Gustavo Ballvé on October 9th, 2009
Industries, Insurance

On Oct. 6th, insurance data provider Verisk Analytics IPO’d. Verisk is primarily owned by P&C insurance firms such as AIG, Berkshire Hathaway, Hartford Financial, Swiss Re, and so on. As some of these companies were hit hard by the crisis (to say the least) and are taking several losses from hurricanes Ike and Gustav, they’re being forced to sell their stake. Berkshire is the only insurer not selling. Quick look at the business and links for follow-up study.

About 60% of the company’s revenues are generated from a data center business that helps insurers meet regulatory standards and better price their risks. While revenue growth in this segment is in the low-single digits, it’s very stable and recurring in nature. Moreover, because it’s a subscription-based model, customers pay up front, creating negative working capital and boosting returns on capital. With little reinvestment needs outside of server maintenance and data storage, Verisk is a cash machine.

The other 40% are a more value-added business (Fraud Identification and Detection Tools) that grows +20% YoY (M&A included), but has lower margins and moat.

Ringing any bells yet? This is very similar to IMS Health, both on business model and growth profile, with the advantage of a ‘Buffet stamp’ and the absence of a pharma overhang (though it might be substituted by an insurance overhang). Morningstar estimated the IPO at a 13-36% discount to fair value – the company went public at US$ 22 per share and quickly jumped to US$ 27.33 in the first trading day.


UPDATE: Verisk acquires retail industry loss-prevention leader (press release, Nov. 17th, 2009)

Link to the definitive prospectus here – and in PDF format.

Video interview with Verisk’s CEO – Nasdaq Marketsite, October 8th 2009. Background on Mr. Coyne from the same story.

Investor Business Daily’s IPO story – October 7th

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