarily at a senior level to help our clients understand the value that we are providing to them across the enterprise. But something, you know, to your question of kind of sustainability and growth, we clearly want to grow subscription revenues at a higher rate where possible.
Speaker Change: So maybe to add a little additional color on how we use this as an opportunity to say we've talked about the environment. We've talked about the benefit of engaging as partners with our with our leading clients, which I think has has helped us on that on that front, probably most primarily at a senior level to help our clients understand the value.
Speaker Change: That we are providing to them across the enterprise, but.
Speaker Change: Something to your question of kind of sustainability and growth, we clearly want to grow the subscription revenues at a higher rate where possible and coming out of a lot of intense engagement at a senior level in 2023.
Lee M. Shavel: Coming out of a lot of intense engagement at a senior level in 2023, we have had three clients in different areas. One's an international insurer, one's a large US insurer, you know, one is outside of the insurance industry but in a variety of areas that have come to us with ideas of products that we might jointly develop or distribute with them. And I think it's a reflection of how we can potentially develop new incremental revenue sources.
Speaker Change: We have had three clients in different areas. One is an international insurer one's a large U S insurer.
Speaker Change: One is outside of the insurer, but in a variety of areas that have come to us with ideas of products that we might jointly developed or distribute with them and I think it's a reflection of how we can potentially develop new incremental revenue sources. This was certainly part of our plan originally but we've been in.
Lee M. Shavel: This was certainly part of our plan originally, but we've been delighted to see that that engagement has enabled real commercial opportunities that we are in the process of exploring and structuring at this stage. That is certainly a primary path for us to find ways to continue to sustain and grow that subscription. Your next question comes from Jeff Silber with BMO Capital Markets. Please go ahead.
Speaker Change: Delighted to see that that engagement has enabled real commercial opportunities that we are in the process of exploring and structuring at this stage that is certainly a primary path for us to find ways to continue to sustain and grow that subscription growth.
Speaker Change: Your next question comes from the line of Jeff Silber with BMO capital markets. Please go ahead.
Operator: Thanks so much.
Jeffrey Marc Silber: Thanks, So much I know you've talked in the past about three bucks.
Jeffrey Marc Silber: Buckets of investment you talked about the core lines re imagine investing in your sales force and investing in AI can we just get a refresh in terms of how much youre picking up spending in those areas and where we are in that process.
Speaker Change: Okay.
Elizabeth Mann: Thanks for the question, Jeff. We don't, you know, we don't break out sort of specific areas of investment by element. I think on the last quarter call, I mentioned those as some of the top areas for investment this year. And I think our investment in those areas is pretty much in line with our expectations for the year and embedded in the margin that you're seeing and the guidance for the full year.
Speaker Change: Yeah. Thanks for the question, Jeff. We don't you know, we don't break out sort of specific areas of investment by by element I think on that on the last quarter call I mentioned those that some of the top areas for investment this year.
Speaker Change: And I think are our investment in those areas is pretty much in line with our with our expectation.
Speaker Change: And embedded in the margin that you're seeing on the guidance for the for the full year.
Operator: Your next question comes from the line of Gregory Peters with Raymond James.
Speaker Change: The next question comes from the line of Gregory Peters with Raymond James.
Gregory Peters: Please go ahead.
Elizabeth Mann: Good morning, everyone. So I'm going to focus on the transactional revenue piece because, if I look at the quarterly numbers last year, you had some pretty strong results for the second and third quarter. Given the conversion of the anti-fraud business, is it your expectation that the transactional piece of OCC will be having some headwinds for the next couple quarters, or any sort of visibility there would be helpful?
Gregory Peters: Good morning, everyone. So I'm going to focus on the transactional revenue piece, because if I look at the quarterly numbers last year.
Gregory Peters: You had some pretty strong results for a second and third quarter.
Gregory Peters: Given the conversion.
Gregory Peters: The anti fraud business is it your expectation that the transactional piece of OCC will be having some headwinds for the next couple of quarters or any sort of visibility there would be helpful.
Elizabeth Mann: Yeah, happy, happy to cover that, Greg. Thanks.
Speaker Change: Yeah happy happy to cover that Greg.
Speaker Change: You are right that we do see headwinds on the transactional revenue side largely because the comps from last year has been so strong you saw double digit transactional growth for about a one year period last year I think.
Elizabeth Mann: You are right that we do see headwinds on the transactional revenue side, largely because the comps from last year have been so strong; you saw, you know, double-digit transactional growth for about a one-year period. Last year, I think some of the main areas of tough comps have been and will be on the auto, auto transactional shopping activity, which was a real area of strength. Last year, in addition to the non-rate action activity, and we saw that really picked up in the first quarter of last year. So we're we're starting the anniversary at now. The shopping activity did actually transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: Some of the main areas of of tough comps have been have been and will be on the auto our.
Speaker Change: Auto transactional shopping activity, which was a real area of strength.
Speaker Change: Last year in addition to the non rate action activity.
Speaker Change: Yeah that that really picked up in the first quarter of last year, or so where we're starting to anniversary it now.
Speaker Change: This shopping activity did actually continued strong in the first quarter, but that's starting next quarter, we really anniversary strong growth there.
Elizabeth Mann: The other area where it could be tough comps has been weather activity. We called out through 2023 the elevated weather patterns that we were seeing. And so that could be a headwind this year. Securitization activity was very strong last year in extreme events.
Speaker Change: The other area, where it could be tough comps has been on the weather activity with called out we called out through 2023, and the elevated weather patterns that we were seeing and so that's that could be a headwind this year.
Speaker Change: Securitization activity was very strong last year in extreme events.
Elizabeth Mann: So that's one that we are also waiting to see. So between those different areas, that's something we're looking at. I think this quarter is a demonstration of the power of the business model, and the bulk of our revenue coming from that subscription revenue, which continues to show very healthy signs of strength, shows the strength that we can deliver, even compounding those tough comps. Your next question comes from the line of Manav Patnaik with Berkley's.
Speaker Change: So that's that's one that we are also waiting to see so between those different areas. That's something we're looking at I think this quarter is a demonstration of the power of the business model and that the bulk of our revenue coming in that subscription revenue, which continues to show very healthy signs of strength.
Speaker Change: It shows the strength that we can we can deliver even compounding those those tough comps.
Speaker Change: Your next question comes from the line of Manav Patnaik with Barclays.
Operator: Please go ahead. Thank you. Good morning.
Manav Shiv Patnaik: Please go ahead.
Manav Shiv Patnaik: Thank you good morning, I guess I'll just ask then capitalizes on fundraising.
Manav Shiv Patnaik: The ASR, so that's going through the filings that will do well.
Manav Shiv Patnaik: For small to medium sized kind of M&A pipeline looks like from a customer who has been building over the last couple of years.
Manav Shiv Patnaik: Okay.
Lee M. Shavel: Thank you, Manav. I think I heard that.
Speaker Change: Thank you Manav I think I heard that I think the focus is on capital allocation and how does the outlook for small and medium sized M&A M&A opportunities I would describe them as they are they are out there that I think that valuations.
Lee M. Shavel: I think the focus is on capital allocation and how the outlook for small and medium-sized M&A opportunities. I would describe them as they are out there, and I think that valuations remain high for those entities. Our focus is always on how we can add value with our distribution, our data, and our relationships. That has been a good equation for us. And valuations kind of continue to make it challenging for us to generate attractive returns.
Speaker Change: Remain remained high for those entities. Our focus is always on how can we add value with our distribution our data our relationships that has been a good equation for us.
Manav Shiv Patnaik: And valuations kind of continue to make that challenging for us to generate attractive returns, but we are very engaged in that market and always looking for products that have achieved traction with the industry, where we think we can accelerate the adoption and deliver them Val.
Lee M. Shavel: But we are very engaged in that market and always looking for products that have achieved traction in the industry where we think we can accelerate adoption and deliver value both to our clients and to our shareholders.
Manav Shiv Patnaik: You both to our clients into our shareholders.
Operator: Your next question comes from the line of Surinder Thind with Jeffreys.
Operator: Your next question comes from the line of Surinder Thind with Jeffrey. Please go ahead. Thank you. Just a question about the internal...
Speaker Change: Your next question comes from the line of furniture.
Jefferies: <unk> with Jefferies.
Furniture: Please go ahead.
Furniture: Yeah.
Furniture: Thank you.
Jefferies: Just a question around the internal investments so when we think about the core lines, we imagined or re platforming or AI.
Jefferies: How should we think about the absolute level of investment from the perspective of how much of this is part of the normal spend cycle and then maybe how much is maybe a little bit elevated and perhaps we might expect capex to golf.
Jefferies: Whether it's this year or the next couple of years.
Elizabeth Mann: Thanks. Yeah, thanks, Surinder.
Speaker Change: Thanks, Yeah. Thanks surrender.
Speaker Change: I I can't break it out numerically I would say that there are we've talked about the various projects that we are investing in now those are finite projects, which we will finish and we've talked about the timelines for each.
Elizabeth Mann: You know, I can't break it out numerically, but I would say that there are, we've talked about the various projects that we are investing in now; those are finite projects that we will finish. And we've talked about the timelines for each. There are some elements of those projects that are fixing or reinvesting in technology that has maybe been overdue. And so I would talk about our internal ERP systems as an area of that.
Speaker Change: There are some elements of those projects that is.
Elizabeth Mann: Some of the places where we are doing tech replatforming would be those areas. And so that level of investment may be elevated, and we may not need to continue going forward. I would say there will be, and we will always be investing in our products to maintain sort of their cutting-edge status. So after we finish Coraline's Reimagine, we will continue to invest in and evolve new projects that we may not know exactly what they are today. And I think that's what they should do.
Speaker Change: Fixing or reinvesting in technology that has maybe been overdue and so I would I would talk about our internal ERP systems is an area that some of the places where we are doing a tech re platforming.
Speaker Change: Would be would be those areas.
Speaker Change: That level of investment may be elevated and we may not need to continue going forward.
Speaker Change: I would say there will we will always be investing in our products.
Speaker Change: To maintain sort of their their cutting edge status. So after we finished core lines re imagine we will continue to invest in and evolve and brought in new projects that we may not.
Speaker Change: No exactly what they are today.
Lee M. Shavel: And I think what I would add to that, Surinder, is that the short answer is that the ability for us to integrate generative AI technology as an expansion of a new form of artificial intelligence within existing products is something that our businesses are effectively absorbing into their current financial models. There have been, and there may be in the future, areas where we have decided that, or we have determined that, there is a really interesting application in a new product category that we want to invest heavily in, or we want to accelerate, and that will be an opportunity for us to provide a focused amount of capital or investment.
Speaker Change: I think what I would add to that surrender is.
Speaker Change: I think the short answer is that the ability for us.
Speaker Change: To integrate generative AI technology as an expansion of a new form of artificial intelligence within the existing products.
Speaker Change: Is something that our businesses are effectively absorbing into their current financial models and thinking about where they are deploying capital within their within their own businesses.
Speaker Change: There have been in there maybe in the future areas, where we have decided that or we have determined that there is a really interesting application in a new products outside that we want to invest heavily in or we want to accelerate.
Speaker Change: And that will be an opportunity for us to provide a focused amount of capital investment at this stage I think there were a couple of opportunities that we evaluated and we determined kind of just maintaining our natural organic level of investment is the rate is the right path at this point that may change in the in the future.
Lee M. Shavel: At this stage, I think there were a couple opportunities that we evaluated, and we determined that kind of just maintaining our natural organic level of investment is the right path at this point. That may change in the future, but I think Elizabeth's comments, I would just reinforce by saying, right now, we're finding a way to integrate risk investment into the businesses and also recognizing that we are making a heightened investment in an ERP upgrade that we think will drive operating efficiencies and informational advantages for us over time.
Speaker Change: Think Elizabeth's comments I would.
Speaker Change: You've just reinforced by saying right now were finding a way to integrate with this investment into the into the businesses and also recognizing that we are making a heightened investment on an ERP upgrade that we think will drive operating efficiencies and informational advantages for us over time.
Lee M. Shavel: And that will be one that, as we finish that level of investment, may free up space if there are good opportunities for us to invest. Otherwise, we'll return that capital as we always do with our decisions.
Speaker Change: That will be one that as we as we've kind of finished that level of investment may free up space. If there are good opportunities for us to invest otherwise we will.
Speaker Change: We'll return that capital as we as we always do with our discipline.
Operator: Your next question comes from the line of Russell Quelch with Redburn.
Speaker Change: Your next question comes from the line of Russell quotes with Redburn.
Russell: Please go ahead.
Operator: Yeah, good morning, both. You mentioned in your opening remarks, Lee, that you'd rolled out the next generation NAT peril models. I wondered if you could articulate what the additional upside opportunity for Verisk is there, given you're already seeing strong subscription revenue growth in the extreme events business. And I just wanted to check, as well, that you mentioned on pricing that you had been able to achieve higher prices on renewals due to the product upgrades. Is that already, is that expected and therefore already factored into your guidance for 24? Does it present a potential upside opportunity on the guidance? Thanks.
Russell: Yeah, Hi, good morning, you.
Russell: You mentioned in the opening remarks, Lee it rolled out the next generation.
Russell: I wondered if you could.
Russell: Well the additional upside opportunity.
Russell: Is that given you're already seeing strong subscription revenue growth in the extreme events business and I just wanted to check as well you mentioned on pricing that you had been able to.
Russell: Realize more pricing on renewals due to the product upgrades is that.
Russell: Ready.
Russell: It is therefore already factored into your guidance with 24 does it present, a potential upside opportunity on the Gaza conflict.
Lee M. Shavel: Thank you. Thank you, Russell.
Russell: Yes.
Speaker Change: Thank you. Thank you Russell So your first one on the next generation models I think that this is a major upgrade in terms of the sophistication of the models, allowing our clients to better estimate and quantify the uncertainty of their losses across the <unk>.
Lee M. Shavel: So first, on the next generation models, I think that this is a major upgrade in terms of the sophistication of the models, allowing our clients to better estimate and quantify the uncertainty of their losses across the industry. And given, if you think about the next generation models, they are taking a variety of environmental, physical, and weather risks related to them and then translating them into what are the real costs associated with damage, restructuring, and the rest. And so we can take this and apply it to all of our perils and all of our geographies.
Speaker Change: History, and given you you'd think about the next generation models. It is taking a variety of the environmental physical weather risk related and then translating into what are the real costs associated with with damage restructuring and the rest and so we can.
Lee M. Shavel: So it is a major enhancement to our portfolio of products, and it's also increased the sophistication of the ability to support complex insurance policy structures and deal with new terms and conditions that weren't previously effectively captured in the model. So we do think that this is a substantial opportunity for us to deliver more value to our risk modeling clients, and certainly, our expectations are reflected in our guidance in that regard.
Speaker Change: Take this and apply it to.
Speaker Change: All of our apparel on all of our geographies. So it is a major enhancement to our portfolio of products and it's also increase the sophistication of the ability to support complex insurance policy structures and deal with the new terms and conditions that werent previously effectively captured in the model it.
Speaker Change: Also is an important step for us to the SaaS model getting the next generation financial model in place was critical and what we've heard from our clients is what they wanted to be addressed first and now we can improve the functionality and the efficiency of that so we do think that this is a substantial opportunity for us.
Speaker Change: To deliver more value to our risk modeling risk modeling clients and certainly our expectations are reflected within our guidance in that regard, but it does I think open us up to continue to expand what we do for clients on that front with regard to your question on that is the pricing ups.
Lee M. Shavel: But it does, I think, open us up to continue to expand what we do for clients on that front. With regard to your question about the pricing upside, that is reflected within our guidance. We're pleased with the progress that we're making in the reaction from our clients to the investments that we've made in a variety of our products. And that's reflected in the guidance that we have.
Speaker Change: Side that is reflected within our within our guidance.
Speaker Change: Pleased with the progress that we're making in the reaction from our clients to the investments that we've made in a variety of our and a variety of our products and that's that's reflected in the in the guidance that we have put forward.
Operator: Your next question comes from the line of Alex Kramm with UBS. Please go ahead.
Speaker Change: Your next question comes from the line of Alex Kramm with UBS. Please go ahead.
Operator: Yes, hello everyone. Just maybe quickly on the international side, I think 23% growth year over year. I know that's not organic, but it's still pretty impressive. Can you just maybe give us an update on where you're seeing the most growth in those businesses? And then maybe related to that, I've historically viewed those businesses as a disparate collection of different businesses in different regions. So I'd be curious if there are any efforts to maybe bring those businesses closer together, or if you're already seeing any synergies between those businesses, or if it's still just a lot of different disparate things. Thanks. Yeah.
Alexander Kramm: Yes, Hello, everyone. Just maybe quickly on the international side, I think 23% growth year over year, I know, that's not organic but still pretty pretty impressive.
Alexander Kramm: Just maybe get something to give us an update where you're seeing the most growth in those businesses and then maybe related to that if historically viewed out those businesses is a disparate collection of different businesses in different regions. So.
Alexander Kramm: I was curious if there's any efforts.
Alexander Kramm: Two to maybe bring those business closer together or if you're already seeing any synergies between those those businesses all of its still just a lot of different desperate things. Thanks.
Lee M. Shavel: Yeah, thank you, Alex. That's a great question.
Speaker Change: Yes. Thank you Alex that's a great question. So I think the first question relates to the overall growth and I think when we look at the businesses on an organic basis I think we are.
Alexander Kramm: Generally.
Alexander Kramm: We've spoken before and we continue to believe that that they have and will continue to drive double digit growth within the within our business and so I think that's kind of the base baseline we continue to see opportunity on that front. Your question on the.
Lee M. Shavel: So, I think the first question relates to overall growth. And I think when we look at the businesses on an organic basis, I think we are generally, you know, we've spoken before, and we continue to believe that they have and will continue to drive double-digit growth within our business. And so, I think that's kind of the baseline.
Speaker Change: The coordination I think is an important one and I would say that each of those businesses are serving distinct.
Speaker Change: <unk> indiscreet constituencies and the opportunity I think has been less to tie all of those products together from a single client perspective, but to partner more effectively with the U S team to mix and the international team to make certain that we are.
Speaker Change: Integrating our expertise our data some of the investments that we've made in the U S to enhance and strengthen those those client those product sets and so I think we're seeing a heightened level of a partnership in that in that regard, but not so much trying together for instance, the claims in the underwriting.
Speaker Change: Businesses as well another dimension, which I referenced earlier is that I think that we.
Lee M. Shavel: We continue to see opportunity on that front. Your question on coordination, I think, is an important one. And I would say that each of those businesses is serving distinct insurance industry constituencies. And so, I think we're seeing a heightened level of partnership in that regard, but not so much tying together, for instance, the claims and the underwriting businesses as well. Another dimension, which I referenced earlier, is that I think that we are seeing an opportunity to partner with institutions within Europe that see that value and, through their existing distribution networks, have the ability for us to deliver some of that value in partnership with other players within that market.
Speaker Change: Are seeing an opportunity to partner partner.
Lee M. Shavel: With institutions within Europe that see that value and through their existing distribution networks have an ability for us to deliver some of that value in partnership with other players within that market and so on that.
Lee M. Shavel: And so, that, I think, becomes an enhancement opportunity for those products as well as some of our U.S.-based products and technology that can be applied. Your next question comes from the line of Heather Balsky with Bank of America. Please go ahead. Hi, thank you for taking my question.
Speaker Change: It becomes an enhancement opportunity for those products as well as some of even our U S based products and technology that can be that can be applied there.
Operator: Your next question comes from the line of Heather Balsky with Bank of America. Please go ahead.
Heather Nicole Balsky: The next question comes from the line of Heather <unk> with Bank of America. Please go ahead.
Heather: Hi, Thank you for taking my question.
Heather Nicole Balsky: Really curious about the catastrophe.
Heather: Bond piece of your business.
Heather Nicole Balsky: There's been some really strong data out there and it seems like Theres some outlooks for continuation of that at what what's driving that and can you also remind us just how you benefit from strength in that market. Thank you.
Lee M. Shavel: Yeah, thanks, Heather. Yes, it is a strong market. I think it's what's driving it is both the need, the increased catastrophe risk, and the need for diversifying the set of investors in that space of risk. And for new investors, it's their own desire to diversify and find uncorrelated areas of investment. So that's been driving strength in that cap on market. How we benefit from it is our extreme event business is one of the primary providers of models and assessments of that risk so that investors and the issuers of those cap bonds can agree to transact on the pricing by assessing the risk.
Heather Nicole Balsky: Yeah. Thanks Heather.
Speaker Change: Yes. It is it is a strong market I think it's it's what's driving it is both the need.
Lee M. Shavel: The increased catastrophe risk and the need for a diversifying the set of investors are in that space of risk and and for new investor that's their own desire to diversify I find uncorrelated areas of investment. So that's been driving strength in that cap on market, how we benefit from it is our extreme event business.
Lee M. Shavel: Is a is one of the primary.
Lee M. Shavel: Providers of models and assessment of that risk so that so that the investors on the issue, whereas that those cat bonds can agree to transact on the on the pricing by assessing the risk.
Lee M. Shavel: And Heather, what we are seeing that is driving this is both demand from investors for non-correlated returns and interest in, particularly in this hard market from an insurance standpoint, what are perceived to be more attractive returns. We're also seeing that in terms of more capital being attracted into excess and surplus lines and reinsurance generally. And it speaks to, I think, the ongoing development and the increasing sophistication of active portfolio management in the insurance industry that is an opportunity for us, given our modeling capabilities, given the loss costs and the rate modeling activities that we have.
Speaker Change: And Heather.
Lee M. Shavel: Let's see what we are seeing that is driving that is both demand from investors for non correlated returns.
Lee M. Shavel: The interest in it particularly in this hard market from an insurance standpoint, what are perceived to be more attractive more attractive returns. We're also seeing that in terms of more capital being attracted into excess and surplus lines and reinsurance reinsurance generally.
Lee M. Shavel: And it speaks to I think the ongoing development and the increasing sophistication of the portfolio.
Lee M. Shavel: Portfolio active portfolio management.
Lee M. Shavel: Of the insurance industry that is an opportunity for us given our modeling capabilities given the loss costs.
Lee M. Shavel: And the the right modeling activities that we have and that has been something that we have been engaged in thinking about at an enterprise level in terms of how we can support the development of that market. One example would be if there was a category of insurers that are ILS managers insurance linked securities managers.
Lee M. Shavel: And that has been something that we have been engaged in thinking about at an enterprise level in terms of how we can support the development of that market. You know, one example would be there's a category of insurers that are ILS managers, insurance-linked securities. And those have been modeling clients of ours and also represent opportunities for us to build broader relationships in how our suite of products can serve their needs as they manage external sources of capital. At this time, I would like to remind everyone, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of George.
George: And those have been modeling clients of ours and also represent opportunities for us to build broader relationships and how our suite of products can serve their needs as they manage external sources of sources of capital.
Lee M. Shavel: Okay.
Operator: At this time, I would like to remind everyone, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of George Tong with Goldman Sachs. Please go ahead.
George: At this time I would like to remind everyone to who'd like to ask a question. Please press star one on your telephone keypad.
Operator: Yeah, thanks, George. We see, you know; we don't forecast subscription growth for you. We do, obviously give our medium-term target range for total revenue growth at 6 to 8% organic constant currency, and subscription has historically been 80% of that. So, you know, that's kind of what we can say numerically. In terms of drivers for acceleration and deceleration, I think, you know, all of the things that we've been talking about, investment in our product, our customer engagement, and our industry expertise drive strength in subscription revenue, both from a renewal, from a new customer base, and from a pricing perspective. Headwinds can come with, we've talked about this before, with, you know, potential attrition or industry consolidation.
Operator: Your next question comes from the line of George Tong with Goldman Sachs.
Speaker Change: Please go ahead.
Speaker Change: Hi, Thanks, good morning.
George: In the early part of last year subscription revenue growth was in the 90% range and over the past two quarters growth was in the 7% to 8% range, what's a reasonable and sustainable rate of growth for subscription revenue and what are the top one or two factors that you believe will drive either acceleration or.
Operator: Deceleration from current levels.
Speaker Change: Yes, Thanks, George we see.
Operator: We don't forecast subscription growth for you we do we basically give our medium term target range for total revenue growth at 6% to 8% organic constant currency.
Operator: Subscription is has historically been 80% of that.
Operator: So.
Operator: That's that's kind of what we can say numerically in terms of drivers for acceleration and deceleration I think.
Operator: All of the things that we've been talking about our investment in our products our customer engagement.
Operator: And our industry expertise drive drive strength in our subscription revenue both from a renewal from a new customer base and from that from a pricing perspective.
Operator: Headwinds could come with a we've talked about this before with potential attrition or industry consolidation or sooner.
Operator: Okay.
Operator: Your next question comes from the line of Gregory Peters with Raymond James. Please go ahead.
Operator: Your next question comes from the line of Gregory Peters with Raymond James. Please go ahead.
Lee M. Shavel: Great. I get to sneak in a follow-up. I appreciate the opportunity. So, Lee, in your comments, you talked about the hard market for non-life insurance, and one of the things that's becoming apparent is that the pricing trends are going to begin to moderate. So, you know, building on Elizabeth's last answer, how does a market that's more normal affect subscription and transactional revenue growth, you know, as we look ahead?
Gregory Peters: Great I'll get to sneak in a follow up I appreciate the opportunity.
Lee M. Shavel: So Lee in your comments, you talked about the hard market in non life insurance and.
Lee M. Shavel: One of the things that's becoming apparent is that.
Lee M. Shavel: The pricing trends.
Lee M. Shavel: Aren't going to begin to moderate so.
Lee M. Shavel: Building on.
Lee M. Shavel: Elizabeth last answer.
Lee M. Shavel: How does.
Lee M. Shavel: Market, that's more normal effect subscription and transactional revenue growth as we look ahead.
Lee M. Shavel: Thanks, Greg, and thanks for coming back for seconds. So, I think that, you know, we are seeing, you know, I would first challenge that we are seeing kind of continued pressures on the industry, both in terms of ongoing inflation, as well as increased risk that they are experiencing, that seemingly is continuing to support premium, premium growth, as well as a natural expansion in coverage for the industry.
Lee: Thanks, Greg and thanks for coming back for seconds, we associate it.
Lee M. Shavel: So.
Lee M. Shavel: I think that we are seeing.
Lee M. Shavel: I would first.
Lee M. Shavel:
Lee M. Shavel: Following that.
Lee M. Shavel: That we are seeing kind of continued pressures on the industry. Both in terms of ongoing inflation as well as increased risk that that they are experiencing that.
Lee M. Shavel: Seemingly is continuing to support premium and premium growth as well as kind of natural expansion in in coverage for the for the industry. So at this point based upon the financial reports and our engagement with with clients we have.
Lee M. Shavel: So at this point, you know, based upon the financial reports and our engagement with clients, we have not seen early signs of that market. In fact, a lot of the reading that I have seen has been to a sustained hard market. But you know, we do have to anticipate at some point that there may be some pressure from a margin standpoint. And in that context, our products and services remain critical in achieving a higher level of operational efficiency within the business in order to maintain or improve that combined ratio, as well as the efficiency of making good underwriting decisions.
Lee M. Shavel: We have not seen early signs of that of that market. In fact, a lot of the reading that I have seen has been into a sustained hard market.
Lee M. Shavel: But we do have to anticipate at some point that there may be.
Lee M. Shavel: Some some pressure from a margin standpoint and in that context.
Lee M. Shavel: Our products and services remain critical in achieving a higher level of operational efficiency within the business in order to maintain or improve that combined ratio.
Lee M. Shavel: As well as the efficiency of making good underwriting decisions and I would use this as an opportunity to say I think one of the most promising dimensions of generative AI use in <unk>.
Lee M. Shavel: And I would use this as an opportunity to say I think one of the most promising dimensions of generative AI is in gathering and pre-digesting a lot of the information flow that the insurance industry relies upon to evaluate Policy Submissions, Evaluating Adequacy, Going to the Risk, not replacing the humans, but enabling them to focus their expertise on the underwriting decision, the risk, and the return decision. We think that that is a secular trend; as technology improves, as data sets expand, that will continue to provide ample opportunity for us to deliver value to the industry.
Lee M. Shavel: Gathering and digesting a lot of the information flow that the insurance industry relies upon to evaluate.
Lee M. Shavel: Policy submissions evaluating adequacy going into the risk not replacing the human but enabling them to focus their expertise on the underwriting decision the risk and the return decision. We think that that is a secular trend.
Lee M. Shavel: As technology improves as datasets expand that will continue to provide ample opportunity for us to deliver value to the value to the industry. It's nice to have some premium growth because I think it puts people in a constructive frame of mind, but these issues and challenges that the industry face.
Lee M. Shavel: You know, it's nice to have some premium growth because I think it puts people in a constructive frame of mind. But these issues and challenges that the industry faces are going to exist, regardless of whether it's a hard market or a soft market. And I think that's our fundamental opportunity.
Lee M. Shavel: Are going to exist, regardless of whether it's a hard market or soft market and I think that's our fundamental opportunity.
Operator: Ladies and gentlemen, there are no further questions at this time. Thank you for your participation. This concludes today's call. You may now disconnect.
Speaker Change: Ladies and gentlemen, there are no further questions at this time thank you.
Speaker Change: You for your participation. This concludes today's call you may now disconnect.