Verisk Analytics, Inc. (VRSK, NASDAQ)
Industry: Consulting Services
Annual report, fiscal year 2014


Following

# THE VERISK WAY

2014 Annual Report



## Company Profile

Verisk Analytics (Nasdaq:VRSK) provides information, analytical tools, and research about risk to professionals in many fields, including insurance, healthcare, financial services, supply chain, and others. The company has delivered data, analytics, and decision support services to its customers for more than 40 years. The Verisk family has grown significantly and includes industry-leading businesses AIR Worldwide, Argus, ISO, Verisk Health, and Xactware.

Using advanced technologies to collect, analyze, develop, and deliver information, Verisk Analytics helps customers evaluate and manage risk. The company draws on vast expertise in actuarial science, insurance coverages, fire protection, fraud prevention, catastrophe and weather risk, predictive modeling, data management, economic forecasting, social and technological trends, and many other fields. To meet the needs of diverse clients, Verisk Analytics employs an experienced staff of business and technical specialists, analysts, and certified professionals.

In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, visit www.verisk.com.

## Financial Highlights



Adjusted EBITDA from Continuing Operations





2014 Revenues by Vertical End Market






## Selected Financial Data

<table><tr><td rowspan="3"></td><td colspan="3">Years Ended December 31,</td></tr><tr><td>2014</td><td>2013</td><td>2012</td></tr><tr><td colspan="3">(in thousands, except for per share data)</td></tr><tr><td>Statement of operations</td><td></td><td></td><td></td></tr><tr><td>Revenues:</td><td></td><td></td><td></td></tr><tr><td>Decision Analytics revenues</td><td>$ 1,096,074</td><td>$ 977,427</td><td>$ 828,342</td></tr><tr><td>Risk Assessment revenues</td><td>650,652</td><td>618,276</td><td>579,506</td></tr><tr><td>Revenues</td><td>$ 1,746,726</td><td>$ 1,595,703</td><td>$ 1,407,848</td></tr><tr><td>Total expenses</td><td>$ 1,086,280</td><td>$ 981,436</td><td>$ 835,620</td></tr><tr><td>Operating income</td><td>$ 660,446</td><td>$ 614,267</td><td>$ 572,228</td></tr><tr><td>Net income</td><td>$ 400,042</td><td>$ 348,380</td><td>$ 329,142</td></tr><tr><td>Adjusted net income from continuing operations</td><td>$ 406,124</td><td>$ 381,833</td><td>$ 348,787</td></tr><tr><td>Adjusted earnings per share from continuing operations:</td><td></td><td></td><td></td></tr><tr><td>Basic</td><td>$ 2.45</td><td>$ 2.27</td><td>$ 2.10</td></tr><tr><td>Diluted</td><td>$ 2.40</td><td>$ 2.21</td><td>$ 2.03</td></tr><tr><td>EBITDA from continuing operations:</td><td></td><td></td><td></td></tr><tr><td>Decision Analytics</td><td>$ 434,210</td><td>$ 397,876</td><td>$ 354,918</td></tr><tr><td>Risk Assessment</td><td>368,770</td><td>346,931</td><td>316,260</td></tr><tr><td>Total EBITDA from continuing operations</td><td>$ 802,980</td><td>$ 744,807</td><td>$ 671,178</td></tr><tr><td>EBITDA margin from continuing operations</td><td>46.0%</td><td>46.7%</td><td>47.7%</td></tr><tr><td>Balance sheet data</td><td></td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 39,359</td><td>$ 165,801</td><td>$ 89,819</td></tr><tr><td>Total assets</td><td>$ 2,345,330</td><td>$ 2,504,451</td><td>$ 2,360,336</td></tr><tr><td>Total debt</td><td>$ 1,436,932</td><td>$ 1,275,887</td><td>$ 1,461,425</td></tr><tr><td>Stockholders&#x27; equity (deficit)</td><td>$ 211,043</td><td>$ 547,589</td><td>$ 255,591</td></tr><tr><td>Other data</td><td></td><td></td><td></td></tr><tr><td>Cash from operations</td><td>$ 489,452</td><td>$ 506,920</td><td>$ 468,229</td></tr><tr><td>Capital expenditures</td><td>$ 146,818</td><td>$ 145,976</td><td>$ 74,373</td></tr></table>

The company defines “EBITDA” as net income before interest expense, income taxes, depreciation, and amortization. The company defines “adjusted EBITDA” as EBITDA before ESOP allocation expense, IPO-related costs, and other nonrecurring items.

The company defines “adjusted net income” as net income before amortization of intangibles, net of tax, and other nonrecurring items. The company calculates “diluted adjusted earnings per share” as adjusted net income divided by diluted shares.

Adjusted net income, adjusted EBITDA, and EBITDA are non-GAAP financial measures. See inside back cover for the reconciliations to net income.

The company defines “capital expenditures” as purchases of fixed assets.




# To our shareholders,
customers, and employees

Scott G. Stephenson

President and Chief Executive Officer

At Verisk Analytics, we help our customers make crucial decisions every day that affect millions of lives and tens of thousands of businesses around the world. We have a long and distinguished history of supporting our customers in managing risk, making informed decisions, complying with regulatory standards, and improving service — ultimately enhancing the lives of people everywhere. Our strong profitability and shareholder returns are the result of our commitment to excellence and quality of service.

Our vision is to be the world’s most effective and responsible data analytics company in pursuit of our customers’ most strategic opportunities. Our unshakable commitment is to serve our customers with the highest level of quality, service, and innovation in all we do. That’s The Verisk Way. We do things The Verisk Way because we want our customers, employees, shareholders, and communities to flourish.

The core of The Verisk Way is three simple but powerful principles about the way we approach our work: Serve. Add Value. Innovate. We serve by anticipating the needs of our customers and colleagues and exceeding their expectations. We add value by improving quality, productivity, and timeliness. And we innovate by visualizing the future and being thought leaders.

In this Annual Report, you’ll find many examples of how we uphold the tenets of The Verisk Way for our customers and shareholders — and achieve profitable growth in the process.

## 2014 Review

Verisk Analytics had a strong year in 2014 as we continued to build for the future. We again achieved peer-leading levels of organic revenue growth and high levels of profitability. We maintained our disciplined capital management strategy and invested substantially in growing our business while also returning capital to shareholders.
Our 2014 consolidated revenues grew 9.5 percent over 2013, to $1.7 billion. In our Decision Analytics business segment, revenues from continuing operations grew 12.1 percent, to $1.1 billion. And in our Risk Assessment business segment, revenues from continuing operations grew 5.2 percent, to $651 million. From 2010 to 2014, consolidated revenues from continuing operations increased at a compound annual growth rate (CAGR) of 15.2 percent; Decision Analytics revenues from continuing operations increased at a CAGR of 24.1 percent; and Risk Assessment revenues from continuing operations rose at a CAGR of 5.2 percent.

For 2014, the company posted $803 million of consolidated EBITDA from continuing operations, up 7.8 percent from 2013. The consolidated EBITDA margin from continuing operations was 46.0 percent. The company posted $400 million of consolidated net income, up 14.8 percent from 2013, and $406 million of consolidated adjusted net income from continuing operations, up 6.4 percent from 2013. Diluted adjusted earnings per share from continuing operations increased 8.6 percent, to $2.40.

Verisk continued to diversify in 2014. Approximately 49.1 percent of revenues from continuing operations came from primary insurers in the property/casualty insurance industry; and 50.9 percent came from our other markets, including healthcare, financial services, and specialized markets. The contribution from those newer markets is up from about 20 percent in 2004.

During 2014, we enhanced our predictive analytics and catastrophe modeling capabilities and focused on key insurance coverages such as drones and Ebola-type viruses. We rolled out new programs in the healthcare domain and launched others in the financial services sector. We continued to expand our supply chain offerings in the areas of compliance, loss prevention, and risk. And we made progress in opening up markets



around the world. We believe our focus on such enhancements will benefit our customers and contribute to our financial results in 2015 and beyond.

Verisk’s global expansion strategy continued to gain momentum in 2014. With market presence centered in Australia, Brazil, Canada, China, India, Israel, Japan, New Zealand, Singapore, and the United Kingdom, we employ a disciplined strategy of acquisitions, strategic collaborations, and global brand and business unit development. Our goal to grow internationally will help us uncover revenue streams and vertical markets in all corners of the world.

We continue to pursue a program of judicious open-market share repurchases. In 2014, we repurchased approximately 4.4 million shares for a total cost of $275 million at a weighted average price of $62.18. We also executed a one-time accelerated share repurchase for $500 million to deploy capital available after we ended efforts to acquire EagleView Technology Corporation. We continue to view aerial imagery as a significant growth area for Verisk.

In March, we closed the sale of our Interthink mortgage analytics business for $155 million (before certain adjustments) to First American Financial Corporation, a leading global provider of title insurance, settlement services, and risk solutions for real estate transactions.

## Growing the Verisk Family

As part of our strategy for growth, we made several acquisitions to augment our offerings in proprietary analytics, financial services, and global risk analytics, reinforcing our commitment to grow our vertical markets and expand internationally.

We acquired Inovatus, a provider of proprietary models that help insurers improve underwriting results. The models reduce fraud and premium leakage for personal auto insurers. The new technology behind our RISKCheck Point of Sale models helps insurers identify risks with a high likelihood of future claims fraud.

We acquired Dart Consulting, a leading provider of benchmarking and advisory solutions to financial services institutions in Australia, New Zealand, and other Asia-Pacific markets. As part of our Argus business, Dart will offer those services to help financial institutions manage their lending and payment portfolios.

And most recently, we acquired Maplecroft, a leading provider of global risk analytics and advisory services, headquartered in Bath, England. The new entity, now known as Verisk Maplecroft, quantifies, mitigates, and manages a growing range of geopolitical, societal, human rights, economic, and environmental risks worldwide. Verisk Maplecroft’s capabilities also augment our supply chain portfolio.

## The Verisk Way

During 2014, we refined and expanded The Verisk Way — our company philosophy and guidelines on how we serve customers and what we should expect of ourselves. I’ve already mentioned The Verisk Way principles: Serve. Add Value. Innovate. But The Verisk Way also underscores our core values, such as excellence, passion, and teamwork, and the leadership qualities to which we aspire, such as customer-centered product innovation and a data/analytics mindset. It also highlights our “distinctives” — or competitive advantages — including our unique data assets and deep domain expertise.

We’re continually evolving as an organization. The Verisk Way guides our nearly 6,500 employees in their everyday work and in our strategies going forward. It serves as the framework to create value for our shareholders and point us toward the future — confidently and profitably.

## Corporate Social Responsibility

In 2014, Verisk furthered its commitment to serving the long-term interests of our stakeholders — customers, employees, shareholders, and the communities in which we operate — by inaugurating an enterprisewide corporate social responsibility program led by a member of our corporate leadership team. We also launched a corporate social responsibility website and published our Corporate Social Responsibility Report to highlight the program. Please visit www.verisk.com/csr to explore our initiatives and download the Verisk Corporate Social Responsibility Report.

Our 2014 Verisk Community Service Week was a resounding success. Across the company and around the world, employees had the opportunity to increase their involvement in our local communities. The program provided an outstanding way to encourage teamwork and promote workplace volunteerism and employee engagement.

Verisk’s corporate social responsibility initiative will strengthen the Verisk brand — recognized for its integrity and excellence, distinguished by its profitability and growth, and respected for its contribution to the greater good.

Sincerely,

Scott G. Stephenson
President and Chief Executive Officer




## Following The Verisk Way

At Verisk Analytics, we follow The Verisk Way. The Verisk Way reflects our philosophy and provides guidelines on how we should treat our customers and one another. It contains three principles that guide us in our work and represent our values as a global company.

In 2014, Verisk served our stakeholders, added value to our offerings and our customers' profitability, and innovated to achieve excellence and maintain competitive advantage.

Verisk’s nearly 6,500 employees help us achieve our mission of measuring, managing, and reducing risk for our customers — a key component of The Verisk Way. Our workforce includes experts in diverse fields, such as actuarial science, statistical modeling, fire protection, medicine, meteorology, geophysics, economics, and engineering. And many hold doctorates, professional certifications and designations, and other advanced degrees.




Here are some of the ways we followed The Verisk Way in 2014 and will continue doing so in the future:

## Serve

We take great satisfaction anticipating the needs of our customers and colleagues and in exceeding their expectations.

We serve our customers by developing tools that detect and prevent fraud.

We serve our customers by engaging with them on emerging issues and releasing insurance coverages that meet their needs.

We serve our customers by providing tools for population health management.

We serve our customers by providing actionable, insightful information to banks and other financial institutions.

## Add Value

We see each day as an opportunity to add value within our areas of responsibility by continually improving quality, productivity, and timeliness.

We add value to insurers by improving risk management, enhancing underwriting tools, and managing catastrophe risk.

We add value to the healthcare industry by improving healthcare effectiveness.

We add value to financial institutions by aggregating massive amounts of data to help them ensure compliance, develop products, detect fraud, and manage credit risk.

We add value to supply chains by providing services to facilitate compliance and safety.

## Innovate

We are passionate about visualizing the future and being thought leaders in order to achieve a better tomorrow.

We innovate with predictive analytics and catastrophe models for different markets and platforms.

We innovate with supply chain management tools that support customers in meeting responsible and strategic sourcing objectives.

We innovate with scientific contributions to weather forecasting and prediction.

We innovate with tools and services that manage geopolitical, societal, human rights, economic, and environmental risks around the world.

In this Annual Report, learn more about how we follow The Verisk Way.



# Property/Casualty Insurance



## Predictive Analytics

Verisk is a leader in predictive analytics and modeling. In 2014, insurers continued to benefit from our services with high-quality models, improved productivity, and gains in automation.

The ISO Risk Analyzer \( ^{®} \)  suite of predictive models helps insurers examine the interactive effects of hundreds of rating variables to predict expected losses at the level of an individual policy. That capability lets our customers set an accurate price for each policy and avoid underpriced — or overpriced — pockets that occur in traditional rating plans. Underpriced policies are a drain on profitability, and overpriced ones can drive away potentially profitable customers. So our models give insurers a significant competitive advantage.

During 2014, Verisk’s ISO business launched two ISO Risk Analyzer Personal Auto modules. One module helps determine vehicle liability risk, allowing insurers to see that specific characteristics of vehicles within the same vehicle series can affect the risk. The other — the next-generation environmental module — includes new variables and data sets and a refined methodology. The modules offer insurers even more accuracy in classifying, segmenting, and pricing auto policies to improve their risk-based decisions.

We launched several highly innovative tools this year. We introduced ISO RiskElements \( ^{™} \) , a service that provides access to ISO’s high-quality insurance data sets along with leading market and demographic research data — validated and ready for use in predictive models. And Verisk’s ISO Claims Partners business launched WC Navigator \( ^{™} \) , a workflow and predictive analytic tool that helps insurers identify potentially unpredictable workers compensation claims earlier in the claims-handling cycle.

For commercial property insurers, Verisk launched the next generation of its ProMetrix \( ^{®} \)  suite — with data and analytics on construction, building and occupancy, relative hazard comparisons, property details, fire protection and sprinkler grading, and exposure details. The new risk engineering analytics allow insurers to price more competitively by identifying the effects on loss costs when insureds remedy property hazards. Other tools instantly benchmark risks against peer properties. We provide the enhanced analytics through a new dynamic web portal with real-time functionality. With more than 3.5 million site-verified commercial properties and more than 6 million businesses in its database, ProMetrix continues to add value for insurers through improved risk management and enhanced rating insights.

## Catastrophe Modeling

The effects of catastrophes on people, the economy, and the insurance industry can be severe. Verisk catastrophe models use sophisticated simulation methods that capture how catastrophes — both natural and man-made — behave and affect buildings and infrastructure. Several Verisk businesses — including AIR Worldwide and Verisk Climate — are leaders in catastrophe modeling.

Customers use our catastrophe models in pricing, risk selection and underwriting, loss mitigation, reinsurance decision making, and portfolio management. Model output provides information about the potential for large losses before they occur, so our customers can prepare for the financial consequences. Today, we offer models for natural catastrophe risk and terrorism in more than 90 countries around the world, covering more than 85 percent of global catastrophe losses.

In 2014, we released Touchstone \( ^{®} $  2.0, the newest version of our premier catastrophe modeling platform. Incorporating data and tools from across the company, Touchstone offers tremendous performance improvements along with rich visualization capabilities that let users interact with their data to generate information that matches the way they work and think. Customers get information on demand to help in making the best business decisions and to communicate the risks clearly to all stakeholders. Many of the world’s largest insurers, reinsurers, and reinsurance brokers are already using Touchstone to manage their catastrophe risk, and market share is growing in the United States, Europe, and the Asia-Pacific region. AIR has implemented the new release for customers, including primary personal and commercial lines insurers, the excess and surplus market, reinsurers, and reinsurance and insurance brokers.




Touchstone 2.0 includes the ability to analyze both catastrophe and noncatastrophe information for a more comprehensive view of a company’s risk. It also features an underwriting mode to streamline the account underwriting process and new functionality for companies to adjust model output to reflect their own view of risk.

In addition to enhanced capabilities, Touchstone 2.0 also includes new and updated models that represent the culmination of major research and development efforts. We released three probabilistic catastrophe models for the United States. The new inland flood model gives insurers a more robust view of individual risk pricing sensitivity and new opportunities for flood insurance product innovation. The crop hail model is the industry's first model that captures the effects of hail on insured crops, providing companies with a comprehensive view of their crop hail risk. The updated severe thunderstorm model features significant enhancements based on a decade's worth of new data and scientific research and overcomes many of the limitations and reporting biases in the historical data. We also released an updated earthquake model for Canada that assesses potential losses from ground shaking, fire following earthquake, tsunami, liquefaction, and landslide.
Our AIR business continues to lead the catastrophe bond market. Most sponsors of catastrophe bonds use AIR services to model the risk profiles of their transactions. In 2014, AIR was the modeling agent for almost 80 percent of catastrophe bond transactions exposed to property risk.

Electrical blackouts can be catastrophic, costing U.S. businesses and society more than $100 billion a year. In 2014, Verisk Climate launched its Blackout Risk Model \( ^{™} \)  with Hartford Steam Boiler to help predict the likelihood, severity, and financial consequences of loss of electrical power. The model helps insurers, other businesses, and governments identify high-risk areas and plan for effective response to blackouts caused by severe weather, peak power demands, human error, and other factors.

## Fraud Mitigation

Verisk helps insurers detect and prevent fraud at every step of the claims life cycle, including reporting, processing, analysis, and investigation. In 2014, Verisk initiated ISO ClaimSearch \( ^{®} $  2.0 — the start of an innovative reimagining for ISO ClaimSearch, the industry’s first and only comprehensive system for improving claims processing and fighting fraud. The new platform adds value to the customer experience by increasing efficiencies




and reducing costs. We also released ISO ClaimSearch DNA \( ^{™} \) , an analytical tool that applies advanced network analytics to the 1 billion claims in the ISO ClaimSearch database to proactively detect networks of organized claims activity most likely to affect organizations.

Verisk continues to invest in tools that can detect and prevent fraud before an insurer even writes a policy. Our RISK:check \( ^{®} \)  Point of Sale system identifies applications for insurance with a high likelihood of future claims fraud. It finds rating errors — such as undisclosed drivers and address discrepancies — that could result in lost premium. In 2014, we migrated the system to a newly developed underwriting technology platform supporting significantly faster and higher-volume transactional requirements. We also developed a new point-of-sale prefill application that reduces the quoting process from minutes to seconds, allowing insurers to quote new business faster and with greater accuracy. The application uses our vast underwriting data sets and various third-party data sources to prefill an entire auto application.

In 2014, Verisk introduced RISK:check Virtual Inspector \( ^{™} \) , a mobile app for vehicle inspections that can play an important role in the underwriting process. The new app uses patent-pending technology to enable agents and consumers to capture real-time images and information — including photos; images of documents such as registrations and titles; and the exact location of a vehicle, its condition, and mileage — during the quote or application process. We also expanded the offering during 2014 to include inspection of other assets, such as classic cars, boats, and specialty vehicles. The app uses the power of mobile devices to improve our customers' insurance experience while providing insurers with important underwriting information.



## Property Assessment

Verisk’s Xactware business offers Roof InSight \( ^{™} \)  and Property InSight \( ^{™} \)  — innovative services that provide property insurance professionals with critical data points for assessing the risk and/or damage associated with any type of agricultural, commercial, or residential structure in the United States.

Roof InSight — launched in 2013 — delivers data that includes high-resolution aerial imagery and a 3D roof plan showing the full dimensions and characteristics of a roof. That gives estimators and property professionals key information needed to estimate the cost of repairs. In 2014, our Roof InSight customer base continued to grow, and Xactware added substantially to our data set of structures, providing comprehensive coverage



for all major metropolitan areas across the United States. Roof InSight provides significant value for our customers as they help policyholders recover from catastrophes and other property loss events.

Continuing on our path of innovation, Xactware ushered in the next phase of our building data strategy with the development of Property InSight, providing information essential for claims and underwriting decisions. Property InSight delivers data that includes ultrahigh-resolution imagery for the entire property—the exterior structure along with all dimensions and slopes; number of levels; type of roof and siding material; detailed information on doors and windows; structural characteristics such as chimneys, decks, patios, and skylights; a 3D model of the building; and much more.

Our customers told us they were looking for a streamlined, standardized property inspection data collection and management system. We listened, and in 2014, Verisk developed an inspection management platform — 360InspectHub \( ^{™} \)  — to optimize, automate, and measure every stage in the inspection life cycle. The new platform gives insurers control of their inspection workflow and allows them to capture detailed information about the process and inspection results. With its user dashboards, custom business rules engine, reporting features, and underwriting tools, 360InspectHub aggregates inspection data and improves the quality, productivity, and timeliness of the inspection process.

## Insurance Coverages

We’re the recognized leader in developing standardized and specialty insurance policy programs to define and cover the risks that policyholders face. We monitor technological, social, and business issues — as well as legislative, regulatory, and legal developments — that may affect our programs.

In 2014, we continued engaging with our customers on emerging issues, releasing innovative coverage options for drones and Ebola-type viruses. The new endorsements for commercial drones address growing liability exposures and include various exclusion and coverage options to give insurers increased flexibility when writing risks with such exposures. The two new coverage options for Ebola help businesses when government authorities take steps to control the spread of the virus. The first endorsement offers coverage for loss of income that a business faces when it follows orders to close during an outbreak. The second endorsement responds if the government suspends public transportation.
The Terrorism Risk Insurance Act (TRIA) faced uncertainty in 2014. Its potential expiration at the end of the year would create challenges in addressing the risk of terrorism for insurers and policyholders, changing the risk landscape and causing a reevaluation of the ability to cover the terrorism exposure. When Congress adjourned for 2014 without taking action on an extension, ISO’s conditional commercial policy contract language helped insurers manage the uncertainty. Options include exclusions for losses from acts of terrorism as well as nuclear, biological, or chemical events. When the 114th Congress convened in January 2015 and extended TRIA’s expiration, we filed revised terrorism forms in advance of President Obama’s signature so that insurers could have the revised tools necessary the moment the bill became law.

Verisk continues on the leading edge of insurance vehicle telematics. We support the collection and analysis of driving data, such as location, speed, acceleration and braking, and driver behavior. Verisk Telematics provides driver discount programs that insurers can integrate into their telematics and usage-based insurance initiatives — refining their underwriting, loss control, and claims adjustment processes.

In 2014, Verisk Telematics offered Safety Scoring \( ^{™} \)  as part of its filed driver discount program. Based on driver behavior, the risk score helps auto insurers offer discounts that reflect how customers actually drive. The score and associated rules use innovative, patented methods backed by science.

## Excess and Surplus Lines

While we continue to develop insurance forms and rules to cover the most common exposures, we launched two new analytical tools in 2014, saving time and generating new revenues for the nonadmitted market.

ISO Rapid Valuator \( ^{™} \) , an innovative pricing tool, helps insurers independently analyze their own loss costs for larger commercial property accounts in the excess and surplus market. The tool can quickly perform a detailed loss cost analysis for an insurer’s multiple individual exposures, with results included in the insurer’s systems and workflow for final excess pricing. It also gives companies significant help with portfolio analysis and rate monitoring and provides strong benchmarking support for international risks. A second new tool, the ISO portal, delivers loss costs and rating information to underwriters and actuaries in the nonadmitted market, helping insurers make more informed pricing decisions.



## Healthcare

+



## Risk Adjustment Tools

Our Verisk Health business helps health plans, employers, providers, and other risk-bearing organizations improve the quality of healthcare delivery, reduce costs, ensure appropriate revenue, pay claims accurately, and support compliance. We accomplish those objectives by providing data services, analytics, and innovative technologies that address the healthcare industry’s complex challenges.

Verisk Health’s Medicare Risk Adjustment program continues experiencing widespread adoption and success, resulting in hundreds of millions of dollars in payments to our health plan customers based on clinically appropriate medical coding. In 2014, we retrieved and coded millions of records for our customers.

Meanwhile, the Affordable Care Act has constructed a framework for risk-adjusted marketplaces that allows individuals to enroll for private coverage. More than 11 million people have signed up for 2015 individual health insurance in the new marketplaces, and those numbers are expected to grow significantly over time. Many of those enrollees are newly insured. Verisk Health addressed the situation by introducing its commercial risk adjustment program in 2014. The program uses our expertise in Medicare Advantage risk adjustment to support Qualified Health Plans (QHPs) participating in the Health Insurance Marketplace to optimize their revenues based on the risks in their patient populations. Verisk Health submits data on behalf of QHPs to calculate risk scores that measure an enrollee’s current health conditions and expected healthcare expenditures.

## Combating Healthcare Fraud

Verisk Health helps healthcare payers detect and prevent fraud, waste, and abuse — a problem that costs the American healthcare system an estimated $900 billion annually. Verisk Health’s solutions include claims editing, clinical validation, healthcare and pharmacy fraud detection and prevention, and high-dollar claim review.

In 2013, Verisk Health launched an industry first with its Pooled Data Alliance. With the Alliance, Verisk Health acts as a neutral entity aggregating data from participating health plans. Our team then applies powerful predictive models and algorithms to identify suspicious patterns that would go undetected within the silo of a single payer’s data.

In 2014, Verisk Health added more than 7 million lives to the Alliance database, which brings the total to 16 million, representing members and providers in every state.



## Healthcare Effectiveness

The Verisk Health Quality Intelligence solution, used by payers and providers to track and benchmark adherence to clinical standards, helps managed care organizations calculate and analyze HEDIS \( ^{\circledR} \)  (Healthcare Effectiveness Data and Information Set) data, develop custom measures for clinical reporting, identify gaps in care for proactive interventions, and evaluate pay-for-performance measures.

In 2014, the National Committee for Quality Assurance (NCQA) certified Verisk Health’s HEDIS measures — quality scores that are a key component of many reimbursement programs. Ten of Verisk Health’s HEDIS customers ranked in NCQA’s top 20 across commercial, Medicaid, and Medicare lines; and all customers passed the new mandatory medical record validation testing. Verisk Health’s HEDIS solution processes claims for one-third of the U.S. insured population that reports to NCQA.



# Financial Services

## Actionable Views of Consumer Behavior

Argus Information and Advisory Services is a major provider of insightful information for banks and other financial institutions. The company collects and aggregates depersonalized transaction-level data on individual credit card, debit card, checking, money market, ATM, personal loan, and deposit accounts and, through a unique Argus-developed algorithm, combines the data to provide every participant with comprehensive insight on each bank’s share of its customers’ financial worth. Participating financial institutions represent the majority of the banking industry in several large economies around the globe.

Argus delivers actionable information and data in a variety of flexible formats. The information helps participants with their business strategies in such areas as regulatory compliance; product development; pricing; marketing; and mitigation of losses associated with credit default, collections, and fraud. Through Argus, participants receive detailed views of consumer behaviors — including spending patterns, revenues, payments, and risk of fraud or default — for participants’ own products in comparison to the rest of the industry. That insight helps banks understand the relationship of product, pricing, promotion, offers, and other programs for their customers.

Already the industry standard in the United States, the United Kingdom, Canada, and Brazil, Argus continued to expand its global presence in 2014 with the launch of its Credit Card Payment Study in Australia. The customized study provides issuers with accurate, credible, and relevant benchmarking information for the credit card market. The 2014 Verisk acquisition of Dart Consulting Limited strengthened the Argus presence and geographical reach in Australia, New Zealand, and other Asia-Pacific markets.

## Stress Testing and Capital Adequacy

In 2014, Argus significantly accelerated the adoption of services for portfolio stress testing, capital adequacy, and regulatory compliance. The company continued to help lenders meet and manage regulatory and capital adequacy requirements through its market-leading LookAhead \( ^{®} \)  software package.

With emerging stress-testing rules from the Federal Reserve and international regulators, large lenders face new guidelines. However, smaller lenders with less than $10 billion in total assets are also encouraged to follow best practices. In 2014, Argus significantly accelerated the adoption of its portfolio stress-testing platforms through its scenario-based forecasting software. Used by lending institutions worldwide, the platform provides control over loss forecasting, helping lenders develop contingency plans and ensuring they can withstand a severe economic downturn.

Also in 2014, Argus established a practice to measure advertising and target effectiveness for digital media by developing new partnerships with institutions that play an important role in advertising performance. The methodology links Argus credit and debit card spending data to the ads to which consumers are exposed. The partnerships have proven to be immediately and highly valuable to both ad buyers and sellers.







## Supply Chain






## Compliance

3E Company, a Verisk business, provides software and services to help customers around the world and throughout the supply chain comply with government-mandated environmental health and safety (EH&S) requirements. As regulations related to hazardous products, chemicals, and conflict minerals become more stringent, companies need a clear view of the contents and origins of their products.

In 2014, 3E expanded its regulatory content and data into new industries, including cosmetics, food, personal care, and pharmaceuticals, continuing to increase the markets for its solutions. 3E also received several industry awards. The 3ESC \( ^{™} \)  platform, a central repository for a wide variety of information about product, supplier, and raw material risk, received the Top Product of the Year Award from Environmental Leader. The award affirms the position of 3ESC as a premier tool to help companies achieve product- and supplier-level compliance and mitigate supply chain risk.

The 3E Online \( ^{®} \) -SDS 7.0 Safety Data Sheet management platform — which helps facilitate compliance and safety for global enterprises — won an ISHN (Industrial Safety & Hygiene News) Readers’ Choice Award. The platform received recognition for its innovative regulatory and safety capabilities, including increased multilingual content and expanded revision alerts, that enhance global supply chain compliance.

3E demonstrated its commitment to innovation in 2014 with the development of a portal to automate data exchanges between suppliers and 3E using web forms. The new technology has allowed 3E to request and collect data and documentation from suppliers more quickly and efficiently than manual methods while simultaneously improving the quality and consistency of the information collected. The web-based forms also improve the supplier experience by allowing suppliers to interact with 3E electronically and to exchange data using industry-recognized standards.

3E also continued to execute on its mobile strategy with the launch of Ariel \( ^{®} \)  WebInsight Mobile, the industry’s first mobile chemical regulatory compliance reference tool. Mobile access to critical compliance data can streamline conformance with product safety and stewardship obligations, adding value by saving time and increasing productivity. Customers can use the tool’s information to help with manufacturing decisions, such as ensuring safety and label compliance, identifying regulatory authorities that require import and export notification, and ascertaining that products don’t contain substances harmful to human health and/or the environment.

## Supply Chain Risk

Verisk’s 2014 acquisition of Maplecroft, a leading provider of country and political risk analytics and advisory services, brings comprehensive data, analytics, and visualizations to Verisk’s risk management and supply chain portfolio. Now known as Verisk Maplecroft, the new entity will continue to deliver thorough analyses of geopolitical, societal, human rights, economic, and environmental risks for countries and geographies worldwide.

Increasingly stringent international laws, such as the Dodd-Frank Act, make it even more important for global businesses to retain transparency about risks associated with physical products. Verisk Maplecroft works with some of the world’s leading organizations to structure their approaches to responsible sourcing. The company advises at all stages of the process, including prescreening and conducting risk-based due diligence on new suppliers, understanding the risks and opportunities of doing business in various locations, and monitoring and mitigating risks across the supply chain.

The Supply Chain Management Tool is one of Verisk Maplecroft’s most innovative resources to help customers meet responsible and strategic sourcing objectives. The tool helps businesses identify, prioritize, and monitor relevant risks across their global operations, supply chains, and distribution networks — homing in on sites and suppliers that pose the highest risk to supply chain disruption or damage to corporate reputation.

The Supply Chain Management Tool offers companies the opportunity to move beyond supplier audits and make risk-adjusted decisions using Verisk Maplecroft’s unique data feeds, risk analytics, and industry-leading country risk expertise. Users can choose from more than 200 global risk indices through a fully integrated supply chain mapping and risk data platform. Verisk Maplecroft can tailor a risk monitoring system that features dynamic alerts for human rights allegations, terrorism threats, corruption incidents, piracy, natural hazards risks, and pandemics warnings. The system provides comprehensive risk assessments for countries, sectors, commodities, or issues that affect the security of operations, the viability of investments, or damage to corporate reputation.



# Emerging Opportunities



## Expanding Our Global Footprint

Verisk Analytics continues to expand around the world. Our international operations are a growing presence in many markets. In 2014 alone, we increased our presence — through acquisitions, strategic collaborations, and other agreements — in Australia, New Zealand, Japan, the United Kingdom, and Germany.

Verisk’s acquisition of Maplecroft, headquartered in Bath, England, has expanded our risk management capabilities to include geopolitical, societal, human rights, economic, and environmental risks in nearly all countries of the world. With its portfolio of risk indices, country risk analyses, and risk calculators, Verisk Maplecroft can identify emerging trends, opportunities, and risks to investments and supply chains worldwide.

In 2014, Xactware grew its business internationally with the largest expansion in a single year in its history. The company entered four new countries — Australia, New Zealand, Germany, and France. Launching its claims solutions in those countries has enabled property insurance professionals to reduce claims-handling costs, give insurers claims transparency, and offer improvements in efficiency and customer satisfaction.

The company reached another significant milestone: The final top ten insurer in Canada joined the other nine in using Xactware’s claims-processing tools.

Also in 2014, Verisk acquired Dart Consulting Limited, a leading provider of benchmarking and advisory capabilities to financial services institutions in Australia, New Zealand, and other Asia-Pacific markets. As part of Argus, Dart’s services help financial institutions manage their lending and payment portfolios, including credit and debit cards, deposit and checking accounts, mortgages, and student loans.
With 17 international offices and customers that include the top ten global reinsurers and eight of the top ten leaders in global chemical manufacturing, we’re committed to an international strategy that will help us uncover streams and vertical markets throughout the world.

Verisk’s overseas investments are important for future growth, and we’ll continue to pursue strategic opportunities around the globe.

## Science and Industry

Verisk’s Atmospheric and Environmental Research (AER) business is a leading source of research and services that enhance understanding of the environment and improve decision making in response to weather and climate risk. Customers include NASA, NOAA, and other U.S. civilian and defense agencies.

Next year, the U.S. government will launch a new meteorological satellite to improve the accuracy and timeliness of severe weather warnings and forecasts and enhance our understanding of long-term climate and environmental conditions. The Geostationary Operational Environmental Satellite – R Series (GOES-R) is a collaborative mission between NASA, which builds and launches the satellites, and NOAA, which operates them.

In 2014, NOAA successfully integrated the satellite data analysis software developed by AER into the GOES-R Ground Segment in anticipation of its 2016 launch. The software generates all imagery and data from the GOES-R sensors as well as GOES-R operational data. As the developer of the GOES-R operational algorithms for the entire instrument suite, AER will support NOAA’s critical satellite weather mission for the coming decades.







## Corporate Social Responsibility



At Verisk Analytics, we’re committed to serving the long-term interests of our stakeholders by building a brand recognized for its integrity and excellence, distinguished by its profitability and growth, and respected for its contribution to the greater good.

High aspirations require that we set high expectations for ourselves and our work. For Verisk, that translates to achieving uncompromising operational integrity in all facets of our business, supporting an inspired workforce, promoting environmental responsibility, and contributing professional expertise or financial support to organizations that benefit everyone.

Visit www.verisk.com/csr and download the Verisk Corporate Social Responsibility Report to learn more.



Our corporate social responsibility program spans four areas.



## Our Company

The Verisk Way — to serve, add value, and innovate — supports our business integrity and customer engagement within a responsible economic, societal, and environmental framework.



## Our People

We provide robust compensation and benefits, ensure employee safety and well-being, foster personal growth, and support professional development.



## Our Environment

We’re committed to right-sizing the organization’s environmental footprint by implementing practical strategies that benefit the planet.



## Our Community

Locally and around the world, we advance issues of global and national importance and support and volunteer in the communities in which we work and live.



## Corporate Leadership

Scott G. Stephenson
President and Chief Executive Officer

Mark V. Anquillare
Group Executive and Chief Financial Officer

Kenneth E. Thompson
General Counsel and Corporate Secretary

Nana Banerjee
Chief Analytics Officer

S. Ming Lee
Group Executive

Jim Loveland
Group Executive

Vincent de P. McCarthy
Corporate Development and Strategy

Perry F. Rotella
Group Executive and Chief Information Officer

Eva F. Huston
Treasurer and Chief Knowledge Officer

Patrick McLaughlin
Corporate Social Responsibility

Mark S. Magath
Risk and Compliance

Christopher H. Perini
Chief Marketing Officer

Marlene P. Reisman
Human Resources

## Board of Directors

Frank J. Coyne
Chairman of the Board
Executive Committee (Chair)

J. Hyatt Brown
Brown & Brown, Inc.
Finance and Investment Committee;
Nominating and Governance Committee

Glen A. Dell
MapleWood Equity Partners LP (retired)
Executive Committee; Audit Committee (Chair);
Compensation Committee

Christopher M. Foskett
First Data Corporation
Audit Committee; Finance and Investment Committee

Constantine P. Iordanou
Arch Capital Group Limited
Executive Committee; Compensation Committee;
Nominating and Governance Committee (Chair)

John F. Lehman, Jr.
J. F. Lehman & Co.
Executive Committee; Compensation Committee (Chair);
Nominating and Governance Committee

Samuel G. Liss
WhiteGate Partners, LLC
Audit Committee; Finance and Investment Committee (Chair)

Andrew G. Mills
Archegos Capital Management
Audit Committee; Finance and Investment Committee

Thomas F. Motamed
CNA Financial Corporation
Audit Committee; Finance and Investment Committee

Scott G. Stephenson
President and Chief Executive Officer

Therese M. Vaughan
Drake College of Business
Nominating and Governance Committee

David B. Wright
Innovative Capital Ventures, Inc.
Audit Committee; Compensation Committee



# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014

or

□ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission file number 001-34480

# VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

26-2994223

545 Washington Boulevard Jersey City, NJ

(I.R.S. Employer Identification No.)

(Address of principal executive offices)

07310-1686

(Zip Code)

(201) 469-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Class A common stock $.001 par value

NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☑ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☑ Yes ☐ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☑ Yes ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

☑ Large accelerated filer

☐ Accelerated filer

☐ Non-accelerated filer

☐ Smaller reporting company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No

As of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $9,119,385,502 based on the closing price reported on the NASDAQ Global Select Market on such date.

The number of shares outstanding of each of the registrant’s classes of common stock, as of February 20, 2015 was:

Class

Shares Outstanding

Class A common stock $.001 par value

158,108,455

## DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this annual report on Form 10-K is incorporated by reference to our definitive Proxy Statement for our 2015 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2014.



## INDEX

## Page

PART I
Item 1. Business ..... 3
Item 1A. Risk Factors ..... 17
Item 1B. Unresolved Staff Comments ..... 24
Item 2. Properties ..... 24
Item 3. Legal Proceedings ..... 25
Item 4. Mine Safety Disclosures ..... 28
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ..... 28
Item 6. Selected Financial Data ..... 31
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ..... 52
Item 8. Financial Statements and Supplementary Data ..... 53
Consolidated Balance Sheets ..... 59
Consolidated Statements of Operations ..... 60
Consolidated Statements of Comprehensive Income ..... 61
Consolidated Statements of Changes in Shareholders' Equity (Deficit) ..... 62
Consolidated Statements of Cash Flows ..... 63
Notes to Consolidated Financial Statements ..... 65
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..... 53
Item 9A. Controls and Procedures ..... 53
Item 9B. Other Information ..... 53
PART III
Item 10. Directors, Executive Officers and Corporate Governance ..... 53
Item 11. Executive Compensation ..... 54
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ..... 54
Item 13. Certain Relationships and Related Transactions and Director Independence ..... 54
Item 14. Principal Accounting Fees and Services ..... 54
PART IV
Item 15. Exhibits and Financial Statement Schedules ..... 54
SIGNATURES ..... 118
EXHIBIT INDEX ..... 119
Exhibit 10.12
Exhibit 10.13
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1



Unless the context otherwise indicates or requires, as used in this annual report on Form 10-K, references to “we,” “us,” “our” or the “Company” refer to Verisk Analytics, Inc. and its subsidiaries.

In this annual report on Form 10-K, all dollar amounts are expressed in thousands, unless indicated otherwise.

## SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Verisk Analytics, Inc., or Verisk, has made statements under the captions “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other sections of this annual report on Form 10-K that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors.” You should specifically consider the numerous risks outlined under “Risk Factors.”

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this annual report on Form 10-K to conform our prior statements to actual results or revised expectations.

## PART I

## Item 1. Business

## Our Company

Verisk Analytics, Inc. is a leading provider of information about risk to professionals in insurance, healthcare, financial services, government, supply chain, and risk management. Using advanced technologies to collect and analyze billions of records, we draw on industry expertise and unique proprietary data sets to provide predictive analytics and decision-support solutions in fraud prevention, actuarial science, insurance coverages, fire protection, catastrophe and weather risk, profitability optimization, data management, and many other fields. In the United States and around the world, we help customers protect people, property, and financial assets.

Our customers use our solutions to make better decisions about risk and opportunities with greater efficiency and discipline. We refer to these products and services as “solutions” due to the integration among our services and the flexibility that enables our customers to purchase components or the comprehensive package. These “solutions” take various forms, including data, statistical models or tailored analytics, all designed to allow our clients to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs. In 2014, our customers included all of the top 100 Property and Casualty, or P&C, insurance providers in the U.S. for the lines of P&C services we offer, 29 of the top 30 credit card issuers in North America, the United Kingdom and Australia, as well as 9 of the top 10 health plan providers in the U.S. We believe that our commitment to our customers and the embedded nature of our solutions serve to strengthen and extend our relationships.



We help those businesses address what we believe are the four primary decision making processes essential for managing risk as set forth below in the Verisk Risk Analysis Framework:

## The Verisk Risk Analysis Framework



These four processes correspond to various functional areas inside our customers' operations:

- our loss predictions are typically used by P&C insurance and healthcare actuaries, advanced analytics groups and loss control groups to help drive their own assessments of future losses

- our risk selection and pricing solutions are typically used by underwriters as they manage their books of business and by financial institutions as they manage the profitability of their credit and debit card portfolios

- our fraud detection and prevention tools are used by P&C insurance and healthcare underwriters to root out fraud prospectively and by claims departments to speed claims and find fraud retroactively; and

- our tools to quantify loss are primarily used by claims departments, independent adjustors and contractors.

We add value by linking our solutions across these four key processes; for example, we use the same modeling methods to support the pricing of homeowner’s insurance policies and to quantify the actual losses when damage occurs to insured homes.

We offer our solutions and services primarily through annual subscriptions or long-term agreements, which are typically pre-paid and represented approximately 72.3% of our revenues in 2014. For the year ended December 31, 2014, we had revenues of $1,746.7 million and net income of $400.0 million. For the five year period ended December 31, 2014, our revenues and net income grew at a compound annual growth rate, or CAGR, of 15.2% and 13.3%, respectively.

As further described below, results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. As necessary, the amounts have been retroactively adjusted in all periods presented to give recognition to the discontinued operations.

## Our History

We trace our history to 1971, when Insurance Services Office, Inc., or ISO, started operations as a not-for-profit advisory and rating organization providing services for the U.S. P&C insurance industry. ISO was formed as an association of insurance companies to gather statistical data and other information from insurers and report to regulators, as required by law. ISO’s original functions also included developing programs to help insurers define and manage insurance products and providing information to help insurers determine their own independent premium rates. Insurers used and continue to use our offerings primarily in their product development, underwriting and rating functions. Today, those businesses form the core of our Risk Assessment segment.

Over the past decade, we have transformed our business beyond its original functions by deepening and broadening our data assets, developing a set of integrated risk management solutions and services and addressing new markets through our Decision Analytics segment. Our expansion into analytics began when we acquired the American Insurance Services Group, or AISG, and certain operations and assets of the National Insurance Crime Bureau in 1997 and 1998, respectively. Those organizations brought to the company large databases of insurance



claims, as well as expertise in detecting and preventing claims fraud. To further expand our Decision Analytics segment, we acquired AIR Worldwide, or AIR, in 2002, the technological leader in catastrophe modeling. In 2004, we entered the healthcare space by acquiring several businesses that now offer web-based analytical and reporting systems for health insurers, provider organizations and self-insured employers. In 2005, we entered the mortgage sector, acquiring the first of several businesses that provided automated fraud detection, compliance and decision support solutions for the U.S. mortgage industry, which we sold in March 2014. In 2006, to bolster our position in the insurance claims field we acquired Xactware, a leading supplier of estimating software for professionals involved in building repair and reconstruction. In 2010, we acquired 3E Company, creating a scale presence in supply chain and environmental health and safety. In 2011 and 2012, we further bolstered our healthcare solutions by acquiring Health Risk Partners, LLC, or HRP, which provides solutions to optimize revenue, improve compliance and improve quality of care for Medicare Advantage health plans and MediConnect Global, Inc. or MediConnect, which provides medical record retrieval, digitization, coding, extraction, and analysis to the healthcare and property casualty industry. Also in 2012, we acquired Argus Information & Advisory Services, LLC, or Argus, to expand our presence in providing information, competitive benchmarking, analytics, and customized services to financial institutions in the payments space globally. In 2014, we acquired Maplecroft.Net Limited, or Maplecroft; as part of our risk management and supply chain solutions business, Maplecroft will continue to deliver thorough analyses of geopolitical, societal, human rights, economic, and environmental risks for many countries in the world.

These acquisitions have added scale, geographic reach, highly skilled workforces, and a wide array of new capabilities to our Decision Analytics segment. They have helped to make us a leading provider of information and decision analytics for customers involved in the business of risk in the U.S. and selectively around the world.

On May 23, 2008, in contemplation of our initial public offering, or IPO, ISO formed Verisk Analytics, Inc., or Verisk, a Delaware corporation, to be the holding company for our business. Verisk was initially formed as a wholly-owned subsidiary of ISO. On October 6, 2009, in connection with our IPO, the Company effected a reorganization whereby ISO became a wholly-owned subsidiary of Verisk. Verisk Class A common stock began trading on the NASDAQ Global Select Market on October 7, 2009 under the symbol “VRSK.”

On March 11, 2014, we sold our mortgage services business, Interthink, Inc., or Interthink. From 2009 to 2011, the mortgage services business was in both Risk Assessment segment within the insurance services revenue category and Decision Analytics segment in the financial services revenue category. In 2012, we reclassified the appraisal mortgage tools from Risk Assessment to our Decision Analytics segment in the financial services revenue category. Therefore, in 2012 and 2013, the mortgage services business is within Decision Analytics segment. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. As necessary, the amounts have been retroactively adjusted in all periods presented to give recognition to the discontinued operations.

Our senior management team, which includes our president and chief executive officer, chief financial officer, general counsel, and six senior officers who lead our business and operational units, have been with us for an average of almost 18 years. This team has led our transformation to a successful for-profit entity, focused on growth with our U.S. P&C insurer customers and expansion into a variety of new vertical markets, including healthcare, financial services, and supply chain.

## Segments

We organize our business in two segments: Risk Assessment and Decision Analytics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this annual report for additional information regarding our segments.



## Risk Assessment Segment

Our Risk Assessment segment serves our P&C insurance customers and focuses on the first two decision making processes in our Risk Analysis Framework: prediction of loss and selection and pricing of risk. Within this segment, we also provide solutions to help our insurance customers comply with their reporting requirements in each U.S. state in which they operate. Our customers include most of the P&C insurance providers in the U.S.

## Industry-Standard Insurance Programs

We are the recognized leader in the U.S. for industry-standard insurance programs that help P&C insurers define coverages and issue policies. Our policy language, prospective loss cost information and policy writing rules can serve as integrated turnkey insurance programs for our customers. Insurance companies need to ensure that their policy language, rules, and rates comply with all applicable legal and regulatory requirements. Insurers must also make sure their policies remain competitive by promptly changing coverages in response to changes in statutes or case law. To meet their needs, we process and interface with state regulators in all 50 states plus the District of Columbia, Guam, Puerto Rico and the Virgin Islands approximately 3,000 regulatory filings each year ensuring smooth implementation of our rules and forms. When insurers choose to develop their own alternative programs, our industry-standard insurance programs also help regulators make sure that such insurers' policies meet basic coverage requirements.

Standardized coverage language, which has been tested in litigation and tailored to reflect judicial interpretation, helps to ensure consistent treatment of claimants. As a result, our industry-standard language also simplifies claim settlements and can reduce the occurrence of costly litigation, because our language causes the meaning of coverage terminology to become established and known. Our policy language includes standard coverage language, endorsements and policy writing support language that assist our customers in understanding the risks they assume and the coverages they are offering. With these policy programs, insurers also benefit from economies of scale. We have over 120 specialized lawyers and insurance experts reviewing changes in each state’s insurance rules and regulations, including on average over 11,000 legislative bills, 1,400 regulatory actions and 2,000 court cases per year, to make any required changes to our policy language and rating information.

To cover the wide variety of risks in the marketplace, we offer a broad range of policy programs. For example, in the homeowner’s line of insurance, we maintain policy language and rules for 6 basic coverages, 248 national endorsements, and 593 state-specific endorsements. Overall, we provide policy language, prospective loss costs, policy writing rules, and a variety of other solutions for 26 lines of insurance.

The P&C insurance industry is heavily regulated in the U.S. P&C insurers are required to collect statistical data about their premiums and losses and to report that data to regulators in every state in which they operate. Our statistical agent services have enabled P&C insurers to meet these regulatory requirements for over 40 years. We aggregate the data and, as a licensed or appointed “statistical agent” in all 50 states, Puerto Rico, and the District of Columbia, we report these statistics to insurance regulators. We are able to capture significant economies of scale given the level of penetration of this service within the U.S. P&C insurance industry.

To provide our customers and the regulators the information they require, we maintain one of the largest private databases in the world. Over the past four decades, we have developed core expertise in acquiring, processing, managing, and operating large and comprehensive databases that are the foundation of our Risk Assessment segment. We use our proprietary technology to assemble, organize and update vast amounts of detailed information submitted by our customers. We supplement this data with publicly available information.

Each year, P&C insurers send us approximately 3.0 billion detailed individual records of insurance transactions, such as insurance premiums collected or losses incurred. We maintain a database of over 17.9 billion statistical records, including approximately 7.1 billion commercial lines records and approximately 10.8 billion personal lines records. We collect unit-transaction detail of each premium and loss record, which enhances the validity, reliability and accuracy of our data sets and our actuarial analyses. Our proprietary quality process includes over 2,500 separate checks to ensure that data meet our high standards of quality.



We provide actuarial services to help our customers analyze and price their risks. Using our large database of premium and loss data, our actuaries are able to perform sophisticated analyses using our predictive models and analytic methods to help our P&C insurance customers with pricing, loss reserving, and marketing. We distribute a number of actuarial solutions and offer flexible services to meet our customers' needs. In addition, our actuarial consultants provide customized services for our clients that include assisting them with the development of independent insurance programs, analysis of their own underwriting experience, development of classification systems and rating plans, and a wide variety of other business decisions. We also supply information to a wide variety of customers in other markets including reinsurance and government agencies.

We project future losses and loss expenses utilizing a broad set of data. These projections tend to be more reliable than if our customers used solely their own data. We make a number of actuarial adjustments before the data is used to estimate future costs. Our customers can use our estimates of future costs in making independent decisions about the prices charged for their policies. For most P&C insurers, in most lines of business, we believe our estimates of future costs are an essential input to rating decisions. Our actuarial products and services are also used to create the analytics underlying our industry-standard insurance programs described above.

## Property-Specific Rating and Underwriting Information

We gather information on individual properties and communities so that insurers can use our information to evaluate and price personal and commercial property insurance, as well as commercial liability insurance. Our property-specific rating and underwriting information allow our customers to understand, quantify, underwrite, mitigate, and avoid potential loss for commercial properties. Our database contains loss costs and other vital information on more than 3.5 million commercial buildings in the United States and also holds information on more than 6.2 million individual businesses occupying those buildings. We have a staff of more than 600 field representatives strategically located around the United States who observe and report on conditions at commercial and residential properties, evaluate community fire-protection capabilities and assess the effectiveness of municipal building-code enforcement. Each year, our field staff visits over 325,000 commercial properties to collect information on new buildings and verify building attributes.

We also provide proprietary analytic measures of the ability of individual communities to mitigate losses from important perils. Nearly every property insurer in the U.S. uses our evaluations of community firefighting capabilities to help determine premiums for fire insurance throughout the country. We provide field-verified and validated data on the fire protection services for more than 47,000 fire response jurisdictions. We also offer services to evaluate the effectiveness of community enforcement of building codes and the efforts of communities to mitigate damage from flooding. Further, we provide information on the insurance rating territories, premium taxes, crime risk, and hazards of windstorm, earthquake, wildfire, and other perils. To supplement our data on specific commercial properties and individual communities, we have assembled, from a variety of internal and third-party sources, information on hazards related to geographic locations representing every postal address in the U.S. Insurers use this information not only for policy quoting but also for analyzing risk concentration in geographical areas. We also make our data and analytics available to commercial real estate lenders to allow them to better understand risks associated with people they lend against.



## Decision Analytics Segment

In the Decision Analytics segment, we support all four phases of our Risk Analysis Framework. We develop predictive models to forecast scenarios and produce both standard and customized analytics that help our customers better predict loss, select and price risk, detect fraud before and after a loss event, and quantify losses. The businesses are categorized by the primary end market for their services.



As we develop our models to quantify loss and detect fraud, we improve our ability to predict the loss and prevent the fraud from happening. We believe this provides us with a significant competitive advantage over firms that do not offer solutions which operate both before and after loss events.

## Insurance

We are a leading provider of fraud-detection tools for the P&C insurance industry. Our fraud solutions improve our customers' profitability by both predicting the likelihood that fraud is occurring and detecting suspicious activity after it has occurred. When a claim is submitted, our system searches our database and returns information about other claims filed by the same individuals or businesses (either as claimants or insurers) which helps our customers determine if fraud has occurred. The system searches for matches in identifying information fields, such as name, address, Social Security number, vehicle identification number, driver's license number, tax identification number, or other parties to the loss. Our system also includes advanced name and address searching to perform intelligent searches and improve the overall quality of the matches. Information from match reports speeds payment of meritorious claims while providing a defense against fraud and can lead to denial of a claim, negotiation of a reduced award or further investigation by the insurer or law enforcement.

We have a comprehensive system used by claims adjusters and investigations professionals to process claims and fight fraud. Claims databases are one of the key tools in the fight against insurance fraud. The benefits of a single all-claims database include improved efficiency in reporting data and searching for information, enhanced capabilities for detecting suspicious claims and superior information for investigating fraudulent claims, suspicious individuals and possible fraud rings. Our database contains information on approximately 994 million claims and is the world’s largest database of P&C claims information used for claims and investigations. Insurers and other participants submit new claims, more than 199,000 a day on average, across all categories of the U.S. P&C insurance industry.

We also provide an expert scoring system that helps distinguish between suspicious and meritorious claims; and products that use link-analysis technology to help visualize and fight insurance fraud.



We pioneered the field of probabilistic catastrophe modeling used by insurers, reinsurers and financial institutions to manage their catastrophe risk. Our models of global natural hazards, which form the basis of our solutions, enable companies to identify, quantify and plan for the financial consequences of catastrophic events. We have developed models, covering natural hazards, including hurricanes, earthquakes, winter storms, tornadoes, hailstorms, and flood, for potential loss events in more than 90 countries. We have also developed and introduced a probabilistic terrorism model capable of quantifying the risk in the U.S. from this emerging threat, which supports pricing and underwriting decisions down to the level of an individual policy.

We also provide data, analytic and networking products for professionals involved in estimating all phases of building repair and reconstruction. We provide solutions for every phase of a building’s life, including:

• quantifying the ultimate cost of repair or reconstruction of damaged or destroyed buildings;

• aiding in the settlement of insurance claims; and

• tracking the process of repair or reconstruction and facilitating communication among insurers, adjusters, contractors and policyholders.

To help our customers estimate repair costs, we provide a solution that assists contractors and insurance adjusters to estimate repairs using a patented plan-sketching program. The program allows our customers to sketch floor plans, roof plans and wall-framing plans and automatically calculates material and labor quantities for the construction of walls, floors, footings and roofs.

We also offer our customers access to wholesale and retail price lists, which include structural repair and restoration pricing for 467 separate economic areas in North America. We revise this information monthly and, in the aftermath of a major disaster, we can update the price lists as often as weekly to reflect rapid price changes. Our structural repair and cleaning database contains more than 21,000 unit-cost line items. For each line item such as smoke cleaning, water extraction and hazardous cleanup, we report time and material pricing, including labor, labor productivity rates (for new construction and restoration), labor burden and overhead, material costs, and equipment costs. We improve our reported pricing data by several methods including direct market surveys and an analysis of the actual claims experience of our customers. We estimate that about 84% of insurance repair contractors and service providers in the U.S. and Canada with computerized estimating systems use our building and repair pricing data. Utilization of such a large percentage of the industry’s claims leads to accurate reporting of pricing information, which we believe is unmatched in the industry.

Our estimates allow our customers to set loss reserves, deploy field adjusters and verify internal company estimates. Our estimates also keep insurers, their customers, regulators, and other interested parties informed about the total costs of disasters. We also provide our customers access to daily reports on severe weather and catastrophes and we maintain a database of information on catastrophe losses in the U.S. since 1950.

## Financial Services

We focus on providing competitive benchmarking, scoring solutions, analytics, and customized services to financial services institutions in North and South America and Europe. We maintain the most comprehensive de-personalized direct observation consortia data sets for the payments industry. We leverage this consortia data and provide proprietary solutions and information that enable clients to achieve higher profitability and growth through enhanced marketing and risk management decisions. We have deployed unique technology to manage vast data sets efficiently and manage vast amount of payments data. We offer services and a suite of solutions to a client base that includes credit and debit card issuers, retail banks and other consumer financial services providers, payment processors, insurance companies, and other industry stakeholders.

Our professionals have substantial industry knowledge in providing solutions to the financial services sector. We are known for our unique ability to blend the highly technical, data-centered aspects of our projects with expert communication and business knowledge. Our solutions enhance our clients' ability to manage their



businesses profitably and position them better to handle present day challenges (competitive, regulatory, and economic). Specifically, we use comprehensive transaction, risk, behavioral, and bureau-sourced account data to assist clients in making better business decisions through analysis and analytical solutions. We maintain a comprehensive and granular direct observation database for credit card, debit card, and deposit transactions in the industry.

## Healthcare

We offer payment accuracy solutions that help healthcare claims payors detect fraud, abuse and overpayment. Our approach combines computer-based modeling and profiling of claims with analysis performed by clinical experts. We run our customers' claims through our proprietary analytic system to identify potential fraud, abuse and overpayment, and then a registered nurse, physician or other clinical specialist skilled in coding and reimbursement decisions reviews all suspect claims and billing patterns. This combination of system and human review is unique in the industry and we believe offers improved accuracy for paying claims. We analyze the patterns of claims produced by individual physicians, physicians' practices, hospitals, dentists, and pharmacies to locate sources of fraud. After a suspicious source of claims is identified, our real-time analytic solutions investigate each claim individually for particular violations, including upcoding, multiple billings, services claimed but not rendered, and billing by unlicensed providers. By finding the individual claims with the most cost-recovery potential and also minimizing the number of false-positive indications of fraud, we enable the special investigation units of healthcare payors to efficiently control their claims costs while maintaining high levels of customer service to their insureds. We also offer web-based reporting tools that let payors take definitive action to prevent overpayments or payment of fraudulent claims. The tools provide the documentation that helps to identify, investigate and prevent abusive and fraudulent activity by providers.

We provide enterprise analytics and reporting systems to health insurers, provider organizations and self-insured employers. Those organizations use our healthcare business intelligence solutions to review their data, including information on claims, membership, providers and utilization, and provide cost trends, forecasts and actuarial, financial and utilization analyses. For example, our solutions allow our customers to predict medical costs and improve the financing and organization of health services. Our predictive models help our customers identify high-cost cases for care-and disease-management intervention, compare providers adjusting for differences in health, predict resource use for individuals and populations, establish health-based and performance-based payments, negotiate payments and incentives, negotiate premium rates, and measure return on investment. We also provide our customers healthcare services using complex clinical analyses to uncover reasons behind cost and utilization increases. Physicians and hospitals are adopting and acquiring new technologies, drugs and devices more rapidly than ever before. We provide financial and actuarial analyses, clinical, technical and implementation services and training services to help our customers manage costs and risks to their practices.

We are a provider of solutions for revenue & quality intelligence and compliance for certain aspects of the healthcare industry. We have systems, including our revenue integrity business, which analyze Medicare data for compliance with CMS (Centers for Medicare & Medicaid Services) guidelines, assist payers in payment integrity, data collection, and encounter data submission. By using our ReconEdge \( ^{™} \) , a web-based risk adjustment reconciliation system, healthcare payers can assess their organizations' opportunities and compliance in payments. In addition, we offer proprietary systems and services that facilitate the aggregation, retrieval, coding, and analysis of medical records. We have a repository of medical records that are digitized, indexed, and securely hosted online. We use custom-built, proprietary technology to deliver medical records from facilities and provider locations. Our clients can access the clinical data through a cloud-based workflow management system. We are also a provider of HEDIS \( ^{®} \)  (Healthcare Effectiveness Data and Information Set) software solutions. Our solution suite allows managed care organizations to calculate and submit HEDIS results to NCQA (National Committee for Quality Assurance), improve quality in covered populations, and reduce administrative overhead associated with quality reporting.



## Specialized Markets

We help businesses and governments better anticipate and manage climate-and weather-related risks. We prepare certain agencies and companies to anticipate, manage, react to and profit from weather and climate-related risk. We serve our clients by providing state-of-the-art research, development and analysis delivered in reports, databases and software solutions. We are dedicated to the advancement of scientific understanding of the atmospheric, climate and weather, ocean, and planetary sciences. Through research conducted by our in-house scientific staff, and often in collaboration with world-renowned scientists at academic and other research institutions, we have developed analytical tools to help measure and observe the properties of the environment and to translate these measurements into useful information to take action. In 2013, we formed the Verisk Climate division in response to customers' needs for new solutions to manage enterprise climate and environmental risks.

We also offer a comprehensive suite of data and information services that enables improved compliance with global Environmental Health & Safety, or EH&S requirements related to the safe manufacturing, distribution, transportation, usage and disposal of chemicals and products. From the supply chain or solutions lifecycle, we deliver a program specific to the EH&S compliance information and management needs of our customers. We have a full solutions lifecycle and cross-supply chain approach that provide a single, integrated solution for managing EH&S capabilities, resulting in reduced cost, risk and liability while improving process.

## Our Growth Strategy

Over the past five years, we have grown our revenues at a CAGR of 15.2% through the successful execution of our business plan. These results reflect strong organic revenue growth, new product development and acquisitions. We have made, and continue to make, investments in people, data sets, analytic solutions, technology, and complementary businesses. The key components of our strategy include:

Increase Solution Penetration with Customers. We expect to expand the application of our solutions in insurance customers' internal risk and underwriting processes. Building on our deep knowledge of, and embedded position in, the insurance industry, we expect to sell more solutions to existing customers tailored to individual insurance segments. By increasing the breadth and relevance of our offerings, we believe we can strengthen our relationships with customers and increase our value to their decision making in critical ways. We also have opportunities to expand solution penetration in our health and financial services customers.

Develop New, Proprietary Data Sets and Predictive Analytics. We work with our customers to understand their evolving needs. We plan to create new solutions by enriching our mix of proprietary data sets, analytic solutions and effective decision support across the markets we serve. We constantly seek to add new data sets that can further leverage our analytic methods, technology platforms and intellectual capital.

Leverage Our Intellectual Capital to Expand into Adjacent Markets and New Customer Sectors. Our organization is built on over four decades of intellectual property in risk management. We believe we can continue to profitably expand the use of our intellectual capital and apply our analytic methods in new markets, where significant opportunities for long-term growth exist. We also continue to pursue growth through targeted international expansion. We have already demonstrated the effectiveness of this strategy with our expansion into healthcare and non-insurance financial services.

Pursue Strategic Acquisitions that Complement Our Leadership Positions. We will continue to expand our data and analytics capabilities across industries. While we expect this will occur primarily through organic growth, we have and will continue to acquire assets and businesses that strengthen our value proposition to customers. We have developed an internal capability to source, evaluate and integrate acquisitions that have created value for shareholders.



## Our Customers

## Risk Assessment Customers

The customers in our Risk Assessment segment for the lines of P&C services we offer include the top 100 P&C insurance providers in the United States, as well as insurers in international markets. Our statistical agent services are used by a substantial majority of P&C insurance providers in the U.S. to report to regulators. Our actuarial services and industry-standard insurance programs are used by the majority of insurers and reinsurers in the U.S. In addition, certain agencies of the federal government, as well as county and state governmental agencies and organizations, use our solutions to help satisfy government needs for risk assessment and emergency response information.

## Decision Analytics Customers

In the Decision Analytics segment, we provide our P&C insurance solutions to the majority of the P&C insurers in the U.S. Specifically, our claims database serves thousands of customers, representing over 90% of the P&C insurance industry by premium volume, 27 state workers' compensation insurance funds, 578 self-insurers, 417 third-party administrators, several state fraud bureaus, and many law-enforcement agencies involved in investigation and prosecution of insurance fraud. We estimate that about 84% of insurance repair contractors and service providers in the U.S. and Canada with computerized estimating systems use our building and repair pricing data. In the U.S. healthcare industry, our customers include 9 of the top 10 health plan providers. Our customers included 29 of the top 30 credit card issuers in North America, the United Kingdom and Australia.

## Our Competitors

We believe no single competitor currently offers the same scope of services and market coverage we provide. The breadth of markets we serve exposes us to a broad range of competitors as described below. Businesses that we acquire may introduce us to additional competitors.

## Risk Assessment Competitors

Our Risk Assessment segment operates primarily in the U.S. P&C insurance industry, where we enjoy a leading market presence. We have a number of competitors in specific lines or services.

We encounter competition from a number of sources, including insurers who develop internal technology and actuarial methods for proprietary insurance programs. Competitors also include other statistical agents, including the National Independent Statistical Service, the Independent Statistical Service and other advisory organizations, providing underwriting rules, prospective loss costs and coverage language such as the American Association of Insurance Services and Mutual Services Organization, although we believe none of our competitors has the breadth or depth of data we have.

Competitors for our property-specific rating and underwriting information are primarily limited to a number of regional providers of commercial property inspections and surveys, including Overland Solutions, Inc. and Regional Reporting, Inc. We also compete with a variety of organizations that offer consulting services, primarily specialty technology and consulting firms. In addition, a customer may use its own internal resources rather than engage an outside firm for these services. Our competitors also include information technology product and services vendors, management and strategy consulting firms including Deloitte Consulting LLP, and smaller specialized information technology firms and analytical services firms including Pinnacle Consulting and EMB, a unit of Towers Watson.

## Decision Analytics Competitors

In the P&C insurance claims market and catastrophe modeling market, certain products are offered by a number of companies, including Risk Management Solutions (catastrophe modeling) and CoreLogic/MSB



(property replacement value), LexisNexis Risk Solutions (loss histories and motor vehicle records for personal lines underwriting), Solera (personal automobile underwriting) and Simbility. We believe that our P&C insurance industry expertise, combined with our ability to offer multiple applications, services and integrated solutions to individual customers, enhances our competitiveness against these competitors with more limited offerings. In the healthcare market, certain products are offered by a number of companies, including ViPS, Inc., OptumInsight, McKesson, Truven Health Analytics, Inovalon, and iHealth (healthcare predictive modeling and business intelligence). Competitive factors include application features and functions, ease of delivery and integration, ability of the provider to maintain, enhance and support the applications or services and price.

## Development of New Solutions

We take a market-focused team approach to developing our solutions. Our operating units are responsible for developing, reviewing and enhancing our various products and services. Our data management and production team designs and manages our processes and systems for market data procurement, proprietary data production and quality control. Our Joint Development Environment, or JDE, and Enterprise Data Management, or EDM, teams support our efforts to create new information and products from available data and explores new methods of collecting data. EDM is focused on understanding and documenting business-unit and corporate data assets and data issues; sharing and combining data assets across the enterprise; creating an enterprise data strategy; facilitating research and product development; and promoting cross-enterprise communication. Our Verisk Innovative Analytics, or VIA, team is a corporate center of excellence for analytical methods in applying modeling techniques to predict risk outcomes.

Our software development teams build the technology used in many of our solutions. As part of our product-development process, we continually solicit feedback from our customers on the value of our products and services and the market’s needs. We have established an extensive system of customer advisory panels, which meet regularly throughout the year to help us respond effectively to the needs of our markets. In addition, we use frequent sales calls, executive visits, user group meetings, and other industry forums to gather information to match the needs of the market with our product development efforts. We also use a variety of market research techniques to enhance our understanding of our clients and the markets in which they operate.

We also add to our offerings through an active acquisition program. Since 2010, we have acquired twelve businesses, which have allowed us to enter new markets, offer new solutions and enhance the value of existing services with additional proprietary sources of data.

When we find it advantageous, we augment our proprietary data sources and systems by forming alliances with other leading information providers and technology companies and integrating their product offerings into our offerings. This approach gives our customers the opportunity to obtain the information they need from a single source and more easily integrate the information into their workflows.

## Sales, Marketing and Customer Support

We sell our products and services primarily through direct interaction with our clients. We employ a three-tier sales structure that includes salespeople, product specialists and sales support. As of December 31, 2014, we had a sales force of 268 people. Within the company, several areas have sales teams that specialize in specific products and services. These specialized sales teams sell specific, highly technical product sets to targeted markets in coordination with account management.

To provide account management to our largest customers, we segment the insurance carrier market into three groups. Tier One or “National” Accounts constitutes our largest customers, Tier Two or “Strategic” Accounts represents both larger carrier groups and middle-market carriers. Tier Three are the small insurance companies that may represent one line of business and/or be one-state or regional writers. A Sales Generalist is assigned to every insurer account and is responsible for our overall relationship with these insurance companies. Our senior executives are also involved with the senior management of our customers.



Sales people participate in both customer-service and sales activities. They provide direct support, interacting frequently with assigned customers to assure a positive experience using our services. Salespeople primarily seek out new sales opportunities and work with the various sales teams to coordinate sales activity and provide the best solutions for our customers. We believe our salespeople’s product knowledge and local presence differentiates us from our competition. Product specialists are subject-matter experts and work with salespeople on specific opportunities for their assigned products. Both salespeople and product specialists have responsibility for identifying new sales opportunities. A team approach and a common customer relationship management system allow for effective coordination between the two groups.

## Sources of our Data

The data we use to perform our analytics and power our solutions are sourced through seven different kinds of data arrangements. First, we gather data from our customers within agreements that also permit our customers to use the solutions created upon their data. These agreements remain in effect unless the data contributor chooses to opt out and represent our primary method of data gathering. It is very rare that contributors elect not to continue providing us data. Second, we have agreements with data contributors in which we specify the particular uses of their data and provide to the data contributors their required levels of privacy, protection of data and where necessary de-identification of data. These agreements represent no cost to us and generally feature a specified period of time for the data contributions and require renewal. Third, we “mine” data found inside the transactions supported by our solutions; as an example, we utilize the claims settlement data generated inside our repair cost estimating solution to improve the cost factors used in our models. Again, these arrangements represent no cost to us and we obtain the consent of our customers to make use of their data in this way. Fourth, we source data generally at no cost from public sources including federal, state and local governments. Fifth, we gather data about the physical characteristics of commercial properties through the direct observation of our field staff that also perform property surveys at the request of, and facilitated by, property insurers. Sixth, we purchase data from data aggregators under contracts that reflect prevailing market pricing for the data elements purchased, including county tax assessor records, descriptions of hazards such as flood plains and professional licenses. Lastly, we retrieve medical records from facilities and provider locations at prevailing market prices under agreements between our insurer customers and their provider networks. In all our modes of data collection, we are the owners of whatever derivative solutions we create using the data. Our costs for data received from our customers were 1.2% and 1.3% of revenues for the years ended December 31, 2014 and 2013, respectively.

## Information Technology

## Technology

Our information technology systems are fundamental to our success. They are used for the storage, processing, access and delivery of the data which forms the foundation of our business and the development and delivery of our solutions provided to our clients. Much of the technology we use and provide to our customers is developed, maintained and supported by approximately 1,258 employees. We generally own or have secured ongoing rights to use for the purposes of our business all the customer-facing applications which are material to our operations. We support and implement a mix of technologies, focused on implementing the most efficient technology for any given business requirement or task.

## Data Centers

We have two primary data centers in Jersey City, New Jersey and Orem, Utah creating redundancy and back-up capabilities. In addition, we have data centers dedicated to certain business units, located in other states.

## Disaster Recovery

We are committed to a framework for business continuity management and carry out annual reviews of the state of preparedness of each business unit. All of our critical databases, systems and contracted client



services are also regularly recovered. We also have documented disaster recovery plans in place for each of our major data centers and each of our solutions. Our primary data center recovery site is in New York State, approximately 50 miles northwest of Jersey City, New Jersey.

## Security

We have adopted a wide range of measures to ensure the security of our IT infrastructure and data. Security measures generally cover the following key areas: physical security; logical security of the perimeter; network security such as firewalls; logical access to the operating systems; deployment of virus detection software; and appropriate policies and procedures relating to removable media such as laptops. All laptops are encrypted and media leaving our premises that is sent to a third-party storage facility is also encrypted. This commitment has led us to achieve certification from CyberTrust (an industry leader in information security certification) since 2002.

## Intellectual Property

We own a significant number of intellectual property rights, including copyrights, trademarks, trade secrets and patents. Specifically, our policy language, insurance manuals, software and databases are protected by both registered and common law copyrights, and the licensing of those materials to our customers for their use represents a large portion of our revenue. We also own in excess of 500 trademarks in the U.S. and foreign countries, including the names of our products and services and our logos and tag lines, many of which are registered. We believe many of our trademarks, trade names, service marks and logos to be of material importance to our business as they assist our customers in identifying our products and services and the quality that stands behind them. We consider our intellectual property to be proprietary, and we rely on a combination of statutory (e.g., copyright, trademark, trade secret and patent) and contractual safeguards in a comprehensive intellectual property enforcement program to protect them wherever they are used.

We also own several software method and processing patents and have several pending patent applications in the U.S. that complement our products. The patents and patent applications include claims which pertain to technology, including a patent for our Claims Outcome Advisor software, and for our Xactware Sketch product. We believe the protection of our proprietary technology is important to our success and we will continue to seek to protect those intellectual property assets for which we have expended substantial research and development capital and which are material to our business.

In order to maintain control of our intellectual property, we enter into license agreements with our customers, granting each customer a license to use our products and services, including our software and databases. This helps to maintain the integrity of our proprietary intellectual property and to protect the embedded information and technology contained in our solutions. As a general practice, employees, contractors and other parties with access to our proprietary information sign agreements that prohibit the unauthorized use or disclosure of our proprietary rights, information and technology.

## Employees

As of December 31, 2014, we employed 6,170 full-time and 380 part-time employees. None of our employees are represented by unions. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.

Our employees include over 185 actuarial professionals, including 42 Fellows and 30 Associates of the Casualty Actuarial Society, as well as 160 Chartered Property Casualty Underwriters, 18 Certified and 22 Associate Insurance Data Managers, and 611 professionals with advanced degrees, including PhDs in mathematics and statistical modeling who review both the data and the models.



## Regulation

Because our business involves the distribution of certain personal, public and non-public data to businesses and governmental entities that make eligibility, service and marketing decisions based on such data, certain of our solutions and services are subject to regulation under federal, state and local laws in the United States and, to a lesser extent, foreign countries. Examples of such regulation include the Fair Credit Reporting Act, which regulates the use of consumer credit report information; the Gramm-Leach-Bliley Act, which regulates the use of non-public personal financial information held by financial institutions and applies indirectly to companies that provide services to financial institutions; the Health Insurance Portability and Accountability Act, which restricts the public disclosure of patient information and applies indirectly to companies that provide services to healthcare businesses; the Drivers Privacy Protection Act, which prohibits the public disclosure, use or resale by any state’s department of motor vehicles of personal information about an individual that was obtained by the department in connection with a motor vehicle record, except for a “permissible purpose”, and various other federal, state and local laws and regulations.

These laws generally restrict the use and disclosure of personal information and provide consumers certain rights to know the manner in which their personal information is being used, to challenge the accuracy of such information and/or to prevent the use and disclosure of such information. In certain instances, these laws also impose requirements for safeguarding personal information through the issuance of data security standards or guidelines. Certain state laws impose similar privacy obligations, as well as obligations to provide notification of security breaches in certain circumstances.

We are also licensed as a rating, rate service, advisory or statistical organization under state insurance codes in all fifty states, Puerto Rico, Guam, the Virgin Islands and the District of Columbia. As such an advisory organization, we provide statistical, actuarial, policy language development and related products and services to property/casualty insurers, including advisory prospective loss costs, other prospective cost information, manual rules and policy language. We also serve as an officially designated statistical agent of state insurance regulators to collect policy-writing and loss statistics of individual insurers and compile that information into reports used by the regulators.

Many of our products, services and operations as well as insurer use of our services are subject to state rather than federal regulation by virtue of the McCarran-Ferguson Act. As a result, many of our operations and products are subject to review and/or approval by state regulators. Furthermore, our operations involving licensed advisory organization activities are subject to periodic examinations conducted by state regulators and our operations and products are subject to state antitrust and trade practice statutes within or outside state insurance codes, which are typically enforced by state attorneys general and/or insurance regulators.

## Available Information

We maintain an Investor Relations website on the Internet at investor.verisk.com. We make available free of charge, on or through this website, our annual, quarterly, and current reports and any amendments to those reports as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC. To access these, click on the “Financial Information” — “SEC” link found on our Investor Relations homepage. Verisk trades on the NASDAQ Global Select Market under the ticker symbol “VRSK.” Our stock was first publicly traded on October 7, 2009.

The public may read and copy any materials filed by Verisk with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.



## Item 1A. Risk Factors

You should carefully consider the following risks and all of the other information set forth in this annual report on Form 10-K before deciding to invest in any of our securities. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our securities including our Class A common stock could decline due to any of these risks, and you may lose all or part of your investment.

We could lose our access to data from external sources which could prevent us from providing our solutions.

We depend upon data from external sources, including data received from customers and various government and public record services, for information used in our databases. In general, we do not own the information in these databases, and the participating organizations could discontinue contributing information to the databases. Our data sources could withdraw or increase the price for their data for a variety of reasons, and we could also become subject to legislative, judicial, or contractual restrictions on the use of such data, in particular if such data is not collected by the third parties in a way which allows us to legally use and/or process the data. In addition, some of our customers are significant stockholders of our company. Specifically, a portion of Class A common stock is owned by insurers who are also our customers. If our customers' percentage of ownership of our common stock decreases in the future, there can be no assurance that our customers will continue to provide data to the same extent or on the same terms. If a substantial number of data sources, or certain key sources, were to withdraw or be unable to provide their data, or if we were to lose access to data due to government regulation or if the collection of data became uneconomical, our ability to provide solutions to our customers could be impacted, which could materially adversely affect our business, reputation, financial condition, operating results and cash flows.

Agreements with our data suppliers are short-term agreements. Some suppliers are also competitors, which may make us vulnerable to unpredictable price increases and may cause some suppliers not to renew certain agreements. Our competitors could also enter into exclusive contracts with our data sources. If our competitors enter into such exclusive contracts, we may be precluded from receiving certain data from these suppliers or restricted in our use of such data, which would give our competitors an advantage. Such a termination or exclusive contracts could have a material adverse effect on our business, financial position, and operating results if we were unable to arrange for substitute sources.

We derive a substantial portion of our revenues from U.S. P&C primary insurers. If there is a downturn in the U.S. insurance industry or that industry does not continue to accept our solutions, our revenues will decline.

Revenues derived from solutions we provide to U.S. P&C primary insurers account for a substantial portion of our total revenues. During the year ended December 31, 2014, approximately 49.1% of our revenue was derived from solutions provided to U.S. P&C primary insurers. Also, invoices for certain of our solutions are linked in part to premiums in the U.S. P&C insurance market, which may rise or fall in any given year due to loss experience and capital capacity and other factors in the insurance industry beyond our control. In addition, our revenues will decline if the insurance industry does not continue to accept our solutions.

Factors that might affect the acceptance of these solutions by P&C primary insurers include the following:

• changes in the business analytics industry;

• changes in technology;

• our inability to obtain or use state fee schedule or claims data in our insurance solutions;

• saturation of market demand;



• loss of key customers;

• industry consolidation; and

• failure to execute our customer-focused selling approach.

A downturn in the insurance industry, pricing pressure or lower acceptance of our solutions by the insurance industry could result in a decline in revenues from that industry and have a material adverse effect on our financial condition, results of operations and cash flows.

Acquisitions could result in operating difficulties, dilution and other harmful consequences, and we may not be successful in achieving growth through acquisitions.

Our long-term business strategy includes growth through acquisitions. Future acquisitions may not be completed on acceptable terms and acquired assets, data or businesses may not be successfully integrated into our operations, and we may ultimately divest unsuccessful acquisitions. Any acquisitions or investments will be accompanied by the risks commonly encountered in acquisitions of businesses. Such risks include, among other things:

- failing to implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies;

• paying more than fair market value for an acquired company or assets;

- failing to integrate the operations and personnel of the acquired businesses in an efficient, timely manner;

• assuming potential liabilities of an acquired company;

• managing the potential disruption to our ongoing business;

• distracting management focus from our core businesses;

• failing to retain management at acquired company;

- difficulty in acquiring suitable businesses, including challenges in predicting the value an acquisition will ultimately contribute to our business;

- possibility of overpaying for acquisitions, particularly those with significant intangible assets that derive value using novel tools and/or are involved in niche markets;

• impairing relationships with employees, customers, and strategic partners;

- incurring expenses associated with the amortization of intangible assets particularly for intellectual property and other intangible assets;

- incurring expenses associated with an impairment of all or a portion of goodwill and other intangible assets due to changes in market conditions, weak economies in certain competitive markets, or the failure of certain acquisitions to realize expected benefits; and

• diluting the share value and voting power of existing stockholders.

The anticipated benefits of many of our acquisitions may not materialize. Future acquisitions or dispositions could result in the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill and other intangible assets, any of which could harm our financial condition.

We typically fund our acquisitions through our debt facilities. Although we have capacity under committed facilities, those may not be sufficient. Therefore, future acquisitions may require us to obtain additional financing through debt or equity, which may not be available on favorable terms or at all and would result in dilution.



In addition, to the extent we cannot identify or consummate, on terms acceptable to us, acquisitions that are complementary or otherwise attractive to our business, we may experience difficulty in achieving future growth.

## There may be consolidation in our end customer market, which would reduce the use of our services.

Mergers or consolidations among our customers could reduce the number of our customers and potential customers. This could adversely affect our revenues even if these events do not reduce the aggregate number of customers or the activities of the consolidated entities. If our customers merge with or are acquired by other entities that are not our customers, or that use fewer of our services, they may discontinue or reduce their use of our services. The adverse effects of consolidation will be greater in sectors that we are particularly dependent upon, for example, in the P&C insurance and healthcare services sector. Any of these developments could materially and adversely affect our business, financial condition, operating results and cash flows.

## If we are unable to develop successful new solutions or if we experience defects, failures and delays associated with the introduction of new solutions, our business could suffer serious harm.

Our growth and success depends upon our ability to develop and sell new solutions. If we are unable to develop new solutions, or if we are not successful in introducing and/or obtaining regulatory approval or acceptance for new solutions, or products we develop face sufficient pricing pressure to make them unattractive to pursue, we may not be able to grow our business, or growth may occur more slowly than we anticipate. In addition, significant undetected errors or delays in new solutions may affect market acceptance of our solutions and could harm our business, financial condition or results of operations. In the past, we have experienced delays while developing and introducing new solutions, primarily due to difficulties in developing models, acquiring data and adapting to particular operating environments. Errors or defects in our solutions that are significant, or are perceived to be significant, could result in rejection of our solutions, damage to our reputation, loss of revenues, diversion of development resources, an increase in product liability claims, and increases in service and support costs and warranty claims.

## We will continue to rely upon proprietary technology rights, and if we are unable to protect them, our business could be harmed.

Our success depends, in part, upon our intellectual property rights. To date, we have relied primarily on a combination of copyright, patent, trade secret, and trademark laws and nondisclosure and other contractual restrictions on copying and distribution to protect our proprietary technology. This protection of our proprietary technology is limited, and our proprietary technology could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Business we acquire also often involve intellectual property portfolios, which increase the challenges we face in protecting our strategic advantage. Any disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact our competitive position, and ultimately, our business. Our protection of our intellectual property rights in the United States or abroad may not be adequate and others, including our competitors, may use our proprietary technology without our consent. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of resources and could harm our business, financial condition, results of operations and cash flows.

## We could face claims for intellectual property infringement, which if successful could restrict us from using and providing our technologies and solutions to our customers.

There has been substantial litigation and other proceedings, particularly in the United States, regarding patent and other intellectual property rights in the information technology industry. There is a risk that we are infringing, or may in the future infringe, the intellectual property rights of third parties. We monitor third-party



patents and patent applications that may be relevant to our technologies and solutions and we carry out freedom to operate analysis where we deem appropriate. However, such monitoring and analysis has not been, and is unlikely in the future to be, comprehensive, and it may not be possible to detect all potentially relevant patents and patent applications. Since the patent application process can take several years to complete, there may be currently pending applications, unknown to us, that may later result in issued patents that cover our products and technologies. As a result, we may infringe existing and future third-party patents of which we are not aware. As we expand our operations there is a higher risk that such activity could infringe the intellectual property rights of third parties.

Third-party intellectual property infringement claims and any resultant litigation against us or our technology partners or providers, could subject us to liability for damages, restrict us from using and providing our technologies and solutions or operating our business generally, or require changes to be made to our technologies and solutions. Even if we prevail, litigation is time consuming and expensive to defend and would result in the diversion of management’s time and attention.

If a successful claim of infringement is brought against us and we fail to develop non-infringing technologies and solutions or to obtain licenses on a timely and cost effective basis, this could materially and adversely affect our business, reputation, financial condition, operating results and cash flows.

## Regulatory developments could negatively impact our business.

Because personal, public and non-public information is stored in some of our databases, we are vulnerable to government regulation and adverse publicity concerning the use of our data. We provide many types of data and services that already are subject to regulation under the Fair Credit Reporting Act, Gramm-Leach-Bliley Act, Driver’s Privacy Protection Act, Health Insurance Portability and Accountability Act, the European Union’s Data Protection Directive, the Dodd Frank Wall Street Reform and Consumer Protection Act and to a lesser extent, various other federal, state, and local laws and regulations. These laws and regulations are designed to protect the privacy of the public and to prevent the misuse of personal information in the marketplace. However, many consumer advocates, privacy advocates, and government regulators believe that the existing laws and regulations do not adequately protect privacy. They have become increasingly concerned with the use of personal information, particularly social security numbers, department of motor vehicle data and dates of birth. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors. Similar initiatives are under way in other countries in which we do business or from which we source data. The following legal and regulatory developments also could have a material adverse effect on our business, financial position, results of operations or cash flows:

• amendment, enactment, or interpretation of laws and regulations which restrict the access and use of personal information and reduce the supply of data available to customers;

- changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions;

• failure of our solutions to comply with current laws and regulations; and

- failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner.

## Fraudulent or unpermitted data access and other security or privacy breaches may negatively impact our business and harm our reputation.

Security breaches in our facilities, computer networks, and databases may cause harm to our business and reputation and result in a loss of customers. Our systems may be vulnerable to physical break-ins, computer viruses, attacks by hackers and similar disruptive problems. Third-party contractors also may experience security breaches involving the storage and transmission of proprietary information. If users gain improper access to our databases, they may be able to steal, publish, delete or modify confidential third-party information that is stored or transmitted on our networks.



In addition, customers’, employees’ or other’s misuse of and/or gaining unpermitted access to or failure to properly secure our information or services could cause harm to our business and reputation and result in loss of customers. Any such misappropriation and/or misuse of or failure to properly secure our information could result in us, among other things, being in breach of certain data protection and related legislation.

A security or privacy breach may affect us in the following ways:

• deterring customers from using our solutions;

• deterring data suppliers from supplying data to us;

• harming our reputation;

• exposing us to liability;

• increasing operating expenses to correct problems caused by the breach;

• affecting our ability to meet customers’ expectations; and/or

• causing inquiry from governmental authorities.

Incidents in which consumer data has been fraudulently or improperly acquired or viewed, or any other security or privacy breaches, may occur and could go undetected. The number of potentially affected consumers identified by any future incidents is obviously unknown. Any such incident could materially and adversely affect our business, reputation, financial condition, operating results and cash flows.

We typically face a long selling cycle to secure new contracts that requires significant resource commitments, which result in a long lead time before we receive revenues from new relationships.

We typically face a long selling cycle to secure a new contract and there is generally a long preparation period in order to commence providing the services. We typically incur significant business development expenses during the selling cycle and we may not succeed in winning a new customer’s business, in which case we receive no revenues and may receive no reimbursement for such expenses. Even if we succeed in developing a relationship with a potential new customer, we may not be successful in obtaining contractual commitments after the selling cycle or in maintaining contractual commitments after the implementation cycle, which may have a material adverse effect on our business, results of operations and financial condition.

We may lose key business assets, including loss of data center capacity or the interruption of telecommunications links, the internet, or power sources, which could significantly impede our ability to do business.

Our operations depend on our ability, as well as that of third-party service providers to whom we have outsourced several critical functions, to protect data centers and related technology against damage from hardware failure, fire, flood, power loss, telecommunications failure, impacts of terrorism, breaches in security (such as the actions of computer hackers), natural disasters, or other disasters. Certain of our facilities are located in areas that could be impacted by coastal flooding, earthquakes or other disasters. The on-line services we provide are dependent on links to telecommunications providers. In addition, we generate a significant amount of our revenues through telesales centers and websites that we utilize in the acquisition of new customers, fulfillment of solutions and services and responding to customer inquiries. We may not have sufficient redundant operations to cover a loss or failure in all of these areas in a timely manner. Certain of our customer contracts provide that our on-line servers may not be unavailable for specified periods of time. Any damage to our data centers, failure of our telecommunications links or inability to access these telesales centers or websites could cause interruptions in operations that materially adversely affect our ability to meet customers' requirements, resulting in decreased revenue, operating income and earnings per share.



We are subject to competition in many of the markets in which we operate and we may not be able to compete effectively.

Some markets in which we operate or which we believe may provide growth opportunities for us are highly competitive, and are expected to remain highly competitive. We compete on the basis of quality, customer service, product and service selection and price. Our competitive position in various market segments depends upon the relative strength of competitors in the segment and the resources devoted to competing in that segment. Due to their size, certain competitors may be able to allocate greater resources to a particular market segment than we can. As a result, these competitors may be in a better position to anticipate and respond to changing customer preferences, emerging technologies and market trends. In addition, new competitors and alliances may emerge to take market share away, and as we enter into new lines of business, due to acquisition or otherwise, we face competition from new players with different competitive dynamics. We may be unable to maintain our competitive position in our market segments, especially against larger competitors. We may also invest further to upgrade our systems in order to compete. If we fail to successfully compete, our business, financial position and results of operations may be adversely affected.

To the extent the availability of free or relatively inexpensive information increases, the demand for some of our solutions may decrease.

Public sources of free or relatively inexpensive information have become increasingly available recently, particularly through the Internet, and this trend is expected to continue. Governmental agencies in particular have increased the amount of information to which they provide free public access. Public sources of free or relatively inexpensive information may reduce demand for our solutions. To the extent that customers choose not to obtain solutions from us and instead rely on information obtained at little or no cost from these public sources, our business and results of operations may be adversely affected.

Our senior leadership team is critical to our continued success and the loss of such personnel could harm our business.

Our future success substantially depends on the continued service and performance of the members of our senior leadership team. These personnel possess business and technical capabilities that are difficult to replace. Members of our senior management operating team have been with us for an average of almost 18 years.

However, we do not have employee contracts with the members of our senior management operating team. If we lose key members of our senior management operating team, we may not be able to effectively manage our current operations or meet ongoing and future business challenges, and this may have a material adverse effect on our business, results of operations and financial condition.

We may fail to attract and retain enough qualified employees to support our operations, which could have an adverse effect on our ability to expand our business and service our customers.

Our business relies on large numbers of skilled employees and our success depends on our ability to attract, train and retain a sufficient number of qualified employees. If our attrition rate increases, our operating efficiency and productivity may decrease. We compete for employees not only with other companies in our industry but also with companies in other industries, such as software services, engineering services and financial services companies, and there is a limited pool of employees who have the skills and training needed to do our work.

If our business continues to grow, the number of people we will need to hire will increase. We will also need to increase our hiring if we are not able to maintain our attrition rate through our current recruiting and retention policies. Increased competition for employees could have an adverse effect on our ability to expand our business and service our customers, as well as cause us to incur greater personnel expenses and training costs.



We are subject to antitrust, consumer protection and other litigation, and may in the future become subject to further such litigation; an adverse outcome in such litigation could have a material adverse effect on our financial condition, revenues and profitability.

We participate in businesses (particularly insurance-related businesses and services) that are subject to substantial litigation, including antitrust and consumer protection litigation. In addition, our insurance specialists are in the business of providing advice on standard contract terms, which if challenged could expose us to substantial reputational harm and possible liability. We are subject to the provisions of a 1995 settlement agreement in an antitrust lawsuit brought by various state Attorneys General and private plaintiffs which imposes certain constraints with respect to insurer involvement in our governance and business. We currently are defending against putative class action lawsuits in which it is alleged that certain of our subsidiaries unlawfully have conspired with insurers with respect to their payment of insurance claims. See “Item 3. Legal Proceedings.” Our failure to successfully defend or settle such litigation could result in liability that, to the extent not covered by our insurance, could have a material adverse effect on our financial condition, revenues and profitability. Given the nature of our business, we may be subject to similar litigation in the future. Even if the direct financial impact of such litigation is not material, settlements or judgments arising out of such litigation could include further restrictions on our ability to conduct business, including potentially the elimination of entire lines of business, which could increase our cost of doing business and limit our prospects for future growth.

## General economic, political and market forces and dislocations beyond our control could reduce demand for our solutions and harm our business.

The demand for our solutions may be impacted by domestic and international factors that are beyond our control, including macroeconomic, political and market conditions, the availability of short-term and long-term funding and capital, the level and volatility of interest rates, currency exchange rates and inflation. The United States economy recently experienced periods of contraction and both the future domestic and global economic environments may continue to be less favorable than those of prior years. Any one or more of these factors may contribute to reduced activity and prices in the securities markets generally and could result in a reduction in demand for our solutions, which could have an adverse effect on our results of operations and financial condition. A significant additional decline in the value of assets for which risk is transferred in market transactions could have an adverse impact on the demand for our solutions.

## If there are substantial sales of our common stock, our stock price could decline.

The market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market, or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem attractive. As of December 31, 2014, our ten largest shareholders owned 48.7% of our Class A common stock including 7.4% of our Class A common stock owned by our Employee Stock Ownership Plan or ESOP. Such stockholders are able to sell their common stock in the public market from time to time without registration, and subject to limitations on the timing, amount and method of those sales imposed by securities laws. If any of these stockholders were to sell a large number of their common stock, the market price of our common stock could decline significantly. In addition, the perception in the public markets that sales by them might occur could also adversely affect the market price of our common stock.

Pursuant to our equity incentive plans, options to purchase approximately 8,986,583 shares of Class A common stock were outstanding as of February 20, 2015. We filed a registration statement under the Securities Act, which covers the shares available for issuance under our equity incentive plans (including for such outstanding options) as well as shares held for resale by our existing stockholders that were previously issued under our equity incentive plans. Such further issuance and resale of our common stock could cause the price of our common stock to decline.

Also, in the future, we may issue our securities in connection with investments and acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding common stock.



Our capital structure, level of indebtedness and the terms of anti-takeover provisions under Delaware law and in our amended and restated certificate of incorporation and bylaws could diminish the value of our common stock and could make a merger, tender offer or proxy contest difficult or could impede an attempt to replace or remove our directors.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our certificate of incorporation and bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable or make it more difficult for stockholders to replace directors even if stockholders consider it beneficial to do so. Our certificate of incorporation and bylaws:

• authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares to thwart a takeover attempt;

• prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors;

• require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office;

• limit who may call special meetings of stockholders;

• prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of the stockholders; and

• establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may inhibit potential acquisition bids for us. As a public company, we are subject to Section 203, which regulates corporate acquisitions and limits the ability of a holder of 15.0% or more of our stock from acquiring the rest of our stock. Under Delaware law, a corporation may opt out of the anti-takeover provisions, but we do not intend to do so.

These provisions may prevent a stockholder from receiving the benefit from any premium over the market price of our common stock offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.

## Item 1B. Unresolved Staff Comments

Not Applicable.

## Item 2. Properties

Our headquarters are in Jersey City, New Jersey. As of December 31, 2014, our principal offices consisted of the following properties:

<table><tr><td>Location</td><td>Square Feet</td><td>Lease Expiration Date</td></tr><tr><td>Jersey City, New Jersey</td><td>390,991</td><td>December 31, 2033</td></tr><tr><td>Lehi, Utah</td><td>200,000</td><td>February 15, 2024</td></tr><tr><td>South Jordan, Utah</td><td>115,801</td><td>August 31, 2025</td></tr><tr><td>Boston, Massachusetts</td><td>69,806</td><td>November 30, 2020</td></tr><tr><td>White Plains, New York</td><td>50,511</td><td>August 31, 2021</td></tr></table>



We also lease offices in 16 states in the United States, and offices outside the United States to support our international operations in Brazil, Canada, China, Denmark, England, Germany, India, Israel, Japan, Nepal, and Singapore.

We believe that our properties are in good operating condition and adequately serve our current business operations. We also anticipate that suitable additional or alternative space, including those under lease options, will be available at commercially reasonable terms for future expansion.

## Item 3. Legal Proceedings

We are party to legal proceedings with respect to a variety of matters in the ordinary course of business, including those matters described below. With respect to the ongoing matters, we are unable, at the present time, to determine the ultimate resolution of or provide a reasonable estimate of the range of possible loss attributable to these matters or the impact they may have on our results of operations, financial position or cash flows. This is primarily because the matters are generally in early stages and discovery has either not commenced or been completed. Although we believe we have strong defenses and intend to vigorously defend these matters, we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations, financial position or cash flows.

## Interthinkx, Inc. Litigation

On May 13, 2013, we were served with a putative class action titled Celeste Shaw v. Interthinkx, Inc., Verisk Analytics, Inc. and Jeffrey Moyer. The plaintiff is a current employee of our former subsidiary Interthinkx, Inc. based in Colorado, who filed the class action in the United States District Court for the District of Colorado on behalf of all fraud detection employees who have worked for Interthinkx for the last three years nationwide and who were classified as exempt employees. The class complaint claims that the fraud detection employees were misclassified as exempt employees and, as a result, were denied certain wages and benefits that would have been received if they were properly classified as non-exempt employees. It pleads three causes of action against defendants: (1) Collective Action under section 216(b) of the Fair Labor Standards Act for unpaid overtime (nationwide class); (2) A Fed. R. Civ. P. 23 class action under the Colorado Wage Act and Wage Order for unpaid overtime and (3) A Fed. R. Civ. P. 23 class action under Colorado Wage Act for unpaid commissions/nondiscretionary bonuses (Colorado class). The complaint seeks compensatory damages, penalties that are associated with the various statutes, declaratory and injunctive relief interest, costs and attorneys' fees.

On July 2, 2013, we were served with a putative class action titled Shabnam Shelia Dehdashtian v. Interthinkx, Inc. and Verisk Analytics, Inc. in the United States District Court for the Central District of California. The plaintiff, Shabnam Shelia Dehdashtian, a former mortgage auditor at our former subsidiary Interthinkx, Inc. in California, filed the class action on behalf of all persons who have been employed by Interthinkx as auditors, mortgage compliance underwriters and mortgage auditors nationwide at any time (i) within 3 years prior to the filing of this action until trial for the Fair Labor Standards Act (FLSA) class and (ii) within 4 years prior to the filing of the initial complaint until trial for the California collective action. The class complaint claims that the defendants failed to pay overtime compensation, to provide rest and meal periods, waiting time penalties and to provide accurate wage statements to the plaintiffs as required by federal and California law. It pleads seven causes of action against defendants: (1) Failure to pay overtime compensation in violation of the FLSA for unpaid overtime (nationwide class); (2) Failure to pay overtime compensation in violation of Cal. Lab. Code sections 510, 1194 and 1198 and IWC Wage Order No. 4; (3) Failure to pay waiting time penalties in violation of Cal. Lab. Code sections 201-203; (4) Failure to provide itemized wage statements in violation of Cal. Lab. Code section 226 and IWC Order No. 4; (5) Failure to provide and or authorize meal and rest periods in violation of Cal. Lab. Code section 226.7 and IWC Order No. 4; (6) Violation of California Business and Professions Code sections 17200 et seq; and (7) a Labor Code Private Attorney General Act (PAGA) Public enforcement claim, Cal. Lab. Code section 2699 (California class). The complaint seeks compensatory damages, penalties that are associated with the various statutes, equitable and injunctive relief, interest, costs and attorneys' fees.



On October 14, 2013, we received notice of a claim titled Dejan Nagl v. Interthinx Services, Inc. filed in the California Labor and Workforce Development Agency. The claimant, Dejan Nagl, a former mortgage auditor at our former subsidiary Interthinx, Inc. in California, filed the claim on behalf of himself and all current and former individuals employed in California as auditors by Interthinx, Inc. for violations of the California Labor Code and Wage Order. The claimant alleges on behalf of himself and other auditors the following causes of action: (1) Failure to provide rest breaks and meal periods in violation of Cal. Lab. Code sections 226.7, 514 and 1198; (2) Failure to pay overtime wages in violation of Cal. Lab. Code sections 510 and 1194; (3) Failure to provide accurate wage statements in violation of Cal. Lab. Code section 226; (4) Failure to timely pay wages in violation of Cal. Lab. Code section 204; and (5) Failures to timely pay wages for violations of Cal. Lab. Code sections 201-203. The claim seeks compensatory damages and penalties that are associated with the various statutes, costs and attorneys' fees.

On March 11, 2014, we sold 100 percent of the stock of Interthinx (see Note 6 Discontinued Operations for additional details). Pursuant to the terms of the sale agreement, we are responsible for the resolution of these matters. In October 2014, the parties agreed to a Joint Stipulation of Settlement and Release resolving the Shaw, Dehdashtian and Nagl matters which provides for a payment of $6.0 million, the majority of which is to be paid by insurance. The United States District Court for the District of Colorado granted Preliminary Approval of the Joint Stipulation of Settlement and Release on November 21, 2014 and scheduled the Final Fairness Hearing for April 3, 2015.

## Mariah Re Litigation

On July 8, 2013, we were served with a summons and complaint filed in the United States District Court for the Southern District of New York in an action titled Mariah Re LTD. v. American Family Mutual Insurance Company, ISO Services, Inc. and AIR Worldwide Corporation, which was amended by the plaintiff on October 18, 2013 (the "Amended Complaint"). Plaintiff Mariah is a special purpose vehicle established to provide reinsurance to defendant American Family Insurance. Mariah entered into contracts with our ISO Services, Inc. and AIR Worldwide Corporation subsidiaries, pursuant to which, among other things, Mariah (i) licensed the right to utilize information published in Catastrophe Bulletins issued by the Property Claims Services division of ISO Services, Inc. and (ii) engaged AIR Worldwide Corporation as Calculation Agent to compute certain reinsured losses. The Amended Complaint alleges the following causes of action: (1) breach of contract against ISO Services, Inc, AIR Worldwide Corporation, and American Family; (2) unjust enrichment against American Family; (3) conversion against American Family; (4) tortious interference with contract against American Family; (5) declaratory judgment against all defendants and (6) specific performance against all defendants. The Amended Complaint seeks declaratory relief, specific performance, restitution, monetary damages and attorneys' fees.

On November 20, 2013, the three defendants filed motions to dismiss the Amended Complaint.

On September 30, 2014, the District Court granted defendants’ motions and dismissed the Amended Complaint in its entirety, with prejudice. Mariah filed a Notice of Appeal on October 28, 2014. Briefing of the appeal was completed on February 13, 2015.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter.

## MediConnect Global, Inc. Litigation

On October 11, 2013, we were served with a summons and complaint in an action titled Naveen Trehan v. MediConnect Global, Inc., Amy Anderson and Verisk Health, Inc. filed on October 9, 2013 in the United States District Court for the District of Utah. The complaint, brought by a former minority shareholder of our subsidiary, MediConnect Global, Inc., arises from MediConnect’s buyout of Naveen Trehan and his family.



members' shares on October 15, 2010. Plaintiff claims that the sale of the shares was based on MediConnect's representations concerning third parties that had expressed interest in an acquisition, merger or investment in MediConnect at that time. Plaintiff claims that MediConnect did not disclose us, which purchased MediConnect on March 23, 2012, as a possible suitor. The complaint alleges four causes of action: (1) Breach of fiduciary duty against MediConnect and Amy Anderson for failure to disclose our interest in acquiring, merging with or investing in MediConnect prior to the buyout of his shares; (2) Fraud against Amy Anderson and MediConnect for intentionally providing false information to plaintiff with the purpose of inducing him to agree to sell his shares at an artificially low price; (3) Negligent misrepresentation against Amy Anderson and MediConnect for their negligent failure to discover and disclose our interest in acquiring MediConnect prior to the buyout of plaintiff's shares and (4) a Violation of SEC Rule 10b-5 against Amy Anderson and MediConnect for defrauding plaintiff and failing to disclose material information in connection with the sale of securities. The complaint seeks joint and several recovery from Amy Anderson and MediConnect for compensatory damages, punitive damages, and disgorgement of all profits earned through the investment of plaintiff's funds, attorneys' fees, interest and an order from the court that plaintiff's funds be held in a constructive trust.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

## Insurance Services Office, Inc. Litigation

In October 2013, we were served with a summons and complaint filed in the United States District Court for the Southern District of New York in an action titled Laurence J. Skelly and Ellen Burke v. Insurance Services Office, Inc. and the Pension Plan for Insurance Organizations. The plaintiffs, former employees of our subsidiary Insurance Services Office, Inc., or ISO, bring the action on their own behalf as participants in the Pension Plan for Insurance Organizations and on the behalf of similarly situated participants of the pension plan and ask the court to declare that a certain amendment to the pension plan as of December 31, 2001, which terminated their right to calculate and define the value of their retirement benefit under the pension plan based on their compensation levels as of immediately prior to their “retirement”, or the Unlawful Amendment, violated the anti-cutback provisions and equitable principles of ERISA. The First Amended Class Action Complaint, or the Amended Complaint, alleges that (1) the Unlawful Amendment of the pension plan violated Section 502(a)(1)(B) of ERISA as well as the anti-cutback rules of ERISA Section 204(g) and Section 411(d)(6) of the Internal Revenue Code; (2) ISO’s failure to provide an ERISA 204(h) notice in a manner calculated to be understood by the average pension plan participant was a violation of Sections 204(h) and 102(a) of ERISA; and (3) the Living Pension Right was a contract right under ERISA common law and that by terminating that right through the Unlawful Amendment ISO violated plaintiffs’ common law contract rights under ERISA. The Amended Complaint seeks declaratory, equitable and injunctive relief enjoining the enforcement of the Unlawful Amendment and ordering the pension plan and ISO retroactive to the date of the Unlawful Amendment to recalculate the accrued benefits of all class members, indemnification from ISO to the pension plan for costs and contribution requirements related to voiding the Unlawful Amendment, bonuses to the class representatives, costs and attorney’s fees. On September 12, 2014, the District Court granted ISO’s motion to dismiss the Amended Complaint finding that ISO provided ample, clear and sufficient notice of the 2002 Amendment to the Plan and that plaintiffs’ claims were time barred. Plaintiffs filed their Notice of Appeal on October 14, 2014 and all briefing of the appeal is complete.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter.

On August 1, 2014 we were served with an Amended Complaint filed in the United States District Court for the District of Colorado titled Snyder, et. al. v. ACORD Corp., et al. The action is brought by nineteen individual plaintiffs, on their own behalf and on behalf of a putative class, against more than 120 defendants, including us and our subsidiary, Insurance Services Office, Inc. or ISO. Except for us, ISO and the defendant Acord Corporation, which provides standard forms to assist in insurance transactions, most of the other



defendants are property and casualty insurance companies that plaintiffs claim conspired to underpay property damage claims. Plaintiffs claim that we and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law. On September 8, 2014, the Court entered an Order striking the Amended Complaint and granting leave to the plaintiffs to file a new complaint. On October 13, 2014, plaintiffs filed their Second Amended Complaint that continues to allege that the defendants conspired to underpay property damage claims, but does not specifically allege what role we or ISO played in the alleged conspiracy. The Second Amended Complaint similarly alleges that we and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law, and seeks all available relief including, injunctive, statutory, actual and punitive damages as well as attorneys' fees.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

## Item 4. Mine Safety Disclosures

Not Applicable.

## PART II

## Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

## Market Information

Verisk trades under the ticker symbol “VRSK” on the NASDAQ Global Select Market. Our common stock was first publicly traded on October 7, 2009. As of February 20, 2015, the closing price of our Class A common stock was $67.80 per share, as reported by the NASDAQ Global Select Market. As of February 20, 2015, there were approximately 33 Class A stockholders of record. We believe the number of beneficial owners is substantially greater than the number of record holders for Class A, because a large portion of Class A common stock is held in “street name” by brokers.

We have not paid or declared any cash dividends on our Class A common stock during the two most recent fiscal years and we currently do not intend to pay dividends on our Class A common stock. We do have a publicly announced share repurchase plan and have repurchased 45,222,306 shares since our IPO. As of December 31, 2014, we had 386,089,811 shares of treasury stock.

The following table shows the quarterly range of the closing high and low per share sales prices for our common stock as reported by the NASDAQ Global Select Market for the years ending December 31:

<table><tr><td rowspan="2"></td><td colspan="2">2014</td><td colspan="2">2013</td></tr><tr><td>High</td><td>Low</td><td>High</td><td>Low</td></tr><tr><td>Fourth Quarter</td><td>$65.15</td><td>$59.07</td><td>$68.74</td><td>$61.27</td></tr><tr><td>Third Quarter</td><td>$64.77</td><td>$59.42</td><td>$66.53</td><td>$60.47</td></tr><tr><td>Second Quarter</td><td>$61.79</td><td>$56.55</td><td>$61.29</td><td>$57.70</td></tr><tr><td>First Quarter</td><td>$66.05</td><td>$59.87</td><td>$61.62</td><td>$52.98</td></tr></table>



## Performance Graph

The graph below compares the cumulative total stockholder return on $100 invested in our Class A common stock, with the cumulative total return (assuming reinvestment of dividends) on $100 invested in each of the NASDAQ Composite Index, S&P 500 Index and an aggregate of peer issuers in the information industry since December 31, 2009. The peer issuers used for this graph are Dun & Bradstreet Corporation, Equifax Inc., Factset Research Systems Inc., Fair Isaac Corporation, IHS Inc, Morningstar, Inc., MSCI Inc., and Solera Holdings, Inc. Each peer issuer was weighted according to its respective market capitalization on December 31, 2009.

COMPARISON OF CUMULATIVE TOTAL RETURN
Assumes $100 Invested on December 31, 2009
Assumes Dividend Reinvested
Fiscal Year Ended December 31, 2014



## Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities by the Company during 2014.

## Issuer Purchases of Equity Securities

Our board of directors has authorized a share repurchase program, or Repurchase Program, up to $2.0 billion, including a $500.0 million accelerated share repurchase program, or ASR Program, announced on December 16, 2014. Excluding the ASR Program, $189.8 million remains available as of December 31, 2014. Under the Repurchase Program, we may repurchase stock in the market or as otherwise determined by us. These authorizations have no expiration dates and may be suspended or terminated at any time. Our shares repurchased for the quarter ended December 31, 2014 is set forth below:

<table><tr><td>Period</td><td>Total Number of Shares Purchased</td><td>Average Price Paid per Share</td><td>Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs</td><td>Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs</td></tr><tr><td>October 1, 2014 through October 31, 2014</td><td>691,260</td><td>$60.10</td><td>691,260</td><td>$238,772</td></tr><tr><td>November 1, 2014 through November 30, 2014</td><td>479,830</td><td>$62.79</td><td>479,830</td><td>$208,645</td></tr><tr><td>December 1, 2014 through December 31, 2014</td><td>6,672,472</td><td>$62.77</td><td>6,672,472</td><td>$189,807</td></tr><tr><td></td><td>7,843,562</td><td></td><td>7,843,562</td><td></td></tr></table>



In connection with the ASR program, we paid the aggregate purchase price in December 2014 and received an initial delivery of 6,372,472 common shares at a price of $62.77 per share, representing approximately $400.0 million of the aggregate purchase price. As of December 31, 2014, the shares associated with the remaining portion of the aggregate purchase price have not yet been settled. We anticipate that all repurchases under the ASR Program will be completed no later than the final settlement in June 2015, at which time we may be entitled to receive additional common shares or, under certain limited circumstances, be required to deliver shares to the counterparties or, at our election, pay cash to the counterparties.



## Item 6. Selected Financial Data

The following selected historical financial data should be read in conjunction with, and are qualified by reference to, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10-K. The consolidated statement of operations data for the years ended December 31, 2014, 2013 and 2012 and the consolidated balance sheet data as of December 31, 2014 and 2013 are derived from the audited consolidated financial statements included elsewhere in this annual report on Form 10-K. The consolidated statement of operations data for the years ended December 31, 2011 and 2010 and the consolidated balance sheet data as of December 31, 2012, 2011 and 2010 are derived from consolidated financial statements that are not included in this annual report on Form 10-K. Results for the year ended December 31, 2014 are not necessarily indicative of results that may be expected in any other future period.

Between January 1, 2010 and December 31, 2014, we acquired 12 businesses, which may affect the comparability of our consolidated financial statements. Our consolidated financial statements have been retroactively adjusted in all periods presented to give recognition to the discontinued operations of our mortgage services business. The following table sets forth our statement of operations for the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td><td>2011</td><td>2010</td></tr><tr><td colspan="6">(In thousands, except for share and per share data)</td></tr><tr><td>Revenues:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Decision Analytics</td><td>$ 1,096,074</td><td>$ 977,427</td><td>$ 828,342</td><td>$ 639,100</td><td>$ 461,743</td></tr><tr><td>Risk Assessment</td><td>650,652</td><td>618,276</td><td>579,506</td><td>552,293</td><td>530,542</td></tr><tr><td>Revenues</td><td>1,746,726</td><td>1,595,703</td><td>1,407,848</td><td>1,191,393</td><td>992,285</td></tr><tr><td>Expenses:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of revenues</td><td>716,598</td><td>622,523</td><td>516,708</td><td>440,979</td><td>376,270</td></tr><tr><td>Selling, general and administrative</td><td>227,306</td><td>228,982</td><td>220,068</td><td>199,495</td><td>157,596</td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>85,506</td><td>66,190</td><td>46,637</td><td>40,135</td><td>35,835</td></tr><tr><td>Amortization of intangible assets</td><td>56,870</td><td>63,741</td><td>52,207</td><td>32,985</td><td>25,202</td></tr><tr><td>Acquisition related liabilities adjustment(1)</td><td>—</td><td>—</td><td>—</td><td>(3,364)</td><td>(544)</td></tr><tr><td>Total expenses</td><td>1,086,280</td><td>981,436</td><td>835,620</td><td>710,230</td><td>594,359</td></tr><tr><td>Operating income</td><td>660,446</td><td>614,267</td><td>572,228</td><td>481,163</td><td>397,926</td></tr><tr><td>Other income (expense):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>158</td><td>609</td><td>106</td><td>879</td><td>374</td></tr><tr><td>Interest expense</td><td>(69,984)</td><td>(76,136)</td><td>(72,508)</td><td>(53,847)</td><td>(34,664)</td></tr><tr><td>Total other expense, net</td><td>(69,826)</td><td>(75,527)</td><td>(72,402)</td><td>(52,968)</td><td>(34,290)</td></tr><tr><td>Income before income taxes from continuing operations</td><td>590,620</td><td>538,740</td><td>499,826</td><td>428,195</td><td>363,636</td></tr><tr><td>Provision for income taxes</td><td>(219,755)</td><td>(196,426)</td><td>(182,363)</td><td>(165,739)</td><td>(148,235)</td></tr><tr><td>Income from continuing operations</td><td>370,865</td><td>342,314</td><td>317,463</td><td>262,456</td><td>215,401</td></tr><tr><td>Income from discontinued operations, net of tax(2)</td><td>29,177</td><td>6,066</td><td>11,679</td><td>20,302</td><td>27,151</td></tr><tr><td>Net income</td><td>$ 400,042</td><td>$ 348,380</td><td>$ 329,142</td><td>$ 282,758</td><td>$ 242,552</td></tr><tr><td>Basic net income per share</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 2.24</td><td>$ 2.04</td><td>$ 1.91</td><td>$ 1.58</td><td>$ 1.21</td></tr><tr><td>Income from discontinued operations</td><td>0.17</td><td>0.03</td><td>0.07</td><td>0.12</td><td>0.15</td></tr><tr><td>Basic net income per share</td><td>$ 2.41</td><td>$ 2.07</td><td>$ 1.98</td><td>$ 1.70</td><td>$ 1.36</td></tr><tr><td>Diluted net income per share</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 2.20</td><td>$ 1.99</td><td>$ 1.85</td><td>$ 1.51</td><td>$ 1.16</td></tr><tr><td>Income from discontinued operations</td><td>0.17</td><td>0.03</td><td>0.07</td><td>0.12</td><td>0.14</td></tr><tr><td>Diluted net income per share</td><td>$ 2.37</td><td>$ 2.02</td><td>$ 1.92</td><td>$ 1.63</td><td>$ 1.30</td></tr><tr><td>Weighted average shares outstanding:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Basic</td><td>165,823,803</td><td>168,031,412</td><td>165,890,258</td><td>166,015,238</td><td>177,733,503</td></tr><tr><td>Diluted</td><td>169,132,423</td><td>172,276,360</td><td>171,709,518</td><td>173,325,110</td><td>186,394,962</td></tr></table>



The financial operating data below sets forth the information we believe is useful for investors in evaluating our overall financial performance for the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td><td>2011</td><td>2010</td></tr><tr><td></td><td colspan="5">(In thousands)</td></tr><tr><td>Other data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA(3):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Decision Analytics EBITDA</td><td>$489,798</td><td>$413,342</td><td>$379,655</td><td>$305,837</td><td>$240,623</td></tr><tr><td>Risk Assessment EBITDA</td><td>368,770</td><td>346,931</td><td>316,260</td><td>287,050</td><td>268,817</td></tr><tr><td>EBITDA</td><td>$858,568</td><td>$760,273</td><td>$695,915</td><td>$592,887</td><td>$509,440</td></tr><tr><td>The following is a reconciliation of net income to EBITDA:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net income</td><td>$400,042</td><td>$348,380</td><td>$329,142</td><td>$282,758</td><td>$242,552</td></tr><tr><td>Depreciation and amortization of fixed and intangible assets from continuing operations</td><td>142,376</td><td>129,931</td><td>98,844</td><td>73,120</td><td>61,037</td></tr><tr><td>Interest expense from continuing operations</td><td>69,984</td><td>76,136</td><td>72,508</td><td>53,847</td><td>34,664</td></tr><tr><td>Provision for income taxes from continuing operations</td><td>219,755</td><td>196,426</td><td>182,363</td><td>165,739</td><td>148,235</td></tr><tr><td>Depreciation, amortization, interest and provision for income taxes from discontinued operations</td><td>26,411</td><td>9,400</td><td>13,058</td><td>17,423</td><td>22,952</td></tr><tr><td>EBITDA</td><td>$858,568</td><td>$760,273</td><td>$695,915</td><td>$592,887</td><td>$509,440</td></tr></table>

The following table sets forth our consolidated balance sheet data as of the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td><td>2011</td><td>2010</td></tr><tr><td></td><td></td><td></td><td>(In thousands)</td><td></td><td></td></tr><tr><td>Balance Sheet Data:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 39,359</td><td>$ 165,801</td><td>$ 89,819</td><td>$ 191,603</td><td>$ 54,974</td></tr><tr><td>Total assets</td><td>$2,345,330</td><td>$2,504,451</td><td>$2,360,336</td><td>$1,541,106</td><td>$1,217,090</td></tr><tr><td>Total debt(4)</td><td>$1,436,932</td><td>$1,275,887</td><td>$1,461,425</td><td>$1,105,886</td><td>$ 839,543</td></tr><tr><td>Stockholders’ equity (deficit)(5)</td><td>$ 211,043</td><td>$ 547,589</td><td>$ 255,591</td><td>$ (98,490)</td><td>$ (114,442)</td></tr></table>

(1) During the second quarter of 2011, we reevaluated the probability of D2Hawkeye and Strategic Analytics achieving the specified predetermined EBITDA and revenue targets for exceptional performance in fiscal year 2011 and reversed the contingent consideration related to these acquisitions. During the third quarter of 2010, we reevaluated the probability of TierMed achieving the specified predetermined EBITDA and revenue targets and reversed its contingent consideration related to this acquisition.

(2) On March 11, 2014, we sold our mortgage services business. See Note 10 of our consolidated financial statements included in this annual report on Form 10-K.

(3) EBITDA is the financial measure which management uses to evaluate the performance of our segments. "EBITDA" is defined as net income before interest expense, provision for income taxes, depreciation and amortization of fixed and intangible assets. Because EBITDA is calculated from net income, this presentation includes EBITDA from discontinued operations of our mortgage services business. In addition, this Management's Discussion and Analysis includes references to EBITDA margin, which is computed as EBITDA divided by revenues from continuing and discontinued operations. See Note 18. of our consolidated financial statements included in this annual report on Form 10-K.

Although EBITDA is a non-GAAP financial measure, EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our results of operations or cash



flow from operating activities reported under GAAP. Management uses EBITDA in conjunction with traditional GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are:

- EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

• EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future and EBITDA does not reflect any cash requirements for such replacements; and

- Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

(4) Includes capital lease obligations.

(5) Subsequent to our corporate reorganization on October 6, 2009, share repurchases are recorded as treasury stock within stockholders’ equity (deficit), as we intend to reissue shares from treasury stock in the future. For the years ended December 31, 2014 and 2013, we repurchased $675.4 million and $278.9 million, respectively, of treasury stock.

## Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our historical financial statements and the related notes included elsewhere in this annual report on Form 10-K, as well as the discussion under “Selected Consolidated Financial Data.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

We enable risk-bearing businesses to better understand and manage their risks and opportunities associated with those risks. We provide value to our customers by supplying proprietary data that, combined with our analytic methods, creates embedded decision support solutions. We are the largest aggregator and provider of data pertaining to U.S. property and casualty, or P&C, insurance risks. We offer solutions for detecting fraud in the U.S. P&C insurance, financial services and healthcare industries and sophisticated methods to predict and quantify loss in diverse contexts ranging from natural catastrophes to supply chain to health insurance.

Our customers use our solutions to make better risk decisions with greater efficiency and discipline. We refer to these products and services as “solutions” due to the integration among our products and the flexibility that enables our customers to purchase components or the comprehensive package of products. These solutions take various forms, including data, statistical models or tailored analytics, all designed to allow our clients to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs.

On May 23, 2008, in contemplation of our IPO, Insurance Service Office, Inc., or ISO, formed Verisk Analytics, Inc., or Verisk, a Delaware corporation, to be the holding company for our business. Verisk was initially formed as a wholly-owned subsidiary of ISO. On October 6, 2009 in connection with our IPO, we effected a reorganization whereby ISO became a wholly-owned subsidiary of Verisk.

On October 1, 2010, we completed a follow-on public offering. We did not receive any proceeds from the sale of common stock in the offering. The primary purpose of the offering was to manage and organize the sale by Class B insurance company shareholders while providing incremental public float. Concurrently with the



closing of the offering, we repurchased shares of common stock, for an aggregate purchase price of $192.5 million, directly from selling shareholders owning Class B common stock. We converted all Class B shares to Class A shares in 2011 and currently have no outstanding Class B shares.

We organize our business in two segments: Risk Assessment and Decision Analytics. Our Risk Assessment segment provides statistical, actuarial and underwriting data for the U.S. P&C insurance industry. Our Risk Assessment segment revenues represented approximately 37.2% and 38.7% of our revenues for the years ended December 31, 2014 and 2013, respectively. Effective December 31, 2012, we combined the statistical agency and data services and actuarial services into industry-standard insurance programs within our Risk Assessment segment. Our Decision Analytics segment provides solutions our customers use to analyze the processes of the Verisk Risk Analysis Framework: Prediction of Loss, Detection and Prevention of Fraud, and Quantification of Loss. Our Decision Analytics segment revenues represented approximately 62.8% and 61.3% of our revenues for the years ended December 31, 2014 and 2013, respectively.

In January 2014, we entered into an agreement to acquire 100% of the stock of Eagleview Technology Corporation, or EVT, the parent company of Pictometry International Corp., and Eagle View Technologies, Inc. for a net cash purchase price of $650 million, which would have been funded by the Company’s operating cash and borrowings from our credit facility. EVT is a provider of geo-referenced aerial image capture and visual-centric data analytics and solutions to insurers, contractors, government, and commercial customers in the United States. On December 16, 2014, we ended our efforts to acquire EVT following the vote by the Federal Trade Commission, or FTC, to challenge the transaction.

On March 11, 2014, we sold our mortgage services business, Interthinx, Inc., or Interthinx. From 2009 to 2011, the mortgage services business was in both Risk Assessment segment within the insurance services revenue category and Decision Analytics segment in the financial services revenue category. In 2012, we reclassified the appraisal mortgage tools from Risk Assessment to our Decision Analytics segment in the financial services revenue category. Therefore, in 2012 and 2013, the mortgage services business is within Decision Analytics segment. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. See Note 10 of our consolidated financial statements included in this annual report on Form 10-K. As necessary, the amounts have been retroactively adjusted in all periods presented to give recognition to the discontinued operations.

## Executive Summary

## Key Performance Metrics

We believe our business’s ability to generate recurring revenue and positive cash flow is the key indicator of the successful execution of our business strategy. We use year over year revenue growth and EBITDA margin as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures (see Note 3, within Item 6. Selected Financial Data section of Management’s Discussion and Analysis of Financial Condition and Results of Operations).

Revenue growth. We use year over year revenue growth as a key performance metric. We assess revenue growth based on our ability to generate increased revenue through increased sales to existing customers, sales to new customers, sales of new or expanded solutions to existing and new customers and strategic acquisitions of new businesses.

EBITDA margin. We use EBITDA margin as a metric to assess segment performance and scalability of our business. We assess EBITDA margin based on our ability to increase revenues while controlling expense growth.

## Revenues

We earn revenues through subscriptions, long-term agreements and on a transactional basis. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year.



As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the business. Our long-term agreements are generally for periods of three to five years. We recognize revenue from subscriptions ratably over the term of the subscription and most long-term agreements are recognized ratably over the term of the agreement.

Certain of our solutions are also paid for by our customers on a transactional basis. For example, we have solutions that allow our customers to obtain property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance, medical or workers' compensation claim with information in our databases. For the years ended December 31, 2014 and 2013, 27.7% and 26.4% of our revenues, respectively, were derived from providing transactional solutions. We earn transactional revenues as our solutions are delivered or services performed. In general, transactions are billed monthly at the end of each month.

Approximately 89.6% and 88.2% of the revenues in our Risk Assessment segment for the years ended December 31, 2014 and 2013, respectively, were derived from subscriptions and long-term agreements for our solutions. Our customers in this segment include most of the P&C insurance providers in the United States. Approximately 61.9% and 64.4% of the revenues in our Decision Analytics segment, for the years ended December 31, 2014 and 2013, respectively, were derived from subscriptions and long-term agreements for our solutions. In this segment, customer bases are within the insurance, healthcare, financial services and specialized markets verticals.

## Principal Operating Costs and Expenses

Personnel expenses are the major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented 56.8% and 59.7% of our total expenses for the years ended December 31, 2014 and 2013, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.

We allocate personnel expenses between two categories, cost of revenues and selling, general and administrative costs, based on the actual costs associated with each employee. We categorize employees who maintain our solutions as cost of revenues, and all other personnel, including executive managers, sales people, marketing, business development, finance, legal, human resources, and administrative services, as selling, general and administrative expenses. A significant portion of our other operating costs, such as facilities and communications, are also either captured within cost of revenues or selling, general and administrative expense based on the nature of the work being performed.

While we expect to grow our headcount over time to take advantage of our market opportunities, we believe that the economies of scale in our operating model will allow us to grow our personnel expenses at a lower rate than revenues. Historically, our EBITDA margin has improved because we have been able to increase revenues without a proportionate corresponding increase in expenses. However, part of our corporate strategy is to invest in new solutions which may offset margin expansion.

Cost of Revenues. Our cost of revenues consists primarily of personnel expenses. Cost of revenues also includes the expenses associated with the acquisition and verification of data, the maintenance of our existing solutions and the development and enhancement of our next-generation solutions. Our cost of revenues excludes depreciation and amortization.

Selling, General and Administrative Expense. Our selling, general and administrative expense also consists primarily of personnel costs. A portion of the other operating costs such as facilities, insurance and communications are also allocated to selling, general and administrative costs based on the nature of the work being performed by the employee. Our selling, general and administrative expenses excludes depreciation and amortization.



## Trends Affecting Our Business

We serve customers in three primary vertical markets: property/casualty insurance, healthcare, and financial services. The industry trends in each of those markets can affect our business.

A significant change in property/casualty insurers’ profitability could positively or negatively affect demand for our solutions. For insurers, the keys to profitability include investment income and premium growth. Investment income remains under pressure as a result of low interest rates. Growth in property/casualty insurers’ direct written premiums is cyclical, with total industry premium growth receding from a peak of 14.8% in 2002 to a trough of negative 3.1% in 2009 and subsequently recovering to 4.4% in 2012 and then receding to 4.3% in 2013 and 3.8% through nine-months 2014. Based on our experience, insurers more closely scrutinize their spending in periods of more challenging growth. In recent years, we have signed multi-year contracts with certain customers, and pricing is fixed at the beginning of each multi-year period; pricing for other customers is still linked to prior years’ premiums.

Trends in catastrophe and noncatastrophe weather losses can have an effect on our customers' profitability and therefore their appetite for buying analytics to help them manage their risks. The apparent increase in the frequency and severity of weather events that cause losses for insurers could lead to increased demand for our catastrophe modeling, catastrophe loss information, and repair cost solutions. A significant decrease in the number or severity of catastrophes could negatively affect our revenues. We also have a portion of our revenue related to the number of claims processed due to losses which can be impacted by seasonal storm activity. The need by our customers to fight insurance fraud — both in claims and at policy inception — could lead to increased demand for our underwriting and claims solutions.

Trends in the U.S. healthcare market can affect a portion of our revenues in the Decision Analytics segment. That market is undergoing significant change as the result of healthcare reform legislation. The specific trends we see affecting our current healthcare business include payment reform, expansion of insurance coverage, and efforts at cost containment. Payment reform will likely drive the market to value-based reimbursement and require healthcare providers to bear increased financial risk and responsibility for quality outcomes. The expansion of insurance eligibility will increase Medicaid rolls and promote participation in statewide health exchanges. And as the government seeks to control fraud, waste, and abuse, efforts to contain costs will likely become more prevalent. Although such changes have the potential to disrupt the healthcare marketplace, we believe the requirements for reform could increase demand for our analytic solutions in the areas of population management, quality measurement provider/payer risk sharing and value-based payment management, Medicare Advantage revenue management and compliance, risk adjustment, and detection of prepayment fraud and abuse. We experience seasonality in our Medicare Advantage business tied to third and fourth quarters of our fiscal year, related to CMS deadlines.

U.S. and global market trends can influence the revenue composition and growth trajectory of our financial services vertical. Recent focus of global regulators on Basel-III compliance and US regulators on compliance to recently adopted 2009 Dodd-Frank laws on anti-money laundering, stress testing and capital adequacy have led to a significant shift of our data-hosting solution toward the meeting of those specific needs of our bank clients. We expect that a rising interest rate environment is likely to put a significant margin pressure on our bank clients, and can resultantly impact their marketing budgets for growth. However, a strengthening American economy is likely to spur increased lending and could likely offset some of that budgetary risk. Trends associated with the strengthening U.S. dollar relative to several other international currencies (U.K., Canadian, Australian and New Zealand) is putting a downward pressure on our revenues from bank clients from overseas markets. Lastly, a longer term shift of advertising spend from TV and radio toward digital media has resulted in a greater opportunity for our partnerships and media effectiveness line of businesses.

## Description of Acquisitions

We acquired seven businesses since January 1, 2012. As a result of these acquisitions, our consolidated results of operations may not be comparable between periods.



On December 8, 2014, we acquired 100% of the stock of Maplecroft.Net Limited, or Maplecroft. Using a proprietary data aggregation and analytical approach, Maplecroft enables its customers to assess, monitor, and forecast a growing range of worldwide risks, including geopolitical and societal risks. Within our Decision Analytics segment, this acquisition positions us as a provider of value chain optimization tools, providing comprehensive quantitative risk analytics and platforms by which customers can visualize, quantify, mitigate, and manage their risk. Maplecroft is headquartered in Bath, England. See Note 9. to our consolidated financial statements included in this annual report on Form 10-K for the preliminary purchases price allocations.

On October 31, 2014, we acquired the net assets of Dart Consulting Limited, or Dart. Dart is a provider of benchmarking and advisory solutions to financial services institutions in Australia, New Zealand, and other key Asia-Pacific markets. As part of our Decision Analytics segment, Dart provides benchmarking solutions and professional services critical to financial services institutions in the management of lending and payment portfolios.

On January 29, 2014, we acquired the net assets of Inovatus, LLC, or Inovatus. The assets primarily consisted of software and are embedded in our existing models focusing on reducing fraud and premium leakage for personal auto insurance carriers. The technology is included in our Decision Analytics segment as part of its solutions to leverage data and analytics to help insurance companies improve results.

On December 20, 2012, we acquired the net assets of Insurance Risk Management Solutions, or IRMS. IRMS provided integrated property risk assessment technology underlying one of our GIS (geographic information system) underwriting solutions. At the end of 2012, this long-term contract (since 1992) with IRMS was expiring and precipitated a change in our business relationship. Instead of continuing forward with a new services agreement, we acquired the technology and service assets of IRMS as this will enable us to better manage, enhance and continue to use the solutions as part of our Risk Assessment segment. This acquisition had minimal revenue and operating expense impact for the year ending December 31, 2012, given the timing of the acquisition. See Note 9. to our consolidated financial statements included in this annual report on Form 10-K.

On August 31, 2012, we acquired Argus Information & Advisory Services, LLC, or Argus, a provider of information, competitive benchmarking, scoring solutions, analytics, and customized services to financial institutions and regulators in North America, Latin America, and Europe. Argus leverages its comprehensive payment data sets and provides proprietary solutions to a client base that includes credit and debit card issuers, retail banks and other consumer financial services providers, payment processors, insurance companies, and other industry stakeholders. Within our Decision Analytics segment, this acquisition enhances our position as a provider of data, analytics, and decision-support solutions to financial institutions globally. See Note 9. to our consolidated financial statements included in this annual report on Form 10-K.

On July 2, 2012, we acquired the net assets of Aspect Loss Prevention, LLC, or ALP, a provider of loss prevention and analytic solutions to the retail, entertainment, and food industries. Within our Decision Analytics segment, this acquisition further advances our position as a provider of data, crime analytics, and decision-support solutions. See Note 9. to our consolidated financial statements included in this annual report on Form 10-K.

On March 30, 2012, we acquired 100% of the stock of MediConnect Global, Inc., or MediConnect, a service provider of medical record retrieval, digitization, coding, extraction, and analysis. Within our Decision Analytics segment, MediConnect further supports our objective to be the leading provider of data, analytics, and decision-support solutions to the healthcare and property casualty industries. See Note 9. to our consolidated financial statements included in this annual report on Form 10-K.

## Description of Discontinued Operations

On March 11, 2014, we sold our mortgage services business, Interthinx, for a price of $151.2 million. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. See Note 10 to our consolidated financial statements included in this annual report on Form 10-K.



## Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

## Consolidated Results of Continuing Operations

## Revenues

Revenues were $1,746.7 million for the year ended December 31, 2014 compared to $1,595.7 million for the year ended December 31, 2013, an increase of $151.0 million or 9.5%. In December 2014, we acquired Maplecroft within our Decision Analytics segment, a recent acquisition. Maplecroft provided an increase of $0.6 million in revenues for the year ended December 31, 2014. Excluding this recent acquisition, revenues increased $150.4 million or 9.4%. Revenue growth within Decision Analytics was primarily driven by our financial services, healthcare, and insurance categories. Both categories, industry-standard insurance programs and property-specific rating and underwriting information, within Risk Assessment contributed to its revenue growth. Refer to the Results of Continuing Operations by Segment within this section for further information regarding our revenues.

## Cost of Revenues

Cost of revenues was $716.6 million for the year ended December 31, 2014 compared to $622.5 million for the year ended December 31, 2013, an increase of $94.1 million or 15.1%. Our recent acquisition of Maplecroft within the Decision Analytics segment, accounted for an increase of $0.5 million in cost of revenues for the year ended December 31, 2014 which were primarily related to salaries and employee benefits. Excluding the impact of our recent acquisition, our cost of revenues increased $93.6 million or 15.0%. The increase was primarily due to increases in salaries and employee benefits cost of $38.1 million. Other increases include data costs and data processing fees of $46.3 million (mostly related to our Decision Analytics segment), rent expense of $8.2 million, and information technology expense of $1.5 million. These are offset by a decrease in other operating costs of $0.5 million.

## Selling, General and Administrative Expenses

Selling, general and administrative expenses, or SGA, were $227.3 million for the year ended December 31, 2014 compared to $229.0 million for the year ended December 31, 2013, a decrease of $1.7 million or 0.7%. Excluding costs associated with our recent acquisition of $0.1 million, SGA decreased $1.8 million or 0.8%. The decrease was primarily due to lower salaries and employee benefits of $7.3 million mostly related to the executive transition that took place in 2013, travel expenses of $0.9 million, and a decrease in other general expenses of $2.5 million. These decreases were offset by an increase in professional fees of $4.6 million, primarily related to our attempted acquisition of EVT, and information technology expense of $4.3 million.

## Depreciation and Amortization of Fixed Assets

Depreciation and amortization of fixed assets was $85.5 million for the year ended December 31, 2014 compared to $66.2 million for the year ended December 31, 2013, an increase of $19.3 million or 29.2%. Depreciation and amortization of fixed assets includes depreciation of furniture and equipment, software, computer hardware, and related equipment. The majority of the increase relates to software and hardware costs to support data capacity expansion and revenue growth.

## Amortization of Intangible Assets

Amortization of intangible assets was $56.9 million for the year ended December 31, 2014 compared to $63.7 million for the year ended December 31, 2013, a decrease of $6.8 million or 10.8%. The decrease was primarily related to intangible assets associated with prior acquisitions that have been fully amortized.

## Investment Income and Others

Investment income and others, was a gain of $0.2 million for the year ended December 31, 2014 as compared to a gain of $0.6 million for the year ended December 31, 2013, a decrease of $0.4 million.



## Interest Expense

Interest expense was $70.0 million for the year ended December 31, 2014 compared to $76.1 million for the year ended December 31, 2013, a decrease of $6.1 million or 8.1%. The decrease was primarily due to the repayment of the private placement debt of $180.0 million during 2013, consisting of $45.0 million that matured in April 2013, $100.0 million that matured in August 2013 and $35.0 million that matured in October 2013.

## Provision for Income Taxes

The provision for income taxes was $219.8 million for the year ended December 31, 2014 compared to $196.4 million for the year ended December 31, 2013, an increase of $23.4 million or 11.9%. The effective tax rate was 37.2% for the year ended December 31, 2014 compared to 36.5% for the year ended December 31, 2013.

## EBITDA Margin

The EBITDA margin for our consolidated results including discontinued operations, was 48.8% for the year ended December 31, 2014 compared to 44.6% for the year ended December 31, 2013. The discontinued operations including the gain on the sale of our mortgage services business increased our margin by 2.8% for the year ended December 31, 2014.

## Results of Continuing Operations by Segment

## Decision Analytics

## Revenues

Revenues for our Decision Analytics segment were $1,096.1 million for the year ended December 31, 2014 compared to $977.4 million for the year ended December 31, 2013, an increase of $118.7 million or 12.1%. Our recent acquisition accounted for an increase of $0.6 million in revenues for the year ended December 31, 2014. Excluding Maplecroft, our Decision Analytics revenue increased $118.1 million or 12.1%. As described, our results in the Decision Analytics segment do not include the discontinued operations of our mortgage services business, which was part of our financial services vertical.

Our revenue by category for the periods presented is set forth below for the years ended December 31:

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td><td rowspan="2">Percentage Change</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>Insurance</td><td>$ 598,757</td><td>$539,150</td><td>11.1%</td></tr><tr><td>Financial services</td><td>96,763</td><td>81,113</td><td>19.3%</td></tr><tr><td>Healthcare</td><td>315,628</td><td>271,538</td><td>16.2%</td></tr><tr><td>Specialized markets</td><td>84,926</td><td>85,626</td><td>(0.8)%</td></tr><tr><td>Total Decision Analytics</td><td>$1,096,074</td><td>$977,427</td><td>12.1%</td></tr></table>

Our insurance revenue increased $59.6 million or 11.1% primarily due to an increase within our loss quantification solutions and in catastrophe modeling services for existing customers. Underwriting and claims solutions as well contributed to the growth.

Our financial services revenue increased $15.7 million or 19.3%, primarily due to the continued demand for our analytic solutions and services within this category.

Our healthcare revenue increased $44.1 million or 16.2% primarily due to an increase in transactions within our revenue and quality intelligence solutions and due to an increase in payment accuracy solutions.



Our specialized markets revenue decreased $0.7 million or 0.8%, and excluding the Maplecroft acquisition revenue within this category, our specialized markets revenue decreased $1.3 million or 1.5% as a result of lower activity related to government contracts partially offset by growth in our supply chain services.

## Cost of Revenues

Cost of revenues for our Decision Analytics segment was $508.4 million for the year ended December 31, 2014 compared to $428.0 million for the year ended December 31, 2013, an increase of $80.4 million or 18.8%. Excluding the impact of Maplecroft, our recent acquisition, of $0.5 million, our cost of revenues increased by $79.9 million or 18.7%. This increase is primarily due to a net increase in salary and employee benefits of $28.3 million, data costs and data processing fees of $45.5 million (primarily related to our healthcare services) and rent expense of $7.2 million. These increases were offset by decreases in information technology expenses of $1.1 million.

## Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Decision Analytics segment were $153.5 million for the year ended December 31, 2014 compared to $151.6 million for the year ended December 31, 2013, an increase of $1.9 million or 1.3%. Excluding the impact of Maplecroft, our recent acquisition, of $0.1 million, SGA increased $1.8 million or 1.2%. The increase was primarily due to an increase in professional consulting fees of $4.5 million, which includes expenses of $6.9 million related to the EVT transaction offset by lower other consulting expenses. Other increases include information technology expenses of $3.5 million. These increases are offset by decrease in salaries and employee benefits of $4.3 million, travel cost of $0.5 million and other general and administrative expenses of $1.4 million.

## EBITDA Margin

The EBITDA margin for our Decision Analytics segment including our discontinued operations, was 44.2% for the year ended December 31, 2014 and 38.0% for the year ended December 31, 2013. The discontinued operations, including the gain on sale of the mortgage services business increased our margin by 4.6% for the year ended December 31, 2014.

## Risk Assessment

## Revenues

Revenues for our Risk Assessment segment were $650.6 million for the year ended December 31, 2014 as compared to $618.3 million for the year ended December 31, 2013, an increase of $32.3 million or 5.2%. The overall increase within this segment primarily resulted from an increase in prices derived from continued enhancements to the content of our industry-standard insurance programs' solutions as well as selling expanded solutions to existing customers.

Our revenue by category for the periods presented is set forth below for the years ended December 31:

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td><td rowspan="2">Percentage Change</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>Industry-standard insurance programs</td><td>$495,065</td><td>$471,130</td><td>5.1%</td></tr><tr><td>Property-specific rating and underwriting information</td><td>155,587</td><td>147,146</td><td>5.7%</td></tr><tr><td>Total Risk Assessment</td><td>$650,652</td><td>$618,276</td><td>5.2%</td></tr></table>

## Cost of Revenues

Cost of revenues for our Risk Assessment segment was $208.2 million for the year ended December 31, 2014 compared to $194.5 million for the year ended December 31, 2013, an increase of $13.7 million or 7.0%. The increase was primarily due to an increase in salaries and employee benefits costs of $9.8 million, which



includes severance costs of $4.8 million that occurred in the fourth quarter in 2014. Other increases were related to information technology expenses of $2.6 million, rent expense of $1.0 million, and data and consulting costs of $0.8 million. These increases were offset by a decrease in other general expenses of $0.5 million.

## Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Risk Assessment segment were $73.8 million for the year ended December 31, 2014 compared to $77.4 million for the year ended December 31, 2013, a decrease of $3.6 million or 4.6%. The decrease was primarily due to a decrease in salaries and employee benefits of $3.0 million, a decrease in travel cost of $0.4 million and other general expenses of $1.1 million. These decreases were offset by an increase in information technology of $0.8 million and professional consulting fees of $0.1 million.

## EBITDA Margin

The EBITDA margin for our Risk Assessment segment was 56.7% for the year ended December 31, 2014 compared to 56.1% for the year ended December 31, 2013. The increase in margin is primarily attributed to operating leverage in the segment as well as cost efficiencies.

## Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

## Consolidated Results of Continuing Operations

## Revenues

Revenues were $1,595.7 million for the year ended December 31, 2013 compared to $1,407.8 million for the year ended December 31, 2012, an increase of $187.9 million or 13.3%. In 2012, we acquired MediConnect, ALP, and Argus, collectively referred to as recent acquisitions, which we define as acquisitions not owned for a significant portion of both the current period and/or prior period and would therefore impact the comparability of the financial results. MediConnect was included as a recent acquisition only for the first quarter of 2013; ALP was included as a recent acquisition in the first and second quarters of 2013; Argus was included as a recent acquisition in the first, second and third quarters of 2013 as full quarter comparable revenues did not exist until certain quarters of 2012 due to the timing of the acquisitions.

These recent acquisitions were within our Decision Analytics segment and provided an increase of $68.1 million in revenues for the year ended December 31, 2013. Excluding recent acquisitions, revenues increased $119.8 million or 8.5%, which included an increase in our Decision Analytics segment of $81.0 million or 9.8% and an increase in our Risk Assessment segment of $38.8 million or 6.7%. Revenue growth within Decision Analytics was primarily driven by increases in our healthcare revenue category and contributions from our insurance revenue category. Both categories, industry-standard insurance programs and property-specific rating and underwriting information, within Risk Assessment contributed to its revenue growth. Refer to the Results of Continuing Operations by Segment within this section for further information regarding our revenues.

## Cost of Revenues

Cost of revenues was $622.5 million for the year ended December 31, 2013 compared to $516.7 million for the year ended December 31, 2012, an increase of $105.8 million or 20.5%. Recent acquisitions all within the Decision Analytics segment, accounted for an increase of $36.8 million in cost of revenues for the year ended December 31, 2013 which were primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased $69.0 million or 13.4%. The increase was primarily due to increases in salaries and employee benefits cost of $36.6 million. Other increases include data costs and data processing fees of $17.7 million, information technology expense of $7.4 million, travel and travel related costs of $3.2 million and other operating costs of $4.1 million.



## Selling, General and Administrative Expenses

Selling, general and administrative expenses, or SGA, were $229.0 million for the year ended December 31, 2013 compared to $220.1 million for the year ended December 31, 2012, an increase of $8.9 million or 4.1%. Recent acquisitions accounted for an increase of $3.8 million, which was primarily related to professional fees. Excluding costs associated with our recent acquisitions, SGA increased $5.1 million or 2.3%. The increase was primarily due to an increase in professional fees of $3.0 million, travel and travel related items of $0.8 million, salaries and employee benefits of $0.7 million, and other general and administrative expenses of $0.6 million.

The increase in salaries and benefits of $0.7 million includes an increase of $5.1 million in annual salaries increases, medical costs and commissions, offset by a decrease in our stock option expense of $4.1 million. Our stock option expense decreased as a result of lower accelerated vesting of equity awards granted to employees at age 62. Other decreases include a decrease in pension expense of $0.3 million, primarily due to our pension plan freeze.

## Depreciation and Amortization of Fixed Assets

Depreciation and amortization of fixed assets was $66.2 million for the year ended December 31, 2013 compared to $46.6 million for the year ended December 31, 2012, an increase of $19.6 million or 41.9%. Depreciation and amortization of fixed assets includes depreciation of furniture and equipment, software, computer hardware, and related equipment. The majority of the increase relates to software and hardware costs to support data capacity expansion and revenue growth.

## Amortization of Intangible Assets

Amortization of intangible assets was $63.7 million for the year ended December 31, 2013 compared to $52.2 million for the year ended December 31, 2012, an increase of $11.5 million or 22.1%. The increase was primarily related to amortization of intangible assets associated with recent acquisitions of $16.0 million, partially offset by $4.5 million of amortization of intangible assets associated with prior acquisitions that have been fully amortized.

## Investment Income and Others

Investment income and realized gain on securities, net, was a gain of $0.6 million for the year ended December 31, 2013 as compared to a gain of $0.1 million for the year ended December 31, 2012, an increase of $0.5 million.

## Interest Expense

Interest expense was $76.1 million for the year ended December 31, 2013 compared to $72.5 million for the year ended December 31, 2012, an increase of $3.6 million or 5.0%. This increase is primarily due to the issuance of our senior notes in September 2012 with an aggregate principal balance of $350.0 million, partially offset by the repayment of $180.0 million of private placement debt during the year.

## Provision for Income Taxes

The provision for income taxes was $196.4 million for the year ended December 31, 2013 compared to $182.4 million for the year ended December 31, 2012, an increase of $14.0 million or 7.7%. The effective tax rate was 36.5% for the year ended December 31, 2013 compared to 36.5% for the year ended December 31, 2012.

## EBITDA Margin

The EBITDA margin for our consolidated results including discontinued operations, was 44.6% for the year ended December 31, 2013 compared to 45.4% for the year ended December 31, 2012. For the year ended December 31, 2013, the recent acquisitions mitigated our margin expansion by 0.2%.



## Results of Continuing Operations by Segment

## Decision Analytics

## Revenues

Revenues for our Decision Analytics segment were $977.4 million for the year ended December 31, 2013 compared to $828.3 million for the year ended December 31, 2012, an increase of $149.1 million or 18.0%. Recent acquisitions accounted for an increase of $68.1 million in revenues for the year ended December 31, 2013. Excluding recent acquisitions, our Decision Analytics revenue increased $81.0 million or 9.8%. As described, our results in the Decision Analytics segment give effect to discontinued operations of our mortgage services business, which was part of our financial services vertical.

Our revenue by category for the periods presented is set forth below for the years ended December 31:

<table><tr><td rowspan="2"></td><td>2013</td><td>2012</td><td rowspan="2">Percentage Change</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>Insurance</td><td>$539,150</td><td>$493,456</td><td>9.3%</td></tr><tr><td>Financial services</td><td>81,113</td><td>26,567</td><td>205.3%</td></tr><tr><td>Healthcare</td><td>271,538</td><td>222,955</td><td>21.8%</td></tr><tr><td>Specialized markets</td><td>85,626</td><td>85,364</td><td>0.3%</td></tr><tr><td>Total Decision Analytics</td><td>$977,427</td><td>$828,342</td><td>18.0%</td></tr></table>

Our insurance revenue increased $45.7 million or 9.3%, and excluding recent acquisitions (ALP) revenue of $1.2 million for the first and second quarters within this category, our insurance revenue increased $44.5 million or 9.0%, primarily due to an increase within our underwriting solutions, an increase in catastrophe modeling services for existing customers, as well as an increase in insurance fraud solutions revenue, and an increase in loss quantification solutions.

Our financial services revenue increased $54.5 million or 205.3%, and excluding recent acquisitions (Argus) revenue of $50.1 million for the first, second and third quarters within this category, our financial services revenue increased $4.4 million or 20.2%. This financial services revenue reflects Argus' increased solutions which became part of organic revenue in the fourth quarter.

Our healthcare revenue increased $48.6 million or 21.8%, and excluding the recent acquisitions (MediConnect) revenue for the first quarter of $16.8 million within this category, our healthcare revenue increased $31.8 million or 14.3% primarily due to an increase in transactions within our revenue and quality intelligence solutions and due to an increase in payment accuracy solutions as customer contracts were implemented.

Our specialized markets revenue increased $0.3 million or 0.3% as a result of modest increase in our supply chain services, offset by a decrease in weather and climate risk solutions.

## Cost of Revenues

Cost of revenues for our Decision Analytics segment was $428.0 million for the year ended December 31, 2013 compared to $334.3 million for the year ended December 31, 2012, an increase of $93.7 million or 28.0%. Excluding the impact of recent acquisitions of $36.8 million, our cost of revenues increased by $56.9 million or 17.1%. This increase is primarily due to a net increase in salary and employee benefits of $30.6 million. Other increases include data costs and data processing fees of $16.7 million, information technology expenses of $4.7 million, travel and travel related costs of $1.3 million, and other general expenses of $3.6 million.

## Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Decision Analytics segment were $151.6 million for the year ended December 31, 2013 compared to $139.2 million for the year ended December 31, 2012, an



increase of $12.4 million or 8.9%. Excluding the impact of recent acquisitions of $3.8 million, SGA increased $8.6 million or 6.2%. The increase was primarily due to an increase in salaries and employee benefits of $6.9 million, professional fees of $0.5 million, costs related to travel expenses of $0.4 million, and other general and administrative expenses of $0.8 million.

## EBITDA Margin

The EBITDA margin for our Decision Analytics segment including our discontinued operations, was 38.0% for the year ended December 31, 2013 and 39.8% for the year ended December 31, 2012. For the year ended December 31, 2013, the recent acquisitions mitigated our margin expansion by 0.2%.

## Risk Assessment

## Revenues

Revenues for our Risk Assessment segment were $618.3 million for the year ended December 31, 2013 as compared to $579.5 million for the year ended December 31, 2012, an increase of $38.8 million or 6.7%. The overall increase within this segment primarily resulted from an increase in prices derived from continued enhancements to the content of our industry-standard insurance programs' solutions as well as selling expanded solutions to existing customers.

Our revenue by category for the periods presented is set forth below for the years ended December 31:

<table><tr><td rowspan="2"></td><td>2013</td><td>2012</td><td rowspan="2">Percentage Change</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>Industry-standard insurance programs</td><td>$471,130</td><td>$450,646</td><td>4.5%</td></tr><tr><td>Property-specific rating and underwriting information</td><td>147,146</td><td>128,860</td><td>14.2%</td></tr><tr><td>Total Risk Assessment</td><td>$618,276</td><td>$579,506</td><td>6.7%</td></tr></table>

## Cost of Revenues

Cost of revenues for our Risk Assessment segment was $194.5 million for the year ended December 31, 2013 compared to $182.4 million for the year ended December 31, 2012, an increase of $12.1 million or 6.7%. The increase was primarily due to an increase in salaries and employee benefits costs of $6.0 million. Other increases were related to information technology expenses of $2.7 million, data and consulting costs of $1.0 million, travel expenses of $1.9 million, and other general expenses of $0.5 million.

## Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Risk Assessment segment were $77.4 million for the year ended December 31, 2013 compared to $80.9 million for the year ended December 31, 2012, a decrease of $3.5 million or 4.4%. The decrease was primarily due to a decrease in salaries and employee benefits of $6.2 million, primarily related to our stock option expense. Our stock option expense decreased as a result of lower accelerated vesting of equity awards granted to employees at age 62. There was also a decrease in other general expenses of $0.2 million. These decreases were offset by an increase in professional consulting fees of $2.5 million and travel costs of $0.4 million.

## EBITDA Margin

The EBITDA margin for our Risk Assessment segment was 56.1% for the year ended December 31, 2013 compared to 54.6% for the year ended December 31, 2012. The increase in margin is primarily attributed to operating leverage in the segment as well as cost efficiencies.



## Quarterly Results of Operations

The following table sets forth our quarterly unaudited consolidated statement of operations data for each of the eight quarters in the period ended December 31, 2014. In management’s opinion, the quarterly data has been prepared on the same basis as the audited consolidated financial statements included in this annual report on Form 10-K, and reflects all necessary adjustments for a fair presentation of this data. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.

<table><tr><td rowspan="3"></td><td colspan="6">For the Quarters Ended</td></tr><tr><td>March 31,</td><td>June 30,</td><td>September 30,</td><td>December 31,</td><td>Full Year</td><td></td></tr><tr><td></td><td>2014</td><td></td><td></td><td>2014</td><td></td></tr><tr><td></td><td colspan="6">(in thousands, except for per share data)</td></tr><tr><td>Statement of operations data:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Revenues</td><td>$409,643</td><td>$423,554</td><td>$448,665</td><td>$464,864</td><td>$1,746,726</td><td></td></tr><tr><td>Operating income</td><td>$148,843</td><td>$159,066</td><td>$175,490</td><td>$177,047</td><td>$ 660,446</td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 84,441</td><td>$ 88,099</td><td>$ 99,015</td><td>$ 99,310</td><td>$ 370,865</td><td></td></tr><tr><td>Income from discontinued operations</td><td>$ 31,117</td><td>$ —</td><td>$ —</td><td>$ (1,940)</td><td>$ 29,177</td><td></td></tr><tr><td>Net income</td><td>$115,558</td><td>$ 88,099</td><td>$ 99,015</td><td>$ 97,370</td><td>$ 400,042</td><td></td></tr><tr><td>Basic net income per share:</td><td>$ 0.69</td><td>$ 0.53</td><td>$ 0.60</td><td>$ 0.59</td><td>$ 2.41</td><td></td></tr><tr><td>Diluted net income per share:</td><td>$ 0.68</td><td>$ 0.52</td><td>$ 0.58</td><td>$ 0.58</td><td>$ 2.37</td><td></td></tr><tr><td></td><td colspan="6">For the Quarters Ended</td></tr><tr><td></td><td>March 31,</td><td>June 30,</td><td>September 30,</td><td>December 31,</td><td>Full Year</td><td></td></tr><tr><td></td><td></td><td>2013</td><td></td><td></td><td>2013</td><td></td></tr><tr><td></td><td colspan="6">(in thousands, except for per share data)</td></tr><tr><td>Statement of operations data:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Revenues</td><td>$376,697</td><td>$390,356</td><td>$411,927</td><td>$416,723</td><td>$1,595,703</td><td></td></tr><tr><td>Operating income</td><td>$145,528</td><td>$146,857</td><td>$166,835</td><td>$155,047</td><td>$ 614,267</td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 79,445</td><td>$ 81,600</td><td>$ 94,894</td><td>$ 86,375</td><td>$ 342,314</td><td></td></tr><tr><td>Income from discontinued operations</td><td>$ 1,066</td><td>$ 2,605</td><td>$ 1,547</td><td>$ 848</td><td>$ 6,066</td><td></td></tr><tr><td>Net income</td><td>$ 80,511</td><td>$ 84,205</td><td>$ 96,441</td><td>$ 87,223</td><td>$ 348,380</td><td></td></tr><tr><td>Basic net income per share:</td><td>$ 0.48</td><td>$ 0.50</td><td>$ 0.57</td><td>$ 0.52</td><td>$ 2.07</td><td></td></tr><tr><td>Diluted net income per share:</td><td>$ 0.47</td><td>$ 0.49</td><td>$ 0.56</td><td>$ 0.51</td><td>$ 2.02</td><td></td></tr></table>

## Liquidity and Capital Resources

As of December 31, 2014 and 2013, we had cash and cash equivalents and available-for-sale securities of $43.2 million and $169.7 million, respectively. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year. Subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our syndicated revolving credit facility, we believe we will have sufficient cash to meet our working capital and capital expenditure needs, and to fuel our future growth plans.

We have historically managed the business with a working capital deficit due to the fact that, as described above, we offer our solutions and services primarily through annual subscriptions or long-term contracts, which are generally prepaid quarterly or annually in advance of the services being rendered. When cash is received for prepayment of invoices, we record an asset (cash and cash equivalents) on our balance sheet with the offset recorded as a current liability (fees received in advance). This current liability is deferred revenue that does not require a direct cash outflow since our customers have prepaid and are obligated to purchase the services. In most businesses, growth in revenue typically leads to an increase in the accounts receivable balance causing a use of cash as a company grows. Unlike these businesses, our cash position is favorably affected by revenue growth, which results in a source of cash due to our customers prepaying for most of our services.



Our capital expenditures as a percentage of revenues for the years ended December 31, 2014 and 2013, were 8.4% and 9.1%, respectively. We estimate our capital expenditures for 2015 will be approximately $150.0 million, which primarily include expenditures on our technology infrastructure and our continuing investments in developing and enhancing our solutions. Expenditures related to developing and enhancing our solutions are predominately related to internal use software and are capitalized in accordance with ASC 350-40, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use.” We also capitalize amounts in accordance with ASC 985-20, “Software to be Sold, Leased or Otherwise Marketed.”

We have also historically used a portion of our cash for repurchases of our common stock from our stockholders. For the years ended December 31, 2014, 2013 and 2012, we repurchased $675.4 million (exclusive of $100.0 million of unsettled purchase price associated with the ASR Program; see Note 15 of our consolidated financial statements in this annual report on Form 10-K), $278.9 million and $162.6 million, respectively, of our common stock.

In prior years, we provided pension and postretirement benefits to certain qualifying active employees and retirees. On February 29, 2012, we instituted a hard freeze, which eliminated all future compensation and service credits, to all participants in the pension plans. In April 2012, we completed a voluntary prefunding to our qualified pension plan of $72.0 million, which resulted in a contribution of $78.8 million for the year, of which $28.2 million was the minimum contribution requirement for 2012. As a result of the prefunding, we do not expect to make any contribution in 2015 with respect to our qualified pension plan. Under the postretirement plan, we provided certain healthcare and life insurance benefits to qualifying participants; however, participants are required to pay a stated percentage of the premium coverage. We expect to contribute approximately $1.1 million to the postretirement plan in 2015. See Note 17 to our consolidated financial statements included in this annual report on Form 10-K.

## Financing and Financing Capacity

We had total debt, excluding capital lease obligations, of $1,425.8 million and $1,265.1 million at December 31, 2014 and 2013, respectively. The debt at December 31, 2014 was primarily issued under senior notes and long-term private placement loan facilities to finance our stock repurchases and acquisitions.

On April 6, 2011, we completed an issuance of senior notes in the aggregate principal amount of $450.0 million. These senior notes are due on May 1, 2021 and accrue interest at a rate of 5.800% per annum. Interest is payable semi-annually on May 1st and November 1st of each year.

On December 8, 2011, we completed a second issuance of senior notes in the aggregate principal of $250.0 million. These senior notes are due on January 15, 2019 and accrue interest at a rate of 4.875% per annum. Interest is payable semi-annually on January 15th and July 15th of each year.

On September 12, 2012, we completed a third issuance of senior notes in the aggregate principal amount of $350.0 million. These senior notes are due on September 12, 2022 and accrue interest at a rate of 4.125% per annum. Interest is payable semi-annually on March 12th and September 12th of each year.

The senior notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured and unsubordinated basis by ISO and certain subsidiaries that guarantee our syndicated revolving credit facility (credit facility), or any amendment, refinancing or replacement thereof. We expect to redraw from our credit facility over time as needed for our corporate strategy, including for general corporate purposes, share repurchases, and acquisitions. The indenture governing the senior notes restricts our ability and our subsidiaries' ability to, among other things, create certain liens, enter into sale/leaseback transactions and consolidate with, sell, lease, convey or otherwise transfer all or substantially all of our assets, or merge with or into, any other person or entity.



On October 21, 2014, we amended our committed senior unsecured credit facility with a syndicate of banks to increase the borrowing capacity under the credit facility from $975.0 million to $990.0 million and extend the maturity date from October 2018 to October 2019. We amortize all one-time fees and third party costs associated with the execution and amendment of this credit facility through the maturity date. Interest is payable at a maturity rate of LIBOR plus 1.125% to 1.625%, depending on the result of certain ratios defined in the credit agreement. Verisk and ISO are co-borrowers under the credit facility. Borrowings may be used for general corporate purposes, including working capital and capital expenditures, acquisitions and share repurchase programs. During the year ended December 31, 2014, we borrowed $225.0 million under the credit facility and repaid $65.0 million. As of December 31, 2014 and 2013, we had $160.0 million and $0 outstanding borrowings under the credit facility, respectively. In January and February 2015, we repaid a total of $140.0 million of the $160.0 million outstanding borrowings under the credit facility.

As of December 31, 2014, we have an available borrowing capacity, net of outstanding letters of credit, of $827.8 million under the credit facility.

The credit facility contains certain customary financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants also place restrictions on mergers, asset sales, sale/leaseback transactions, payments between us and our subsidiaries, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated interest coverage ratio of at least 3.0 to 1.0 and that during any period of four fiscal quarters, we maintain a consolidated funded debt leverage ratio below 3.5 to 1.0. We were in compliance with all debt covenants under the credit facility as of December 31, 2014.

We also had long-term private placement loan facilities under uncommitted master shelf agreements with New York Life and Prudential Capital Group that expired during 2013. We did not extend these agreements. As of December 31, 2014 and 2013, we had $220.0 million outstanding under these facilities for both periods. The weighted average rate of interest with respect to our outstanding borrowings under these facilities was 6.36% for each of the years ended December 31, 2014 and 2013 and amounts outstanding was $1.9 million at the end of each period. These notes contain certain covenants that limit our ability to create liens, enter into sale/leaseback transactions and consolidate, merge or sell assets to another company. These notes also contain financial covenants that require that, at the end of any fiscal quarter, we have a consolidated interest coverage ratio of at least 3.0 to 1.0 and that we maintain a consolidated funded debt leverage ratio below 3.0 to 1.0 at the end of any fiscal quarter. We were in compliance with all debt covenants under our master shelf agreements as of December 31, 2014.

## Cash Flow

The following table summarizes our cash flow data for the years ended December 31:

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td colspan="3">(In thousands)</td></tr><tr><td>Net cash provided by operating activities</td><td>$ 489,452</td><td>$ 506,920</td><td>$ 468,229</td></tr><tr><td>Net cash used in investing activities</td><td>$ (35,530)</td><td>$ (145,626)</td><td>$ (883,583)</td></tr><tr><td>Net cash (used in) provided by financing activities</td><td>$ (579,078)</td><td>$ (284,472)</td><td>$ 313,555</td></tr></table>

## Operating Activities

Net cash provided by operating activities decreased to $489.5 million for the year ended December 31, 2014 compared to $506.9 million for the year ended December 31, 2013. Net cash provided by operating activities was primarily affected by the sale of our mortgage services business and the timing of excess tax benefits from exercised stock options in the first quarter of 2013.



Net cash provided by operating activities increased to $506.9 million for the year ended December 31, 2013 compared to $468.2 million for the year ended December 31, 2012. The increase in cash provided by operating activities was primarily due to an increase in cash receipts from customers, partially offset by an increase in interest payments related to our bond offerings. In the second quarter of 2012, we pre-funded $72.0 million to our pension plan. This prefunding was partially offset by the tax benefit associated with those deductible contributions and the deferral of our fourth quarter 2012 tax payment to 2013 as a result of a temporary federal tax relief program related to Hurricane Sandy. This tax payment would have typically been paid in the fourth quarter of 2012, but due to this relief, the payment was made in the first quarter of 2013.

## Investing Activities

Net cash used in investing activities was $35.5 million and $145.6 million for the years ended December 31, 2014 and 2013, respectively. The decrease in net cash used in investing activities was primarily due to the sale of our mortgage services business for $155.0 million on March 11, 2014, partially offset by the acquisition of Maplecroft of $30.1 million.

Net cash used in investing activities was $145.6 million and $883.6 million for the years ended December 31, 2013 and 2012, respectively. The decrease in net cash used in investing activities was primarily due to the fact that we had acquisitions in 2012 with a combined net cash purchase price of $808.3 million versus minor acquisition activity in 2013.

## Financing Activities

Net cash used in financing activities was $579.1 million and $284.5 million for the years ended December 31, 2014 and 2013, respectively. The increase of net cash used in financing activities for the year ended December 31, 2014 was primarily due to the repurchase of common stock of $778.5 million related to the ASR, partially offset by net debt draw downs of $160.0 million.

Net cash used in financing activities was $284.5 million for the year ended December 31, 2013 and net cash provided by financing was $313.6 million for the year ended December 31, 2012. Net cash used in financing activities for the year ended December 31, 2013 was primarily due to the repurchase of common stock of $277.4 million and debt repayments of $190.0 million, partially offset by proceeds from stock option exercises and the related excess tax benefit of $190.3 million.

## Contractual Obligations

The following table summarizes our contractual obligations and commercial commitments at December 31, 2014 and the future periods in which such obligations are expected to be settled in cash:

<table><tr><td rowspan="3"></td><td colspan="6">Payments Due by Period</td></tr><tr><td rowspan="2">Total</td><td rowspan="2">Less than 1 year</td><td rowspan="2">2-3 years</td><td rowspan="2">4-5 years</td><td colspan="2">More than 5 years</td></tr><tr><td colspan="2">(In thousands)</td></tr><tr><td>Contractual obligations</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Long-term debt, current portion of long-term debt and interest</td><td>$1,605,265</td><td>$230,706</td><td>$157,008</td><td>$343,770</td><td>$ 873,781</td><td></td></tr><tr><td>Operating leases</td><td>434,696</td><td>37,958</td><td>75,856</td><td>60,849</td><td>260,033</td><td></td></tr><tr><td>Pension and postretirement plans(1)</td><td>45,200</td><td>3,207</td><td>6,115</td><td>5,735</td><td>30,143</td><td></td></tr><tr><td>Capital lease obligations</td><td>11,487</td><td>6,295</td><td>4,867</td><td>240</td><td>85</td><td></td></tr><tr><td>Other long-term liabilities(2)</td><td>21,325</td><td>1,264</td><td>18,721</td><td>484</td><td>856</td><td></td></tr><tr><td>Total(3)</td><td>$2,117,973</td><td>$279,430</td><td>$262,567</td><td>$411,078</td><td>$1,164,898</td><td></td></tr></table>

(1) Our funding policy is to contribute at least equal to the minimum legal funding requirement.



(2) Other long-term liabilities consist of our ESOP contributions and employee-related deferred compensation plan. We also have a deferred compensation plan for our Board of Directors; however, based on past performance and the uncertainty of the dollar amounts to be paid, if any, we have excluded such amounts from the above table.

(3) Unrecognized tax benefits of approximately $10.6 million have been recorded as liabilities in accordance with ASC 740, which have been omitted from the table above, and we are uncertain as to if or when such amounts may be settled, with the exception of those amounts subject to a statute of limitation. Related to the unrecognized tax benefits, we also have recorded a liability for potential penalties and interest of $2.8 million.

## Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

## Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require management to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, goodwill and intangible assets, pension and other post retirement benefits, stock based compensation, and income taxes. Actual results may differ from these assumptions or conditions.

## Revenue Recognition

The Company’s revenues are primarily derived from sales of services and revenue is recognized as services are performed and information is delivered to our customers. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, fees and/or price are fixed or determinable and collectability is reasonably assured. Revenues for subscription services are recognized ratably over the subscription term, usually one year. Revenues from transaction-based fees are recognized as information is delivered to customers, assuming all other revenue recognition criteria are met.

The Company also has term based software licenses where the only remaining undelivered element is post-contract customer support or PCS, including unspecified upgrade rights on a when and if available basis. The Company recognizes revenue for these licenses ratably over the duration of the license term. The PCS associated with these arrangements is coterminous with the duration of the license term. The Company also provides hosting or software solutions that provide continuous access to information and include PCS and recognizes revenue ratably over the duration of the license term. In addition, the determination of certain of our services revenues requires the use of estimates, principally related to transaction volumes in instances where these volumes are reported to us by our clients on a monthly basis in arrears. In these instances, we estimate transaction volumes based on average actual volumes reported by our customers in the past. Differences between our estimates and actual final volumes reported are recorded in the period in which actual volumes are reported. We have not experienced significant variances between our estimates of these services revenues reported to us by our customers and actual reported volumes in the past.

We invoice our customers in annual, quarterly, or monthly installments. Amounts billed and collected in advance are recorded as fees received in advance on the balance sheet and are recognized as the services are performed and revenue recognition criteria are met.



## Stock Based Compensation

The fair value of equity awards is measured on the date of grant using a Black-Scholes option-pricing model, which requires the use of several estimates, including expected term, expected risk-free interest rate, expected volatility and expected dividend yield.

Stock based compensation cost is measured at the grant date, based on the fair value of the awards granted, and is recognized as expense over the requisite service period. Option grants and restricted stock awards are generally expensed ratably over the four-year vesting period. We follow the substantive vesting period approach for awards granted after January 1, 2005, which requires that stock based compensation expense be recognized over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service.

We estimate expected forfeitures of equity awards at the date of grant and recognize compensation expense only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate.

## Goodwill and Intangibles

Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have definite lives are amortized over their useful lives. Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of June 30, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable, using the guidance and criteria described in the accounting standard for Goodwill and Other Intangible Assets. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value.

As of December 31, 2014, we had goodwill and net intangible assets of $1,613.6 million, which represents 68.8% of our total assets. During 2014, we performed an impairment test as of June 30, 2014 and confirmed that no impairment charge was necessary. There are many assumptions and estimates used that directly impact the results of impairment testing, including an estimate of future expected revenues, earnings and cash flows, useful lives and discount rates applied to such expected cash flows in order to estimate fair value. We have the ability to influence the outcome and ultimate results based on the assumptions and estimates we choose for determining the fair value of our reporting units. To mitigate undue influence, we set criteria and benchmarks that are reviewed and approved by various levels of management and reviewed by other independent parties. The determination of whether or not goodwill or indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions and estimates underlying the approach used to determine the value of our reporting units. Changes in our strategy or market conditions could significantly impact these judgments and require an impairment to be recorded to intangible assets and goodwill. Our valuation has not indicated any impairment of our goodwill asset of $1,207.1 million as of December 31, 2014. For the year ended December 31, 2014, there were no impairment indicators related to our intangible assets.

## Pension and Postretirement

On February 29, 2012, we instituted a hard freeze, which eliminates all future compensation and service credits, to all participants in the pension plans. See Note 17 to our consolidated financial statements included in this annual report on Form 10-K. We account for our pension and postretirement benefit plans in accordance with the accounting standard for Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. This standard requires that employers recognize on a prospective basis the funded status of their defined benefit pension and other postretirement benefit plans on their consolidated balance sheets and recognize as a component of other comprehensive income (loss), net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit (credit) cost. Additional minimum pension liabilities and related intangible assets are also derecognized upon adoption of the new standard.



Certain assumptions are used in the determination of our annual net period benefit (credit) cost and the disclosure of the funded status of these plans. The principal assumptions concern the discount rate used to measure the projected benefit obligation and the expected return on plan assets. We revise these assumptions based on an annual evaluation of long-term trends and market conditions that may have an impact on the cost of providing retirement benefits.

In determining the discount rate, we utilize quoted rates from long-term bond indices, and changes in long-term bond rates over the past year, cash flow models and other data sources we consider reasonable based upon the life expectancy and mortality rate of eligible employees. As part of our evaluation, we calculate the approximate average yields on securities that were selected to match our separate projected cash flows for both the pension and postretirement plans. Our separate benefit plan cash flows are input into actuarial models that include data for corporate bonds rated AA or better at the measurement date. The output from the actuarial models are assessed against the prior year’s discount rate and quoted rates for long-term bond indices. For our pension plans at December 31, 2014, we determined this rate to be 3.99%, a decrease of 0.75% from the 4.74% rate used at December 31, 2013. Our postretirement rate is 3.00% at December 31, 2014, a decrease of 0.45% from the 3.45% used at December 31, 2013.

The expected return on plan assets is determined by taking into consideration our analysis of our actual historical investment returns to a broader long-term forecast adjusted based on our target investment allocation, and the current economic environment. Our pension asset investment guidelines target an investment portfolio allocation of 40.00% debt securities and 60.00% equity securities. As of December 31, 2014, the pension plan assets were allocated 41.30% debt, 56.80% equity securities and 1.90% other. The VEBA Plan target allocation is 100% debt. We have used our target investment allocation to derive the expected return as we believe this allocation will be retained on an ongoing basis that will be commensurate with the projected cash flows of the plan. The expected return for each investment category within our target investment allocation is developed using average historical rates of return for each targeted investment category, considering the projected cash flow of the qualified pension plan and postretirement plan. The difference between this expected return and the actual return on plan assets is generally deferred and recognized over subsequent periods through future net periodic benefit (credits) costs. We believe these considerations provide the basis for reasonable assumptions with respect to the expected long-term rate of return on plan assets.

The measurement date used to determine the benefit obligation and plan assets is December 31. The future benefit payments for the postretirement plan are net of the federal medical subsidy. As a result of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at least actuarially equivalent to the corresponding benefits provided under Medicare Part D was effectively changed. This legislative change reduces future tax benefits of the coverage we provided to participants in the postretirement plan. We are required to account for this change in the period during which the law is enacted.

A one percent change in discount rate and future rate of return on plan assets would have the following effects:

<table><tr><td rowspan="3"></td><td colspan="4">Pension</td><td colspan="4">Postretirement</td></tr><tr><td colspan="2">1% Decrease</td><td colspan="2">1% Increase</td><td colspan="2">1% Decrease</td><td colspan="2">1% Increase</td></tr><tr><td>Benefit (Credit) Cost</td><td>Projected Benefit Obligation</td><td>Benefit (Credit) Cost</td><td>Projected Benefit Obligation</td><td>Benefit (Credits) Cost</td><td>Projected Benefit Obligation</td><td>Benefit (Credit) Cost</td><td>Expected Benefit Obligation</td></tr><tr><td>Discount Rate</td><td>$ (422)</td><td>$56,621</td><td>$ 1,393</td><td>$(46,814)</td><td>$ (52)</td><td>$1,049</td><td>$ 46</td><td>$(942)</td></tr><tr><td>Expected Rate of Return on Assets</td><td>$4,526</td><td>$ —</td><td>$ (4,526)</td><td>$ —</td><td>$157</td><td>$ —</td><td>$ (157)</td><td>$ —</td></tr></table>



## Income Taxes

In projecting future taxable income, we develop assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use to manage the underlying businesses. The calculation of our tax liabilities also involves dealing with uncertainties in the application and evolution of complex tax laws and regulations in other jurisdictions.

We account for uncertain tax positions in accordance with Accounting for Uncertainty in Income Taxes — an interpretation of ASC 740, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this interpretation, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position.

We recognize and adjust our liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

We estimate unrecognized tax positions of $1.1 million that may be recognized by December 31, 2015, due to expiration of statutes of limitations and resolution of audits with taxing authorities, net of additional uncertain tax positions.

As of December 31, 2014, we have gross federal, state, and foreign income tax net operating loss carryforwards of $47.3 million, which will expire at various dates from 2015 through 2034. Such net operating loss carryforwards expire as follows:

<table><tr><td></td><td>(In thousands)</td></tr><tr><td>2015 - 2022</td><td>$ 6,912</td></tr><tr><td>2023 - 2027</td><td>13,755</td></tr><tr><td>2028 - 2034</td><td>26,674</td></tr><tr><td></td><td>$47,341</td></tr></table>

The deferred income tax liability of $197.8 million consists primarily of timing differences involving depreciation and amortization.

## Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2(t) to the audited consolidated financial statements included elsewhere in this annual report on Form 10-K.

## Item 7A. Quantitative and Qualitative Disclosures about Market Risk

## Interest Rate Risk

We are exposed to market risk from fluctuations in interest rates. At December 31, 2014, we had borrowings outstanding under our credit facility of $160.0 million, which bear interest at variable rates based on LIBOR plus 1.125% to 1.625%, depending on certain ratios defined in the credit agreement. A change in interest rates on variable rate debt impacts our pre-tax income and cash flows, but does not impact the fair value of the instruments. Based on our overall interest rate exposure at December 31, 2014, a one percent change in interest rate would result in a change in annual pre-tax interest expense of approximately $1.6 million based on our current borrowing levels.



## Item 8. Financial Statements and Supplementary Data

The information required by this Item is set forth on pages 49 through 107 of this annual report on Form 10-K.

## Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

## Item 9A. Controls and Procedures

## Evaluation of Disclosure Controls and Procedures

We are required to maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives at the reasonable assurance level.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report on Form 10-K. Based upon the foregoing assessments, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2014, our disclosure controls and procedures were effective at the reasonable assurance level.

## Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting as of December 31, 2014 is set forth in Item 8. Financial Statement and Supplementary Data.

## Attestation Report of the Registered Public Accounting Firm

The Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting as of December 31, 2014 is set forth in Item 8. Financial Statement and Supplementary Data.

## Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Item 9B. Other Information

None.

## PART III

## Item 10. Directors, Executive Officers and Corporate Governance

The information required to be furnished by this Item 10. is incorporated herein by reference to our Notice of Annual Meeting of Stockholders and Proxy Statement to be filed within 120 days of December 31, 2014 (the “Proxy Statement”).



## Item 11. Executive Compensation

The information required to be furnished by this Item 11. is incorporated herein by reference from our Proxy Statement.

## Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required to be furnished by this Item 12. is incorporated herein by reference to our Proxy Statement.

## Item 13. Certain Relationships and Related Transactions and Director Independence

The information required to be furnished by this Item 13. is incorporated herein by reference to our Proxy Statement.

## Item 14. Principal Accounting Fees and Services

The information required to be furnished by this Item 14. is incorporated herein by reference to our Proxy Statement.

## PART IV

## Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report.

(1) Financial Statements. See Index to Financial Statements and Schedules in Part II, Item 8. on this Form 10-K.

(2) Financial Statement Schedules. See Schedule II. Valuation and Qualifying Accounts and Reserves.

(3) Exhibits. See Index to Exhibits in this annual report on Form 10-K.



## Item 8. Consolidated Financial Statements and Supplementary Data

## Index to Consolidated Financial Statements and Schedules

Verisk Analytics, Inc. Consolidated Financial Statements as of December 31, 2014 and 2013 and for the Years Ended December 31, 2014, 2013 and 2012.
Management’s Report on Internal Controls Over Financial Reporting ..... 56
Report of Independent Registered Public Accounting Firm ..... 57
Report of Independent Registered Public Accounting Firm on Internal Controls Over Financial Reporting ..... 58
Consolidated Balance Sheets ..... 59
Consolidated Statements of Operations ..... 60
Consolidated Statements of Comprehensive Income ..... 61
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) ..... 62
Consolidated Statements of Cash Flows ..... 63
Notes to Consolidated Financial Statements ..... 65
Financial Statements Schedule
Schedule II, Valuation and Qualifying Accounts and Reserves ..... 117



## MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on this assessment, management concluded that our internal control over financial reporting was effective at December 31, 2014.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this annual report on Form 10-K has also audited the effectiveness of our internal control over financial reporting as of December 31, 2014, as stated in their report which is included herein.



# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Verisk Analytics, Inc.

Jersey City, New Jersey

We have audited the accompanying consolidated balance sheets of Verisk Analytics, Inc. and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Verisk Analytics, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Parsoppany, New Jersey

February 24, 2015



# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Verisk Analytics, Inc.

Jersey City, New Jersey

We have audited the internal control over financial reporting of Verisk Analytics, Inc. and subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2014 of the Company and our report dated February 24, 2015 expressed an unqualified opinion on those financial statements and financial statements schedule.



## VERISK ANALYTICS, INC
CONSOLIDATED BALANCE SHEETS
As of December 31, 2014 and 2013

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td></tr><tr><td colspan="2">(In thousands, except for share and per share data)</td></tr><tr><td colspan="3">ASSETS</td></tr><tr><td>Current assets:</td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 39,359</td><td>$ 165,801</td></tr><tr><td>Available-for-sale securities</td><td>3,801</td><td>3,911</td></tr><tr><td>Accounts receivable, net</td><td>220,668</td><td>158,547</td></tr><tr><td>Prepaid expenses</td><td>31,496</td><td>25,657</td></tr><tr><td>Deferred income taxes, net</td><td>4,772</td><td>5,077</td></tr><tr><td>Income taxes receivable</td><td>65,512</td><td>67,346</td></tr><tr><td>Other current assets</td><td>18,875</td><td>34,681</td></tr><tr><td>Current assets held-for-sale</td><td>—</td><td>13,825</td></tr><tr><td>Total current assets</td><td>384,483</td><td>474,845</td></tr><tr><td>Noncurrent assets:</td><td></td><td></td></tr><tr><td>Fixed assets, net</td><td>302,273</td><td>233,373</td></tr><tr><td>Intangible assets, net</td><td>406,476</td><td>447,618</td></tr><tr><td>Goodwill</td><td>1,207,146</td><td>1,181,681</td></tr><tr><td>Pension assets</td><td>18,589</td><td>60,955</td></tr><tr><td>Other assets</td><td>26,363</td><td>20,034</td></tr><tr><td>Noncurrent assets held-for-sale</td><td>—</td><td>85,945</td></tr><tr><td>Total assets</td><td>$ 2,345,330</td><td>$ 2,504,451</td></tr><tr><td colspan="3">LIABILITIES AND STOCKHOLDERS&#x27; EQUITY</td></tr><tr><td>Current liabilities:</td><td></td><td></td></tr><tr><td>Accounts payable and accrued liabilities</td><td>$ 180,726</td><td>$ 188,264</td></tr><tr><td>Short-term debt and current portion of long-term debt</td><td>336,058</td><td>4,448</td></tr><tr><td>Pension and postretirement benefits, current</td><td>1,894</td><td>2,437</td></tr><tr><td>Fees received in advance</td><td>252,592</td><td>226,581</td></tr><tr><td>Current liabilities held-for-sale</td><td>—</td><td>9,449</td></tr><tr><td>Total current liabilities</td><td>771,270</td><td>431,179</td></tr><tr><td>Noncurrent liabilities:</td><td></td><td></td></tr><tr><td>Long-term debt</td><td>1,100,874</td><td>1,271,439</td></tr><tr><td>Pension benefits</td><td>13,805</td><td>13,007</td></tr><tr><td>Postretirement benefits</td><td>2,410</td><td>2,061</td></tr><tr><td>Deferred income taxes, net</td><td>202,540</td><td>198,604</td></tr><tr><td>Other liabilities</td><td>43,388</td><td>36,043</td></tr><tr><td>Noncurrent liabilities held-for-sale</td><td>—</td><td>4,529</td></tr><tr><td>Total liabilities</td><td>2,134,287</td><td>1,956,862</td></tr><tr><td>Commitments and contingencies</td><td></td><td></td></tr><tr><td>Stockholders&#x27; equity:</td><td></td><td></td></tr><tr><td>Verisk Class A common stock, $0.001 par value; 1,200,000,000 shares authorized; 544,003,038 shares issued and 157,913,227 and 167,457,927 shares outstanding, respectively</td><td>137</td><td>137</td></tr><tr><td>Unearned KSOP contributions</td><td>(161)</td><td>(306)</td></tr><tr><td>Additional paid-in capital</td><td>1,171,196</td><td>1,202,106</td></tr><tr><td>Treasury stock, at cost, 386,089,811 and 376,545,111 shares, respectively</td><td>(2,533,764)</td><td>(1,864,967)</td></tr><tr><td>Retained earnings</td><td>1,654,149</td><td>1,254,107</td></tr><tr><td>Accumulated other comprehensive losses</td><td>(80,514)</td><td>(43,488)</td></tr><tr><td>Total stockholders&#x27; equity</td><td>211,043</td><td>547,589</td></tr><tr><td>Total liabilities and stockholders&#x27; equity</td><td>$ 2,345,330</td><td>$ 2,504,451</td></tr></table>

The accompanying notes are an integral part of these consolidated financial statements.



## VERISK ANALYTICS, INC.

## CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 2014, 2013 and 2012

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td colspan="3">(In thousands, except for share and per share data)</td></tr><tr><td>Revenues</td><td>$ 1,746,726</td><td>$ 1,595,703</td><td>$ 1,407,848</td></tr><tr><td>Expenses:</td><td></td><td></td><td></td></tr><tr><td>Cost of revenues (exclusive of items shown separately below)</td><td>716,598</td><td>622,523</td><td>516,708</td></tr><tr><td>Selling, general and administrative</td><td>227,306</td><td>228,982</td><td>220,068</td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>85,506</td><td>66,190</td><td>46,637</td></tr><tr><td>Amortization of intangible assets</td><td>56,870</td><td>63,741</td><td>52,207</td></tr><tr><td>Total expenses</td><td>1,086,280</td><td>981,436</td><td>835,620</td></tr><tr><td>Operating income</td><td>660,446</td><td>614,267</td><td>572,228</td></tr><tr><td>Other income (expense):</td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>158</td><td>609</td><td>106</td></tr><tr><td>Interest expense</td><td>(69,984)</td><td>(76,136)</td><td>(72,508)</td></tr><tr><td>Total other expense, net</td><td>(69,826)</td><td>(75,527)</td><td>(72,402)</td></tr><tr><td>Income before income taxes</td><td>590,620</td><td>538,740</td><td>499,826</td></tr><tr><td>Provision for income taxes</td><td>(219,755)</td><td>(196,426)</td><td>(182,363)</td></tr><tr><td>Income from continuing operations</td><td>370,865</td><td>342,314</td><td>317,463</td></tr><tr><td>Income from discontinued operations, net of tax of $25,305, $4,753 and $7,703, respectively (Note 10)</td><td>29,177</td><td>6,066</td><td>11,679</td></tr><tr><td>Net income</td><td>$ 400,042</td><td>$ 348,380</td><td>$ 329,142</td></tr><tr><td>Basic net income per share:</td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 2.24</td><td>$ 2.04</td><td>$ 1.91</td></tr><tr><td>Income from discontinued operations</td><td>0.17</td><td>0.03</td><td>0.07</td></tr><tr><td>Basic net income per share</td><td>$ 2.41</td><td>$ 2.07</td><td>$ 1.98</td></tr><tr><td>Diluted net income per share:</td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$ 2.20</td><td>$ 1.99</td><td>$ 1.85</td></tr><tr><td>Income from discontinued operations</td><td>0.17</td><td>0.03</td><td>0.07</td></tr><tr><td>Diluted net income per share</td><td>$ 2.37</td><td>$ 2.02</td><td>$ 1.92</td></tr><tr><td>Weighted average shares outstanding:</td><td></td><td></td><td></td></tr><tr><td>Basic</td><td>165,823,803</td><td>168,031,412</td><td>165,890,258</td></tr><tr><td>Diluted</td><td>169,132,423</td><td>172,276,360</td><td>171,709,518</td></tr></table>

The accompanying notes are an integral part of these consolidated financial statements.



## VERISK ANALYTICS, INC.

## CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For The Years Ended December 31, 2014, 2013 and 2012

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td colspan="3">(In thousands)</td></tr><tr><td>Net income</td><td>$400,042</td><td>$348,380</td><td>$329,142</td></tr><tr><td>Other comprehensive income (loss), net of tax:</td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>(1,286)</td><td>(840)</td><td>15</td></tr><tr><td>Unrealized holding loss on available-for-sale securities</td><td>(35)</td><td>(147)</td><td>(197)</td></tr><tr><td>Pension and postretirement adjustment</td><td>(35,705)</td><td>46,659</td><td>(10,691)</td></tr><tr><td>Total other comprehensive (loss) income</td><td>(37,026)</td><td>45,672</td><td>(10,873)</td></tr><tr><td>Comprehensive income</td><td>$363,016</td><td>$394,052</td><td>$318,269</td></tr></table>



## VERISK ANALYTICS, INC.

## CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 2014, 2013 and 2012

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td></td><td colspan="3">(In thousands)</td></tr><tr><td>Cash flows from operating activities:</td><td></td><td></td><td></td></tr><tr><td>Net income</td><td>$ 400,042</td><td>$ 348,380</td><td>$ 329,142</td></tr><tr><td>Adjustments to reconcile net income to net cash provided by operating activities:</td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>86,501</td><td>70,279</td><td>50,624</td></tr><tr><td>Amortization of intangible assets</td><td>56,982</td><td>64,299</td><td>53,575</td></tr><tr><td>Amortization of debt issuance costs and original issue discount</td><td>2,638</td><td>2,713</td><td>2,337</td></tr><tr><td>Allowance for doubtful accounts</td><td>1,814</td><td>2,482</td><td>1,065</td></tr><tr><td>KSOP compensation expense</td><td>15,351</td><td>14,930</td><td>13,111</td></tr><tr><td>Stock based compensation</td><td>20,253</td><td>21,087</td><td>24,696</td></tr><tr><td>Gain on sale of subsidiary</td><td>(65,410)</td><td>—</td><td>—</td></tr><tr><td>Realized (gain) loss on securities, net</td><td>(257)</td><td>92</td><td>332</td></tr><tr><td>Deferred income taxes</td><td>24,491</td><td>44,140</td><td>63,261</td></tr><tr><td>Loss on disposal of fixed assets</td><td>1,048</td><td>628</td><td>597</td></tr><tr><td>Excess tax benefits from exercised stock options</td><td>(22,566)</td><td>(109,946)</td><td>(60,672)</td></tr><tr><td>Other operating activities, net</td><td>—</td><td>448</td><td>265</td></tr><tr><td>Changes in assets and liabilities, net of effects from acquisitions:</td><td></td><td></td><td></td></tr><tr><td>Accounts receivable</td><td>(54,515)</td><td>2,106</td><td>(6,425)</td></tr><tr><td>Prepaid expenses and other assets</td><td>(9,625)</td><td>(2,386)</td><td>550</td></tr><tr><td>Income taxes</td><td>13,760</td><td>39,661</td><td>83,711</td></tr><tr><td>Accounts payable and accrued liabilities</td><td>12,675</td><td>34,022</td><td>11,256</td></tr><tr><td>Fees received in advance</td><td>22,114</td><td>26,970</td><td>20,493</td></tr><tr><td>Pension and postretirement benefits</td><td>(14,802)</td><td>(11,392)</td><td>(105,829)</td></tr><tr><td>Other liabilities</td><td>(1,042)</td><td>(41,593)</td><td>(13,860)</td></tr><tr><td>Net cash provided by operating activities</td><td>489,452</td><td>506,920</td><td>468,229</td></tr><tr><td>Cash flows from investing activities:</td><td></td><td></td><td></td></tr><tr><td>Acquisitions, net of cash acquired of $304, $0 and $36,113, respectively</td><td>(35,192)</td><td>(983)</td><td>(769,513)</td></tr><tr><td>Purchase of non-controlling interest in non-public companies</td><td>(5,000)</td><td>—</td><td>(2,250)</td></tr><tr><td>Proceeds from sale of subsidiary</td><td>151,170</td><td>—</td><td>—</td></tr><tr><td>Earnout payments</td><td>—</td><td>—</td><td>(250)</td></tr><tr><td>Escrow funding associated with acquisitions</td><td>—</td><td>—</td><td>(38,800)</td></tr><tr><td>Proceeds from release of acquisition related escrows</td><td>—</td><td>280</td><td>1,455</td></tr><tr><td>Capital expenditures</td><td>(146,818)</td><td>(145,976)</td><td>(74,373)</td></tr><tr><td>Purchases of available-for-sale securities</td><td>(203)</td><td>(5,870)</td><td>(1,784)</td></tr><tr><td>Proceeds from sales and maturities of available-for-sale securities</td><td>513</td><td>7,484</td><td>1,932</td></tr><tr><td>Other investing activities, net</td><td>—</td><td>(561)</td><td>—</td></tr><tr><td>Net cash used in investing activities</td><td>(35,530)</td><td>(145,626)</td><td>(883,583)</td></tr></table>



## VERISK ANALYTICS, INC.

## CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For The Years Ended December 31, 2014, 2013 and 2012

<table><tr><td rowspan="2"></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td colspan="3">(In thousands)</td></tr><tr><td>Cash flows from financing activities:</td><td></td><td></td><td></td></tr><tr><td>Proceeds from issuance of long-term debt, net of original issue discount</td><td>—</td><td>—</td><td>347,224</td></tr><tr><td>Repayments of current portion of long-term debt</td><td>—</td><td>(180,000)</td><td>—</td></tr><tr><td>Repayments of short-term debt refinanced on a long-term basis</td><td>—</td><td>—</td><td>(347,224)</td></tr><tr><td>Proceeds (repayments) from short-term debt, net</td><td>160,000</td><td>(10,000)</td><td>357,224</td></tr><tr><td>Payment of debt issuance costs</td><td>(465)</td><td>(605)</td><td>(3,905)</td></tr><tr><td>Repurchases of Class A common stock</td><td>(778,484)</td><td>(277,411)</td><td>(162,275)</td></tr><tr><td>Net share settlement of taxes from restricted stock awards</td><td>(1,625)</td><td>—</td><td>—</td></tr><tr><td>Excess tax benefits from exercised stock options</td><td>22,566</td><td>109,946</td><td>60,672</td></tr><tr><td>Proceeds from stock options exercised</td><td>24,648</td><td>80,368</td><td>68,388</td></tr><tr><td>Other financing activities, net</td><td>(5,718)</td><td>(6,770)</td><td>(6,549)</td></tr><tr><td>Net cash (used in) provided by financing activities</td><td>(579,078)</td><td>(284,472)</td><td>313,555</td></tr><tr><td>Effect of exchange rate changes</td><td>(1,286)</td><td>(840)</td><td>15</td></tr><tr><td>(Decrease) increase in cash and cash equivalents</td><td>(126,442)</td><td>75,982</td><td>(101,784)</td></tr><tr><td>Cash and cash equivalents, beginning of period</td><td>165,801</td><td>89,819</td><td>191,603</td></tr><tr><td>Cash and cash equivalents, end of period</td><td>$ 39,359</td><td>$ 165,801</td><td>$ 89,819</td></tr><tr><td>Supplemental disclosures:</td><td></td><td></td><td></td></tr><tr><td>Taxes paid</td><td>$ 205,498</td><td>$ 126,846</td><td>$ 47,516</td></tr><tr><td>Interest paid</td><td>$ 67,231</td><td>$ 75,084</td><td>$ 60,977</td></tr><tr><td>Non-cash investing and financing activities:</td><td></td><td></td><td></td></tr><tr><td>Repurchases of Class A common stock included in accounts payable and accrued liabilities</td><td>$ —</td><td>$ 3,038</td><td>$ 1,511</td></tr><tr><td>Deferred tax liability established on the date of acquisitions</td><td>$ 2,654</td><td>$ 1,187</td><td>$ 80,979</td></tr><tr><td>Tenant improvement allowance</td><td>$ 9,134</td><td>$ —</td><td>$ —</td></tr><tr><td>Capital lease obligations</td><td>$ 6,044</td><td>$ 10,512</td><td>$ 3,869</td></tr><tr><td>Capital expenditures included in accounts payable and accrued liabilities</td><td>$ 76</td><td>$ 5,960</td><td>$ 4,946</td></tr><tr><td>Increase in goodwill due to acquisition related escrow distributions</td><td>$ —</td><td>$ —</td><td>$ 5,934</td></tr></table>

The accompanying notes are an integral part of these consolidated financial statements.



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except for share and per share data, unless otherwise stated)

## 1. Organization:

Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) enable risk-bearing businesses to better understand and manage their risks. The Company provides its customers proprietary data that, combined with analytic methods, create embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) insurance risks in the United States of America (“U.S.”). The Company offers solutions for detecting fraud in the U.S. P&C insurance, financial and healthcare industries and sophisticated methods to predict and quantify loss in diverse contexts ranging from natural catastrophes to supply chain to health insurance. The Company provides solutions, including data, statistical models or tailored analytics, all designed to allow clients to make more logical decisions.

Verisk was established to serve as the parent holding company of Insurance Services Office, Inc. (“ISO”) upon completion of the initial public offering (“IPO”), which occurred on October 9, 2009. ISO was formed in 1971 as an advisory and rating organization for the P&C insurance industry to provide statistical and actuarial services, to develop insurance programs and to assist insurance companies in meeting state regulatory requirements. For over the past decade, the Company broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. Verisk trades under the ticker symbol “VRSK” on the NASDAQ Global Select Market.

## 2. Basis of Presentation and Summary of Significant Accounting Policies:

The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill, the realization of deferred tax assets, acquisition related liabilities, fair value of stock based compensation, assets and liabilities for pension and postretirement benefits, and the estimate for the allowance for doubtful accounts. Actual results may ultimately differ from those estimates. Certain reclassifications have been made related to realized gain (loss) on available-for-sale securities, net and investment income within the consolidated financial statements and in the notes to confirm to the respective 2014 presentation. As of December 31, 2013, the Company’s mortgage services business qualified as assets held-for-sale. Accordingly, the respective assets and liabilities were classified as held-for-sale in the consolidated balance sheet at December 31, 2013. The mortgage services business was sold on March 11, 2014. In addition, the results of operations for the Company’s mortgage services business are reported as a discontinued operation for the years presented herein (See Note 10).

Significant accounting policies include the following:

## (a) Intercompany Accounts and Transactions

The consolidated financial statements include the accounts of Verisk. All intercompany accounts and transactions have been eliminated.

## (b) Revenue Recognition

The following describes the Company’s primary types of revenues and the applicable revenue recognition policies. The Company’s revenues are primarily derived from sales of services and revenue is recognized as services are performed and information is delivered to customers. Revenue is recognized



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, fees and/or price is fixed or determinable, and collectability is reasonably assured. Revenue is recognized net of applicable sales tax withholdings.

## Industry-Standard Insurance Programs

Industry-standard insurance programs, statistical agent and data services and actuarial services are sold to participating insurance company customers under annual agreements covering a calendar year where the price is determined at the inception of the agreement. In accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition, the Company recognizes revenue ratably over the term of these annual agreements, as services are performed and continuous access to information is provided over the entire term of the agreements.

## Property-Specific Rating and Underwriting Information

The Company provides property-specific rating information through reports issued for specific commercial properties, for which revenue is recognized when the report is delivered to the customer, provided that all other revenue recognition criteria are met.

In addition, the Company provides hosting or software solutions that provide continuous access to information about the properties being insured and underwriting information in the form of standard policy forms to be used by customers. As the customer has a contractual right to take possession of the software without significant penalty, revenues from these arrangements are recognized ratably over the contract period from the time when the customer had access to the solution in accordance with ASC 985-605, Software Revenue Recognition (“ASC 985-605”). The Company recognizes software license revenue when the arrangement does not require significant production, customization or modification of the software and the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred, fees are fixed or determinable, and collections are probable. These software arrangements include post-contract customer support (“PCS”). The Company recognizes software license revenue ratably over the duration of the annual license term as vendor specific objective evidence (“VSOE”) of PCS, the only remaining undelivered element, cannot be established in accordance with ASC 985-605. The PCS associated with these arrangements is coterminous with the duration of the license term.

## Insurance

Insurance services primarily consist of term-based software licenses. These software arrangements include PCS, which includes unspecified upgrades on a when-and-if available basis. The Company recognizes software license revenue ratably over the duration of the annual license term as VSOE of PCS, the only remaining undelivered element, cannot be established in accordance with ASC 985-605. The PCS associated with these arrangements is coterminous with the duration of the license term. In certain instances, the customers are billed for access on a monthly basis for the term-based software licenses and the Company recognizes revenue accordingly.

There are also services within insurance, which are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met.

## Financial Services

Financial services include various types of services to customers. The Company primarily recognizes revenue ratably for these services over the term of the agreements, as services are performed and continuous service is provided over the entire term of the agreements. In addition, there are certain



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

services which are comprised of transaction-based fees; in these instances, revenue is recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met.

## Healthcare

The Company provides software hosting arrangements to customers whereby the customer does not have the right to take possession of the software. As these arrangements include PCS throughout the hosting term, revenues from these multiple element arrangements are recognized in accordance with ASC 605-25, Revenue Recognition — Multiple Element Arrangements (“ASC 605-25”). The Company recognizes revenue ratably over the duration of the license term, which ranges from one to five years, since the contractual elements do not have stand alone value.

There are also services within healthcare, which are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met.

## Specialized Markets

Specialized markets consist of term-based software licenses. These software arrangements include PCS, which includes unspecified upgrades on a when-and-if available basis. The Company recognizes software license revenue ratably over the duration of the annual license term as VSOE of PCS, the only remaining undelivered element, cannot be established in accordance with ASC 985-605. The PCS associated with these arrangements is coterminous with the duration of the license term. In certain instances, the customers are billed for access on a monthly basis for the term-based software licenses and the Company recognizes revenue accordingly. In addition, specialized markets are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met.

The Company services long-term contract arrangements with certain customers. For these arrangements, revenue is recognized in accordance with ASC 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts (“ASC 605-35”), using the percentage-of-completion method, which requires the use of estimates. In such instances, management is required to estimate the input measures, based on hours incurred to date compared to total estimated hours of the project, with consideration also given to output measures, such as contract milestones, when applicable. Adjustments to estimates are made in the period in which the facts requiring such revisions become known. Accordingly, recognized revenues and profits are subject to revisions as the contract progresses to completion. The Company considers the contract substantially complete when there is compliance with all performance specifications and there are no remaining costs or potential risk.

## (c) Fees Received in Advance

The Company invoices its customers in annual, quarterly, monthly or milestone installments. Amounts billed and collected in advance of contract terms are recorded as “Fees received in advance” in the accompanying consolidated balance sheets and are recognized as the services are performed and the applicable revenue recognition criteria are met.

## (d) Fixed Assets and Finite-lived Intangible Assets

Property and equipment, internal-use software and finite-lived intangibles are stated at cost less accumulated depreciation and amortization, which are computed on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term.



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s internal software development costs primarily relate to internal-use software. Such costs are capitalized in the application development stage in accordance with ASC 350-40, Internal-use Software. The Company also capitalizes software development costs upon the establishment of technological feasibility for a product in accordance with ASC 985-20, Software to be Sold, Leased, or Marketed (“ASC 985-20”). Software development costs are amortized on a straight-line basis over a three-year period, which management believes represents the useful life of these capitalized costs.

In accordance with ASC 360, Property, Plant & Equipment, whenever events or changes in circumstances indicate that the carrying amount of long-lived assets and finite-lived intangible assets may not be recoverable, the Company reviews its long-lived assets and finite-lived intangible assets for impairment by first comparing the carrying value of the assets to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. If the carrying value exceeds the sum of the assets’ undiscounted cash flows, the Company estimates and recognizes an impairment loss by taking the difference between the carrying value and fair value of the assets.

## (e) Assets Held-for-Sale

The Company classifies its long-lived assets as held-for-sale when management commits to a plan to sell the assets, the assets are ready for immediate sale in their present condition, an active program to locate buyers has been initiated, the sale of the assets is probable and expected to be completed within one year, the assets are marketed at reasonable prices in relation to their fair value and it is unlikely that significant changes will be made to the plan to sell the assets. The Company measures the value of long-lived assets held for sale at the lower of the carrying amount or fair value, less cost to sell.

## (f) Capital and Operating Leases

The Company leases various property, plant and equipment. Leased property is accounted for under ASC 840, Leases (“ASC 840”). Accordingly, leased property that meets certain criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of assets accounted for as capital leases is computed utilizing the straight-line method over the shorter of the remaining lease term or the estimated useful life (principally 3 to 4 years for computer equipment and automobiles).

All other leases are accounted for as operating leases. Rent expense for operating leases, which may have rent escalation provisions or rent holidays, is recorded on a straight-line basis over the non-cancelable lease period in accordance with ASC 840. The initial lease term generally includes the build-out period, where no rent payments are typically due under the terms of the lease. The difference between rent expensed and rent paid is recorded as deferred rent. Construction allowances received from landlords are recorded as a deferred rent credit and amortized to rent expense over the term of the lease.

## (g) Investments

The Company’s investments at December 31, 2014 and 2013 included registered investment companies and equity investments in non-public companies. The Company accounts for short-term investments in accordance with ASC 320, Investments-Debt and Equity Securities (“ASC 320”).

There were no investments classified as trading securities at December 31, 2014 or 2013. All investments with readily determinable market values are classified as available-for-sale. While these investments are not held with the specific intention to sell them, they may be sold to support the Company’s investment strategies. All available-for-sale investments are carried at fair value. The cost of



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

all available-for-sale investments sold is based on the specific identification method, with the exception of mutual fund-based investments, which is based on the weighted average cost method. Dividend income is accrued on the ex-dividend date.

The Company performs reviews of its investment portfolio when individual holdings have experienced a decline in fair value below their respective cost. The Company considers a number of factors in the evaluation of whether a decline in value is other-than-temporary including: (a) the financial condition and near term prospects of the issuer; (b) the Company’s ability and intent to retain the investment for a period of time sufficient to allow for an anticipated recovery in value; and (c) the period and degree to which the market value has been below cost. Where the decline is deemed to be other-than-temporary, a charge is recorded to “Investment income and others” in the accompanying consolidated statements of operations, and a new cost basis is established for the investment.

The Company’s equity investments in non-public companies are included in “Other assets” in the accompanying consolidated balance sheets. Those securities are carried at cost, as the Company owns less than 20% of the stock and does not otherwise have the ability to exercise significant influence. These securities are written down to their estimated realizable value when management considers there is an other-than-temporary decline in value based on financial information received and the business prospects of the entity.

## (h) Fair Value of Financial Instruments

The Company follows the provisions of ASC 820-10, Fair Value Measurements (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value under U.S. GAAP and expands fair value measurement disclosures. The Company follows the provisions of ASC 820-10 for its financial assets and liabilities recognized or disclosed at fair value on a recurring basis. The Company follows the provisions of ASC 820-10 for its non-financial assets and liabilities recognized or disclosed at fair value.

## (i) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable is generally recorded at the invoiced amount. The allowance for doubtful accounts is estimated based on an analysis of the aging of the accounts receivable, historical write-offs, customer payment patterns, individual customer creditworthiness, current economic trends, and/or establishment of specific reserves for customers in adverse financial condition. The Company assesses the adequacy of the allowance for doubtful accounts on a quarterly basis.

## (j) Foreign Currency

The Company has determined local currencies are the functional currencies of the foreign operations. The assets and liabilities of foreign subsidiaries are translated at the period-end rate of exchange and statement of operations items are translated at the average rates prevailing during the year. The resulting translation adjustment is recorded as a component of “Accumulated other comprehensive losses” in the accompanying consolidated statements of changes in stockholders’ equity (deficit).

## (k) Stock Based Compensation

The Company follows ASC 718, Stock Compensation (“ASC 718”). Under ASC 718, stock based compensation cost is measured at the grant date, based on the fair value of the awards granted, and is recognized as expense over the requisite service period.



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other equity awards, including restricted stock, are valued at the closing price of the Company’s Class A common stock on the grant date. Restricted stock generally has a service vesting period of four years and the Company recognizes the expense ratably over this service vesting period.

The Company estimates expected forfeitures of equity awards at the date of grant and recognizes compensation expense only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized, as well as the timing of expense recognized over the requisite service period.

## (1) Research and Development Costs

Research and development costs, which are primarily related to the personnel and related overhead costs incurred in developing new services for customers, are expensed as incurred. Such costs were $25,508, $21,426 and $18,386 for the years ended December 31, 2014, 2013 and 2012, respectively, and were included in the accompanying consolidated statements of operations.

## (m) Advertising Costs

Advertising costs, which are primarily associated with promoting the Company’s brand, names and solutions provided, are expensed as incurred. Such costs were $6,360, $8,457 and $6,166 for the years ended December 31, 2014, 2013 and 2012, respectively.

## (n) Income Taxes

The Company accounts for income taxes under the asset and liability method under ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Deferred tax assets are recorded to the extent these assets are more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Valuation allowances are recognized to reduce deferred tax assets if it is determined to be more likely than not that all or some of the potential deferred tax assets will not be realized.

The Company follows ASC 740-10, Income Taxes (“ASC 740-10”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized based on the technical merits when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. Income tax positions must meet a more likely than not recognition threshold at the effective date to be recognized upon the adoption of ASC 740-10 and in subsequent periods. This standard also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within “Other liabilities” on the accompanying consolidated balance sheets.

## (o) Earnings Per Share

Basic and diluted earnings per share (“EPS”) are determined in accordance with ASC 260, Earnings per Share, which specifies the computation, presentation and disclosure requirements for EPS. Basic EPS excludes all dilutive common stock equivalents. It is based upon the weighted average number of common shares outstanding during the period. Diluted EPS, as calculated using the treasury stock method, reflects the potential dilution that would occur if the Company’s dilutive outstanding stock options and stock awards were issued.

## (p) Pension and Postretirement Benefits

The Company accounts for its pension and postretirement benefits under ASC 715, Compensation — Retirement Benefits (“ASC 715”). ASC 715 requires the recognition of the funded status of a benefit plan in the balance sheet, the recognition in other comprehensive income (loss) of gains or losses and prior service costs or credits arising during the period, but which are not included as components of periodic benefit cost, and the measurement of defined benefit plan assets and obligations as of the balance sheet date. The Company utilizes a valuation date of December 31.

## (q) Product Warranty Obligations

The Company provides warranty coverage for certain of its solutions. The Company recognizes a product warranty obligation when claims are probable and can be reasonably estimated. As of December 31, 2014 and 2013, product warranty obligations were not material.

In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of confidentiality, infringement of intellectual property or gross negligence. Such indemnifications are primarily granted under licensing of computer software. Most agreements contain provisions to limit the maximum potential amount of future payments that the Company could be required to make under these indemnifications; however, the Company is not able to develop an estimate of the maximum potential amount of future payments to be made under these indemnifications as the triggering events are not subject to predictability.

## (r) Loss Contingencies

The Company accrues for costs relating to litigation, claims and other contingent matters when such liabilities become probable and reasonably estimable. Such estimates are based on management’s judgment. Actual amounts paid may differ from amounts estimated, and such differences will be charged to operations in the period in which the final determination of the liability is made.

## (s) Goodwill

Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have finite lives are amortized over their useful lives. Goodwill and intangible assets with indefinite lives are subject to impairment testing



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

annually as of June 30 or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The Company completed the required annual impairment test as of June 30, 2014, which resulted in no impairment of goodwill in 2014. This test compares the carrying value of each reporting unit to its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets, including goodwill assigned to that reporting unit, goodwill is not impaired. If the carrying value of the reporting unit's net assets, including goodwill, exceeds the fair value of the reporting unit, then the Company will determine the implied fair value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then an impairment loss is recorded for the difference between the carrying amount and the implied fair value of the goodwill.

## (t) Recent Accounting Pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU No. 2013-05”). Under ASU No. 2013-05, an entity is required to release any related cumulative translation adjustment into net income upon cessation to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. ASU 2013-05 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. ASU 2013-05 was adopted by the Company on January 1, 2014. The adoption of ASU 2013-05 did not have a material impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU No. 2013-11”). Under ASU No. 2013-11, an unrecognized tax benefit should be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with the exception that these unrecognized tax benefits are not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position or the tax law. An additional exception applies when the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability and should not be combined with deferred tax assets. ASU No. 2013-11 is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The Company adopted the standard on January 1, 2014. The adoption of ASU No. 2013-11 did not have a material impact on the Company’s consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU No. 2014-08”). Under ASU No. 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this ASU further require additional disclosures on discontinued operations in the financial statements. ASU No. 2014-08 is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held-for-sale) that have not been reported in the financial statements previously issued. The Company has elected not to early adopt and will assess the impact of this standard when applicable circumstances are required to be reported in discontinued operations under the existing guidance and this ASU.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU No. 2014-09”). The objective of ASU No. 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

principle of ASU No. 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the contract's performance obligations; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU No. 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 for public companies. Early adoption is not permitted. Entities have the option of using either a full retrospective or modified approach to adopt ASU No. 2014-09. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on its financial statements nor decided upon the method of adoption.

In January 2015, the FASB issued ASU No. 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU No. 2015-01”). As it is extremely rare in current practice for an event or transaction to be presented as an extraordinary item, this ASU eliminates from the U.S. GAAP the concept of extraordinary items. ASU No. 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company has elected not to early adopt and will assess the impact of this standard when applicable circumstances are warranted.

## 3. Concentration of Credit Risk:

Financial instruments that potentially expose the Company to credit risk consist primarily of cash and cash equivalents, available for sale securities and accounts receivable, which are generally not collateralized. The Company maintains its cash and cash equivalents in higher credit quality financial institutions in order to limit the amount of credit exposure. The total domestic cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) to a maximum amount of $250 per bank at December 31, 2014 and 2013. At December 31, 2014 and 2013, the Company had cash balances on deposit that exceeded the balance insured by the FDIC limit by approximately $16,316 and $138,028 with six banks. At December 31, 2014 and 2013, the Company also had cash on deposit with foreign banks of approximately $21,886 and $26,228, respectively.

The Company considers the concentration of credit risk associated with its trade accounts receivable to be commercially reasonable and believes that such concentration does not result in the significant risk of near-term severe adverse impacts. The Company’s top fifty customers represent approximately 41% of revenues for 2014, 38% for 2013 and 38% for 2012 with no individual customer accounting for more than 5% of revenues during the year ended December 31, 2014, and 3% of revenue during the years ended December 31, 2013 and 2012. No individual customer comprised more than 7% of accounts receivable at December 31, 2014 and 5% at December 31, 2013.

## 4. Cash and Cash Equivalents:

Cash and cash equivalents consist of cash in banks, commercial paper, money-market funds, and other liquid instruments with original maturities of 90 days or less at the time of purchase.



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 5. Accounts Receivable:

Accounts receivable consisted of the following at December 31:

<table><tr><td></td><td>2014</td><td>2013</td></tr><tr><td>Billed receivables</td><td>$203,339</td><td>$143,059</td></tr><tr><td>Unbilled receivables</td><td>23,324</td><td>19,903</td></tr><tr><td>Total receivables</td><td>226,663</td><td>162,962</td></tr><tr><td>Less allowance for doubtful accounts</td><td>(5,995)</td><td>(4,415)</td></tr><tr><td>Accounts receivable, net</td><td>$220,668</td><td>$158,547</td></tr></table>

## 6. Investments:

Available-for-sale securities consisted of the following:

<table><tr><td></td><td>Adjusted Cost</td><td>Gross Unrealized Loss</td><td>Fair Value</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td></tr><tr><td>Registered investment companies</td><td>$4,045</td><td>$(244)</td><td>$3,801</td></tr><tr><td>December 31, 2013</td><td></td><td></td><td></td></tr><tr><td>Registered investment companies</td><td>$4,098</td><td>$(187)</td><td>$3,911</td></tr></table>

In addition to the available-for-sale securities above, the Company has equity investments in non-public companies in which the Company acquired non-controlling interests and for which no readily determinable market value exists. These securities were accounted for under the cost method in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock. At December 31, 2014 and 2013, the carrying value of such securities was $8,487 and $3,602, respectively, and has been included in “Other assets” in the accompanying consolidated balance sheets.

Realized gain (loss) on securities, net, including write downs related to other-than-temporary impairments of available-for-sale securities and other assets, has been included in “Investment income and others” in the accompanying consolidated statements of operations. Realized gain (loss) on securities, net, was as follows for the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Gross realized gain on sale of registered investment securities</td><td>$285</td><td>$ 966</td><td>$ 420</td></tr><tr><td>Other-than-temporary impairment of registered investment securities</td><td>(28)</td><td>(84)</td><td>(74)</td></tr><tr><td>Other-than-temporary impairment of non-controlling interest in non-public companies</td><td>—</td><td>(974)</td><td>(678)</td></tr><tr><td>Realized gain (loss) on securities, net</td><td>$257</td><td>$ (92)</td><td>$(332)</td></tr></table>



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 7. Fair Value Measurements:

Certain assets and liabilities of the Company are reported at fair value in the accompanying consolidated balance sheets. Such assets and liabilities include amounts for both financial and non-financial instruments. To increase consistency and comparability of assets and liabilities recorded at fair value, ASC 820-10 establishes a three-level fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. ASC 820-10 requires disclosures detailing the extent to which companies' measure assets and liabilities at fair value, the methods and assumptions used to measure fair value and the effect of fair value measurements on earnings. In accordance with ASC 820-10, the Company applied the following fair value hierarchy:

Level 1 — Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments.

Level 2 — Assets and liabilities valued based on observable market data for similar instruments.

Level 3 — Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a market participant would require.

The following table provides information for such assets and liabilities as of December 31, 2014 and 2013. The fair values of cash and cash equivalents (other than money-market funds which are recorded on a reported net asset value basis disclosed below), accounts receivable, accounts payable and accrued liabilities, fees received in advance, acquisition related liabilities prior to the adoption of ASC 805, Business Combinations (“ASC 805”), short-term debt, and short-term debt expected to be refinanced approximate their carrying amounts because of the short-term nature of these instruments.

The following table summarizes fair value measurements by level for cash equivalents and registered investment companies that were measured at fair value on a recurring basis:

<table><tr><td></td><td>Total</td><td>Quoted Prices in Active Markets for Identical Assets (Level 1)</td><td>Significant Other Observable Inputs (Level 2)</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td></tr><tr><td>Cash equivalents — money-market funds</td><td>$3,707</td><td>$ —</td><td>$3,707</td></tr><tr><td>Registered investment companies(1)</td><td>$3,801</td><td>$3,801</td><td>$ —</td></tr><tr><td>December 31, 2013</td><td></td><td></td><td></td></tr><tr><td>Cash equivalents — money-market funds</td><td>$ 889</td><td>$ —</td><td>$ 889</td></tr><tr><td>Registered investment companies(1)</td><td>$3,911</td><td>$3,911</td><td>$ —</td></tr></table>

(1) Registered investment companies are classified as available-for-sale securities and are valued using quoted prices in active markets multiplied by the number of shares owned.



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has not elected to carry its long-term debt at fair value. The carrying value of the long-term debt represents amortized cost. The Company assesses the fair value of its long-term debt based on quoted market prices if available, and if not, an estimate of interest rates available to the Company for debt with similar features, the Company’s current credit rating and spreads applicable to the Company. The fair value of the long-term debt would be a Level 2 liability if the long-term debt was measured at fair value on the consolidated balance sheets. The following table summarizes the carrying value and estimated fair value of the long-term debt as of December 31, 2014 and 2013 respectively:

<table><tr><td rowspan="2"></td><td colspan="2">2014</td><td colspan="2">2013</td></tr><tr><td>Carrying Value</td><td>Estimated Fair Value</td><td>Carrying Value</td><td>Estimated Fair Value</td></tr><tr><td>Financial instrument not carried at fair value:</td><td></td><td></td><td></td><td></td></tr><tr><td>Long-term debt excluding capitalized leases</td><td>$1,265,848</td><td>$1,371,213</td><td>$1,265,129</td><td>$1,335,844</td></tr></table>

## 8. Fixed Assets

The following is a summary of fixed assets:

<table><tr><td></td><td>Useful Life</td><td>Cost</td><td>Accumulated Depreciation and Amortization</td><td>Net</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td><td></td></tr><tr><td>Furniture and office equipment</td><td>3-10 years</td><td>$199,199</td><td>$(131,055)</td><td>$ 68,144</td></tr><tr><td>Leasehold improvements</td><td>Lease term</td><td>65,212</td><td>(27,884)</td><td>37,328</td></tr><tr><td>Purchased software</td><td>3 years</td><td>116,089</td><td>(80,794)</td><td>35,295</td></tr><tr><td>Software development costs</td><td>3 years</td><td>266,559</td><td>(111,766)</td><td>154,793</td></tr><tr><td>Leased equipment</td><td>3-4 years</td><td>32,776</td><td>(26,063)</td><td>6,713</td></tr><tr><td>Total fixed assets</td><td></td><td>$679,835</td><td>$(377,562)</td><td>$302,273</td></tr><tr><td>December 31, 2013</td><td></td><td></td><td></td><td></td></tr><tr><td>Furniture and office equipment</td><td>3-10 years</td><td>$179,564</td><td>$(105,262)</td><td>$ 74,302</td></tr><tr><td>Leasehold improvements</td><td>Lease term</td><td>38,796</td><td>(22,022)</td><td>16,774</td></tr><tr><td>Purchased software</td><td>3 years</td><td>89,064</td><td>(65,753)</td><td>23,311</td></tr><tr><td>Software development costs</td><td>3 years</td><td>201,192</td><td>(91,656)</td><td>109,536</td></tr><tr><td>Leased equipment</td><td>3-4 years</td><td>33,956</td><td>(24,506)</td><td>9,450</td></tr><tr><td>Total fixed assets</td><td></td><td>$542,572</td><td>$(309,199)</td><td>$233,373</td></tr></table>

Depreciation and amortization of fixed assets for the years ended December 31, 2014, 2013 and 2012 were $85,506, $66,190 and $46,637, of which $19,000, $12,806 and $8,935 related to amortization of internal-use software development costs, respectively. Amortization expense related to development of software for sale in accordance with ASC 985-20 was $4,497 and $3,623 for the years ended December 31, 2014 and 2013, respectively. There was no amortization expense related to development of software for sale during the year ended December 31, 2012 as these projects were in process. The Company had unamortized software development costs that had been capitalized in accordance with ASC 985-20 of $34,749 and $29,149 as of December 31, 2014 and 2013, respectively. Leased equipment includes amounts held under capital leases for automobiles, computer software and computer equipment.



# VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 9. Acquisitions

2014 Acquisition

On December 8, 2014, the Company acquired 100% of the stock of Maplecroft.Net Limited (“Maplecroft”), a provider of global risk analytics and advisory services, for a net cash purchase price of $30,141, which includes $2,725 of indemnity escrows held by the seller. Using a proprietary data aggregation and analytical approach, Maplecroft enables its customers to assess, monitor, and forecast a growing range of worldwide risks, including geopolitical and societal risks. Within the Company’s Decision Analytics segment, this acquisition establishes the Company’s position as a provider of value chain optimization tools, providing comprehensive quantitative risk analytics and platforms by which customers can visualize, quantify, mitigate, and manage risk. Maplecroft is headquartered in Bath, England.

The preliminary purchase price allocation of the acquisition resulted in the following:

<table><tr><td></td><td>Maplecroft</td></tr><tr><td>Accounts receivable</td><td>$ 1,833</td></tr><tr><td>Current assets</td><td>543</td></tr><tr><td>Fixed assets</td><td>98</td></tr><tr><td>Intangible assets</td><td>13,270</td></tr><tr><td>Goodwill</td><td>21,369</td></tr><tr><td>Total assets acquired</td><td>37,113</td></tr><tr><td>Current liabilities</td><td>4,318</td></tr><tr><td>Deferred income taxes, net</td><td>2,654</td></tr><tr><td>Total liabilities assumed</td><td>6,972</td></tr><tr><td>Net assets acquired</td><td>$30,141</td></tr></table>

The preliminary amounts assigned to intangible assets by type for the acquisition are summarized in the table below:

<table><tr><td></td><td>Weighted Average Useful Life</td><td>Total</td></tr><tr><td>Technology-based</td><td>10 years</td><td>$ 3,202</td></tr><tr><td>Marketing-related</td><td>10 years</td><td>458</td></tr><tr><td>Customer-related</td><td>10 years</td><td>9,610</td></tr><tr><td>Total intangible assets</td><td>10 years</td><td>$13,270</td></tr></table>

Due to the timing of the acquisition, the allocation of the purchase price (noted within the tables above) is all subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The revisions may have an impact on the consolidated financial statements. The allocation of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date.

The goodwill associated with the stock purchase of Maplecroft is not deductible for tax purposes. For the year ended December 31, 2014, the Company incurred transaction costs related to this acquisition of $349 included within “Selling, general and administrative” expenses in the accompanying consolidated statements of operations.



# VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 2012 Acquisitions

On December 20, 2012, the Company acquired the net assets of Insurance Risk Management Solutions (“IRMS”). IRMS provided integrated property risk assessment technology underlying one of the Company’s geographic information system (“GIS”) underwriting solutions. At the end of 2012, the long-term contract with IRMS was expiring and precipitated a change in the business relationship. Instead of continuing forward with a new service agreement, the Company acquired IRMS as this will enable the Company to better manage, enhance and continue to use the solutions as part of its Risk Assessment segment. The Company paid a net cash purchase price of $26,422 and funded $1,000 of indemnity escrows. The preliminary purchase price allocation of the acquisition is presented as “Others” in the table below.

On August 31, 2012, the Company acquired Argus Information & Advisory Services, LLC (“Argus”), a provider of information, competitive benchmarking, scoring solutions, analytics, and customized services to financial institutions and regulators in North America, Latin America, and Europe, for a net cash purchase price of approximately $404,995 and funded $20,000 of indemnity escrows. Argus leverages its comprehensive payment data sets and provides proprietary solutions to a client base that includes credit and debit card issuers, retail banks and other consumer financial services providers, payment processors, insurance companies, and other industry stakeholders. Within the Company’s Decision Analytics segment, this acquisition enhances the Company’s position as a provider of data, analytics, and decision-support solutions to financial institutions globally.

On July 2, 2012, the Company acquired the net assets of Aspect Loss Prevention, LLC (“ALP”), a provider of loss prevention and analytic solutions to the retail, entertainment, and food industries, for a net cash purchase price of approximately $6,917 and funded $800 of indemnity escrows. Within the Company’s Decision Analytics segment, ALP further advances the Company’s position as a provider of data, crime analytics, and decision-support solutions. The purchase price allocation of the acquisition is presented as “Others” in the table below.

On March 30, 2012, the Company acquired 100% of the stock of MediConnect Global, Inc. (“MediConnect”), a service provider of medical record retrieval, digitization, coding, extraction, and analysis, for a net cash purchase price of approximately $331,405 and funded $17,000 of indemnity escrows. Within the Company’s Decision Analytics segment, MediConnect further supports the Company’s objective as the leading provider of data, analytics, and decision-support solutions to the healthcare and property casualty industry.

The preliminary purchase price allocations of the acquisitions resulted in the following:

<table><tr><td></td><td>MediConnect</td><td>Argus</td><td>Others</td><td>Total</td></tr><tr><td>Accounts receivable</td><td>$ 7,077</td><td>$ 12,165</td><td>$ 489</td><td>$ 19,731</td></tr><tr><td>Current assets</td><td>17,238</td><td>568</td><td>68</td><td>17,874</td></tr><tr><td>Fixed assets</td><td>1,075</td><td>4,994</td><td>76</td><td>6,145</td></tr><tr><td>Intangible assets</td><td>159,506</td><td>179,316</td><td>9,264</td><td>348,086</td></tr><tr><td>Goodwill</td><td>222,976</td><td>277,857</td><td>29,875</td><td>530,708</td></tr><tr><td>Other assets</td><td>5,087</td><td>20,000</td><td>1,801</td><td>26,888</td></tr><tr><td>Total assets acquired</td><td>412,959</td><td>494,900</td><td>41,573</td><td>949,432</td></tr><tr><td>Current liabilities</td><td>15,007</td><td>9,661</td><td>4,625</td><td>29,293</td></tr><tr><td>Deferred income taxes, net</td><td>40,836</td><td>40,244</td><td>—</td><td>81,080</td></tr><tr><td>Other liabilities</td><td>8,711</td><td>20,000</td><td>1,809</td><td>30,520</td></tr><tr><td>Total liabilities assumed</td><td>64,554</td><td>69,905</td><td>6,434</td><td>140,893</td></tr><tr><td>Net assets acquired</td><td>$348,405</td><td>$424,995</td><td>$35,139</td><td>$808,539</td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Current assets and current liabilities primarily consisted of MediConnect’s indemnity escrow of $12,000. Other assets and other liabilities primarily consisted of $26,800 of indemnity escrows for MediConnect, ALP, Argus, and IRMS.

The amounts assigned to intangible assets by type for the acquisitions are summarized in the table below:

<table><tr><td></td><td>Weighted Average Useful Life</td><td>Total</td></tr><tr><td>Technology-based</td><td>10 years</td><td>$ 77,936</td></tr><tr><td>Marketing-related</td><td>5 years</td><td>30,331</td></tr><tr><td>Customer-related</td><td>13 years</td><td>239,819</td></tr><tr><td>Total intangible assets</td><td>11 years</td><td>$348,086</td></tr></table>

The goodwill associated with the stock purchase of MediConnect is not deductible for tax purposes; whereas the goodwill associated with the asset purchases of ALP and IRMS is deductible for tax purposes. The goodwill associated with the acquisition of Argus is partially deductible for income tax purposes as approximately 46% of the net cash purchase price represented an asset purchase. For the year ended December 31, 2012, the Company incurred transaction costs related to these acquisitions of $1,874 included within “Selling, general and administrative” expenses in the accompanying consolidated statements of operations. In accordance with ASC 805, the allocations of the purchase prices for MediConnect, ALP, Argus and IRMS were revised during the measurement period. Refer to Note 11. Goodwill and Intangible Assets for further discussion.

Supplemental information on an unaudited pro forma basis is presented below as if the acquisitions of MediConnect and Argus occurred at the beginning of the year 2012. The pro forma information for the year ended December 31, 2012 presented below is based on estimates and assumptions, which the Company believes are reasonable and not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had these acquisitions been completed at the beginning of 2012. The unaudited pro forma information includes intangible asset amortization charges and incremental borrowing costs as a result of the acquisitions, net of related tax, estimated using the Company’s effective tax rate for continuing operations for the years ended December 31:

<table><tr><td></td><td>2012 (unaudited)</td></tr><tr><td>Pro forma revenues</td><td>$1,462,677</td></tr><tr><td>Pro forma net income</td><td>$ 321,140</td></tr><tr><td>Pro forma basic income per share</td><td>$ 1.94</td></tr><tr><td>Pro forma diluted income per share</td><td>$ 1.87</td></tr></table>

## Acquisition Escrows

Pursuant to the related acquisition agreements, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition dates, as well as a portion of the contingent payments. At December 31, 2014 and 2013, the escrows amounted to $5,583 and $27,967, respectively, and have been included in “Other current assets” in the accompanying consolidated balance sheets.

## 10. Discontinued Operations:

On March 11, 2014, the Company sold 100% of the stock of the Company’s mortgage services business, Interthinx, which was a guarantor subsidiary, in exchange for a purchase price of $151,170. At the completion of



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the sale, Interthink ceased being a guarantor. The cash received was adjusted subsequent to close to reflect final balances of certain working capital accounts and other closing adjustments. The Company recognized income from discontinued operations, net of tax, of $29,177 during 2014. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. Refer to Note 18. Segment Reporting for further discussion.

The mortgage services business met the criteria for being reported as a discontinued operation and has been segregated from continuing operations. The following table summarizes the results from the discontinued operation for the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Revenues from discontinued operations</td><td>$ 11,512</td><td>$109,151</td><td>$126,472</td></tr><tr><td>Income from discontinued operations before income taxes (including gain on sale of $65,410 in 2014)</td><td>54,482</td><td>10,819</td><td>19,382</td></tr><tr><td>Provision for income taxes (including tax on the gain on sale in 2014)</td><td>(25,305)</td><td>(4,753)</td><td>(7,703)</td></tr><tr><td>Income from discontinued operations, net of tax</td><td>$ 29,177</td><td>$ 6,066</td><td>$ 11,679</td></tr></table>

The following table summarizes the assets held-for-sale and the liabilities held-for-sale as of December 31, 2013:

<table><tr><td>Accounts receivable, net</td><td>$15,295</td></tr><tr><td>Income taxes payable</td><td>(3,005)</td></tr><tr><td>Other current assets</td><td>1,535</td></tr><tr><td>Total current assets held-for-sale</td><td>$13,825</td></tr><tr><td>Fixed assets, net</td><td>$ 7,670</td></tr><tr><td>Intangible assets, net</td><td>9,018</td></tr><tr><td>Goodwill</td><td>69,207</td></tr><tr><td>Other assets</td><td>50</td></tr><tr><td>Total noncurrent assets held-for-sale</td><td>$85,945</td></tr><tr><td>Accounts payable and accrued liabilities</td><td>$ 8,272</td></tr><tr><td>Fees received in advance</td><td>1,177</td></tr><tr><td>Total current liabilities held-for-sale</td><td>$ 9,449</td></tr><tr><td>Deferred income taxes, net</td><td>$ 3,975</td></tr><tr><td>Other liabilities</td><td>554</td></tr><tr><td>Total noncurrent liabilities held-for-sale</td><td>$ 4,529</td></tr></table>

## 11. Goodwill and Intangible Assets:

Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have finite lives are amortized over their useful lives. The Company completed the required annual impairment test as of June 30, 2014, 2013 and 2012, which resulted in no impairment of goodwill. Based on the results of the impairment assessment as of June 30, 2014, the Company determined that the fair value of its reporting units exceeded their respective carrying value. There were no goodwill impairment indicators after the date of the last annual impairment test.



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of the change in goodwill from December 31, 2012 through December 31, 2014, both in total and as allocated to the Company’s operating segments:

<table><tr><td></td><td>Risk Assessment</td><td>Decision Analytics</td><td>Total</td></tr><tr><td>Goodwill at December 31, 2012(1)</td><td>$55,555</td><td>$1,191,904</td><td>$1,247,459</td></tr><tr><td>Current year acquisitions</td><td>—</td><td>705</td><td>705</td></tr><tr><td>Purchase accounting reclassifications</td><td>—</td><td>2,724</td><td>2,724</td></tr><tr><td>Discontinued operations (Note 10)</td><td>—</td><td>(69,207)</td><td>(69,207)</td></tr><tr><td>Goodwill at December 31, 2013(1)</td><td>55,555</td><td>1,126,126</td><td>1,181,681</td></tr><tr><td>Current year acquisitions</td><td>—</td><td>22,740</td><td>22,740</td></tr><tr><td>Acquisition related escrow funding</td><td>—</td><td>2,725</td><td>2,725</td></tr><tr><td>Goodwill at December 31, 2014(1)</td><td>$55,555</td><td>$1,151,591</td><td>$1,207,146</td></tr></table>

(1) These balances are net of accumulated impairment charges of $3,244 that occurred prior to December 31, 2012.

During the year ended December 31, 2013, the Company finalized the purchase accounting for the acquisitions of MediConnect, ALP and Argus, which resulted in an increase in goodwill of $2,724, an increase in fixed assets of $316, an increase in current liabilities of $1,548, an increase in deferred tax liabilities of $1,187, and a cash distribution to Argus of $305 related to the finalization of working capital. The impact of the finalization of the purchase accounting for these acquisitions was not material to the consolidated statements of operations for the years ended December 31, 2013 and 2012.

The Company’s intangible assets and related accumulated amortization consisted of the following:

<table><tr><td></td><td>Weighted Average Useful Life</td><td>Cost</td><td>Accumulated Amortization</td><td>Net</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td><td></td></tr><tr><td>Technology-based</td><td>8 years</td><td>$299,705</td><td>$(195,698)</td><td>$104,007</td></tr><tr><td>Marketing-related</td><td>5 years</td><td>71,504</td><td>(54,745)</td><td>16,759</td></tr><tr><td>Contract-based</td><td>6 years</td><td>6,555</td><td>(6,555)</td><td>—</td></tr><tr><td>Customer-related</td><td>13 years</td><td>399,011</td><td>(113,301)</td><td>285,710</td></tr><tr><td>Total intangible assets</td><td></td><td>$776,775</td><td>$(370,299)</td><td>$406,476</td></tr><tr><td>December 31, 2013</td><td></td><td></td><td></td><td></td></tr><tr><td>Technology-based</td><td>8 years</td><td>$294,940</td><td>$(180,581)</td><td>$114,359</td></tr><tr><td>Marketing-related</td><td>5 years</td><td>71,047</td><td>(44,274)</td><td>26,773</td></tr><tr><td>Contract-based</td><td>6 years</td><td>6,555</td><td>(6,555)</td><td>—</td></tr><tr><td>Customer-related</td><td>13 years</td><td>388,505</td><td>(82,019)</td><td>306,486</td></tr><tr><td>Total intangible assets</td><td></td><td>$761,047</td><td>$(313,429)</td><td>$447,618</td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortization expense related to intangible assets for the years ended December 31, 2014, 2013 and 2012, was approximately $56,870, $63,741, and $52,207, respectively. Estimated amortization expense in future periods through 2020 and thereafter for intangible assets subject to amortization is as follows:

<table><tr><td>Year</td><td>Amount</td></tr><tr><td>2015</td><td>$ 52,268</td></tr><tr><td>2016</td><td>50,436</td></tr><tr><td>2017</td><td>49,532</td></tr><tr><td>2018</td><td>48,786</td></tr><tr><td>2019</td><td>47,326</td></tr><tr><td>2020 and thereafter</td><td>158,128</td></tr><tr><td>Total</td><td>$406,476</td></tr></table>

## 12. Income Taxes:

The components of the provision for income taxes from continuing operations for the years ended December 31 were as follows:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Current:</td><td></td><td></td><td></td></tr><tr><td>Federal and foreign</td><td>$169,153</td><td>$135,215</td><td>$111,713</td></tr><tr><td>State and local</td><td>26,333</td><td>18,764</td><td>8,442</td></tr><tr><td>Total current provision for income taxes</td><td>195,486</td><td>153,979</td><td>120,155</td></tr><tr><td>Deferred:</td><td></td><td></td><td></td></tr><tr><td>Federal and foreign</td><td>27,009</td><td>38,160</td><td>56,036</td></tr><tr><td>State and local</td><td>(2,740)</td><td>4,287</td><td>6,172</td></tr><tr><td>Total deferred provision for income taxes</td><td>24,269</td><td>42,447</td><td>62,208</td></tr><tr><td>Provision for income taxes</td><td>$219,755</td><td>$196,426</td><td>$182,363</td></tr></table>

The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate is as follows for the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Federal statutory rate</td><td>35.0%</td><td>35.0%</td><td>35.0%</td></tr><tr><td>State and local taxes, net of federal tax benefit</td><td>2.7%</td><td>2.6%</td><td>1.7%</td></tr><tr><td>Non-deductible KSOP expenses</td><td>0.9%</td><td>0.9%</td><td>0.9%</td></tr><tr><td>Other</td><td>(1.4)%</td><td>(2.0)%</td><td>(1.1)%</td></tr><tr><td>Effective tax rate for continuing operations</td><td>37.2%</td><td>36.5%</td><td>36.5%</td></tr></table>

The increase in the effective tax rate in 2014 compared to 2013 was due to greater tax benefits realized from tax planning strategies, as well as favorable audit settlements and resolution of uncertain tax positions in the prior period.



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of significant items comprising the Company’s deferred tax assets as of December 31 are as follows:

<table><tr><td></td><td>2014</td><td>2013</td></tr><tr><td>Deferred income tax asset:</td><td></td><td></td></tr><tr><td>Employee wages, pension and other benefits</td><td>$ 29,756</td><td>$ 26,113</td></tr><tr><td>Deferred revenue</td><td>1,835</td><td>1,835</td></tr><tr><td>Deferred rent</td><td>5,463</td><td>4,342</td></tr><tr><td>Net operating loss carryover</td><td>4,292</td><td>8,247</td></tr><tr><td>State tax adjustments</td><td>2,472</td><td>1,639</td></tr><tr><td>Capital and other unrealized losses</td><td>3,255</td><td>3,301</td></tr><tr><td>Other</td><td>4,956</td><td>6,720</td></tr><tr><td>Total</td><td>52,029</td><td>52,197</td></tr><tr><td>Less valuation allowance</td><td>(789)</td><td>(741)</td></tr><tr><td>Deferred income tax asset</td><td>51,240</td><td>51,456</td></tr><tr><td>Deferred income tax liability:</td><td></td><td></td></tr><tr><td>Fixed assets and intangible assets</td><td>(242,857)</td><td>(223,639)</td></tr><tr><td>Other</td><td>(6,151)</td><td>(21,344)</td></tr><tr><td>Deferred income tax liability</td><td>(249,008)</td><td>(244,983)</td></tr><tr><td>Deferred income tax liability, net</td><td>(197,768)</td><td>(193,527)</td></tr></table>

The deferred income liability has been classified in “Deferred income taxes, net” in the accompanying consolidated balance sheets as of December 31, as follows:

<table><tr><td></td><td>2014</td><td>2013</td></tr><tr><td>Current deferred income tax asset, net</td><td>$ 4,772</td><td>$ 5,077</td></tr><tr><td>Non-current deferred income tax liability, net</td><td>(202,540)</td><td>(198,604)</td></tr><tr><td>Deferred income tax liability, net</td><td>(197,768)</td><td>(193,527)</td></tr></table>

The deferred income tax liability of $197,768 consists primarily of timing differences involving depreciation and amortization.

The ultimate realization of the deferred tax assets depends on the Company’s ability to generate sufficient taxable income in the future. The Company has provided for a valuation allowance against the deferred tax assets associated with the net operating losses of certain subsidiaries. The Company’s net operating loss carryforwards expire as follows:

<table><tr><td>Years</td><td>Amount</td></tr><tr><td>2015-2022</td><td>$ 6,912</td></tr><tr><td>2023-2027</td><td>13,755</td></tr><tr><td>2028-2034</td><td>26,674</td></tr><tr><td>Total</td><td>$47,341</td></tr></table>

A valuation allowance has been established based on the Company’s evaluation of the likelihood of utilizing these benefits before they expire. The Company has determined that the generation of future taxable income from certain subsidiaries to fully realize the deferred tax assets is uncertain. Other than these items, the



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company has determined, based on the Company’s historical operating performance, that taxable income of the Company will more likely than not be sufficient to fully realize the deferred tax assets.

It is the practice of the Company to permanently reinvest the undistributed earnings of its foreign subsidiaries in those operations. As of December 31, 2014, the Company has not made a provision for U.S. or additional foreign withholdings taxes on approximately $12,440 of the unremitted earnings. The Company does not rely on these unremitted earnings as a source of funds for its domestic business as it expects to have sufficient cash flow in the U.S. to fund its U.S. operational and strategic needs. Consequently, the Company has not provided for U.S. federal or state income taxes or associated withholding taxes on these undistributed foreign earnings.

The Company follows ASC 740-10, which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. For each tax position, the Company must determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to recognize within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Unrecognized tax benefit at January 1</td><td>$ 9,524</td><td>$17,883</td><td>$17,877</td></tr><tr><td>Gross increase in tax positions in prior period</td><td>2,679</td><td>541</td><td>911</td></tr><tr><td>Gross decrease in tax positions in prior period</td><td>—</td><td>(4,241)</td><td>(1,494)</td></tr><tr><td>Gross increase in tax positions from stock acquisitions</td><td>—</td><td>—</td><td>3,304</td></tr><tr><td>Settlements</td><td>—</td><td>(390)</td><td>(1,770)</td></tr><tr><td>Lapse of statute of limitations</td><td>(1,566)</td><td>(4,269)</td><td>(945)</td></tr><tr><td>Unrecognized tax benefit at December 31</td><td>$10,637</td><td>$ 9,524</td><td>$17,883</td></tr></table>

Of the total unrecognized tax benefits at December 31, 2014, 2013 and 2012, $5,771, $4,658 and $10,103, respectively, represent the amounts that, if recognized, would have a favorable effect on the Company’s effective tax rate in any future periods.

The total gross amount of accrued interest and penalties at December 31, 2014, 2013 and 2012 was $2,818, $2,619 and $3,728, respectively. The Company’s practice is to recognize interest and penalties associated with income taxes as a component of “Provision for income taxes” in the accompanying consolidated statements of operations.

The Company does not expect a significant increase in unrecognized benefits related to federal, foreign, or state tax exposures within the coming year. In addition, the Company believes that it is reasonably possible that approximately $1,109 of its currently remaining unrecognized tax positions, each of which is individually insignificant, may be recognized by the end of 2015 as a result of a combination of audit settlements and lapses of statute of limitations, net of additional uncertain tax positions.

The Company is subject to tax in the U.S. and in various state and foreign jurisdictions. The Company joined by its domestic subsidiaries, files a consolidated income tax return for the Federal income tax purposes. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for tax years before 2009. As a result of refunds requested through the filing of amended returns, the Internal Revenue Service is conducting an audit of the 2009 - 2011 time period.



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 13. Composition of Certain Financial Statement Captions:

The following table presents the components of “Other current assets”, “Accounts payable and accrued liabilities” and “Other liabilities” as of December 31:

<table><tr><td></td><td>2014</td><td>2013</td></tr><tr><td>Other current assets:</td><td></td><td></td></tr><tr><td>Acquisition related escrows</td><td>$ 5,583</td><td>$ 27,967</td></tr><tr><td>Other current assets</td><td>13,292</td><td>6,714</td></tr><tr><td>Total other current assets</td><td>$ 18,875</td><td>$ 34,681</td></tr><tr><td>Accounts payable and accrued liabilities:</td><td></td><td></td></tr><tr><td>Accrued salaries, benefits and other related costs</td><td>$ 87,729</td><td>$ 79,372</td></tr><tr><td>Escrow liabilities</td><td>5,565</td><td>27,918</td></tr><tr><td>Trade accounts payable and other accrued expenses</td><td>87,432</td><td>80,974</td></tr><tr><td>Total accounts payable and accrued liabilities</td><td>$180,726</td><td>$188,264</td></tr><tr><td>Other liabilities:</td><td></td><td></td></tr><tr><td>Unrecognized tax benefits, including interest and penalty</td><td>$ 13,455</td><td>$ 12,143</td></tr><tr><td>Deferred rent</td><td>22,386</td><td>12,219</td></tr><tr><td>Other liabilities</td><td>7,547</td><td>11,681</td></tr><tr><td>Total other liabilities</td><td>$ 43,388</td><td>$ 36,043</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 14. Debt:

The following table presents short-term and long-term debt by issuance as of December 31:

<table><tr><td></td><td>Issuance Date</td><td>Maturity Date</td><td>2014</td><td>2013</td></tr><tr><td>Short-term debt and current portion of long-term debt:</td><td></td><td></td><td></td><td></td></tr><tr><td>Syndicated revolving credit facility</td><td>Various</td><td>Various</td><td>$ 160,000</td><td>$ —</td></tr><tr><td>Prudential shelf notes:</td><td></td><td></td><td></td><td></td></tr><tr><td>5.84% Series H shelf notes</td><td>10/26/2007</td><td>10/26/2015</td><td>17,500</td><td>—</td></tr><tr><td>6.28% Series I shelf notes</td><td>4/29/2008</td><td>4/29/2015</td><td>85,000</td><td>—</td></tr><tr><td>New York Life shelf notes:</td><td></td><td></td><td></td><td></td></tr><tr><td>5.87% Series A shelf notes</td><td>10/26/2007</td><td>10/26/2015</td><td>17,500</td><td>—</td></tr><tr><td>6.35% Series B shelf notes</td><td>4/29/2008</td><td>4/29/2015</td><td>50,000</td><td>—</td></tr><tr><td>Capital lease obligations</td><td>Various</td><td>Various</td><td>6,058</td><td>4,448</td></tr><tr><td>Short-term debt and current portion of long-term debt</td><td></td><td></td><td>336,058</td><td>4,448</td></tr><tr><td>Long-term debt:</td><td></td><td></td><td></td><td></td></tr><tr><td>Senior notes:</td><td></td><td></td><td></td><td></td></tr><tr><td>4.125% senior notes, less unamortized discount of $2,137 and $2,415 as of December 31, 2014 and 2013, respectively</td><td>9/12/2012</td><td>9/12/2022</td><td>347,863</td><td>347,585</td></tr><tr><td>4.875% senior notes, less unamortized discount of $1,361, and $1,699 as of December 31, 2014 and 2013, respectively</td><td>12/8/2011</td><td>1/15/2019</td><td>248,639</td><td>248,301</td></tr><tr><td>5.80% senior notes, less unamortized discount of $654 and $757 as of December 31, 2014 and 2013, respectively</td><td>4/6/2011</td><td>5/1/2021</td><td>449,346</td><td>449,243</td></tr><tr><td>Prudential shelf notes:</td><td></td><td></td><td></td><td></td></tr><tr><td>5.84% Series H shelf notes</td><td>10/26/2007</td><td>10/26/2015</td><td>—</td><td>17,500</td></tr><tr><td>6.28% Series I shelf notes</td><td>4/29/2008</td><td>4/29/2015</td><td>—</td><td>85,000</td></tr><tr><td>6.85% Series J shelf notes</td><td>6/15/2009</td><td>6/15/2016</td><td>50,000</td><td>50,000</td></tr><tr><td>New York Life shelf notes:</td><td></td><td></td><td></td><td></td></tr><tr><td>5.87% Series A shelf notes</td><td>10/26/2007</td><td>10/26/2015</td><td>—</td><td>17,500</td></tr><tr><td>6.35% Series B shelf notes</td><td>4/29/2008</td><td>4/29/2015</td><td>—</td><td>50,000</td></tr><tr><td>Capital lease obligations</td><td>Various</td><td>Various</td><td>5,026</td><td>6,310</td></tr><tr><td>Long-term debt</td><td></td><td></td><td>1,100,874</td><td>1,271,439</td></tr><tr><td>Total debt</td><td></td><td></td><td>$1,436,932</td><td>$1,275,887</td></tr></table>

Accrued interest associated with the Company’s outstanding debt obligations was $16,265 and $16,150 as of December 31, 2014 and 2013, respectively, and included in “Accounts payable and accrued liabilities” within the accompanying consolidated balance sheets. Interest expense associated with the Company’s outstanding debt obligations was $66,881, $73,068 and $69,892 for the years ended December 31, 2014, 2013 and 2012, respectively.



# VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## Senior Notes

On September 12, 2012, the Company completed an issuance of senior notes in the aggregate principal amount of $350,000. These senior notes are due on September 12, 2022 and accrue interest at a rate of 4.125% per annum. Interest is payable semi-annually on March 12th and September 12th of each year.

On December 8, 2011, the Company completed an issuance of senior notes in the aggregate principal amount of $250,000. These senior notes are due on January 15, 2019 and accrue interest at a rate of 4.875% per annum. Interest is payable semi-annually on January 15th and July 15th of each year.

On April 6, 2011, the Company completed an issuance of senior notes in the aggregate principal amount of $450,000. These senior notes are due on May 1, 2021 and accrue interest at a rate of 5.80% per annum. Interest is payable semi-annually on May 1st and November 1st of each year.

All senior notes issued by Verisk Analytics, Inc. (the “Parent Company”) are fully and unconditionally guaranteed, jointly and severally, on an unsecured and unsubordinated basis by ISO, the principal operating subsidiary and certain subsidiaries that guarantee the syndicated revolving credit facility or any amendment, refinancing or replacement thereof (See Note 21. Condensed Consolidated Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries for further information). The debt issuance costs are amortized from the date of issuance to the maturity date. The senior notes rank equally with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. However, the senior notes are subordinated to the indebtedness of any of the subsidiaries that do not guarantee the senior notes and are effectively subordinated to any future secured indebtedness to the extent of the value of the assets securing such indebtedness. The guarantees of the senior notes rank equally and ratably in right of payment with all other existing and future unsecured and unsubordinated indebtedness of the guarantors, and senior in right of payment to all future subordinated indebtedness of the guarantors. Because the guarantees of the senior notes are not secured, such guarantees are effectively subordinated to any existing and future secured indebtedness of the applicable guarantor to the extent of the value of the collateral securing that indebtedness. Upon a change of control event, the holders of the senior notes have the right to require the Company to repurchase all or any part of such holder’s senior notes at a purchase price in cash equal to 101% of the principal amount of the senior notes plus accrued and unpaid interest, if any, to the date of repurchase. The indenture governing the senior notes restricts the Company’s ability and its subsidiaries’ ability to, among other things, create certain liens, enter into sale/leaseback transactions and consolidate with, sell, lease, convey or otherwise transfer all or substantially all of the Company’s assets, or merge with or into, any other person or entity.

## Prudential Master Shelf Agreement

The Company had an uncommitted master shelf agreement with Prudential Capital Group that expired on August 30, 2013. The Company did not extend this agreement. As of December 31, 2014, $152,500 was outstanding under this agreement.

## New York Life Master Shelf Agreement

The Company had an uncommitted master shelf agreement with New York Life that expired on March 16, 2013. The Company did not extend this agreement. As of December 31, 2014, $67,500 was outstanding under this agreement.

## Syndicated Revolving Credit Facility

The Company has a committed senior unsecured Syndicated Revolving Credit Facility (the “Credit Facility”) with Bank of America N.A., JPMorgan Chase Bank N.A., Wells Fargo Bank N.A., SunTrust Bank,



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

RBS Citizens N.A., Morgan Stanley Bank N.A., TD Bank N.A., Royal Bank of Canada, The Northern Trust Company, Capital One, N.A., and HSBC Bank USA, N.A. On October 21, 2014, the Company amended its Credit Facility to increase the borrowing capacity from $975,000 to $990,000 and extend the maturity date from October 24, 2018 to October 24, 2019. The Company amortizes all one-time fees and third party costs associated with the execution and amendment of this Credit Facility through the maturity date. Interest is payable at maturity at a rate of LIBOR plus 1.125% to 1.625%, depending upon the result of certain ratios defined in the credit agreement. The Credit Facility contains certain customary financial and other covenants that, among other things, require the Company to maintain certain leverage and interest coverage ratios. Verisk and ISO are co-borrowers under the Credit Facility. Borrowings may be used for general corporate purposes, including working capital, capital expenditures, acquisitions, and share repurchase programs.

As of December 31, 2014, the Company has an available borrowing capacity, net of outstanding letters of credit, of $827,874 under the Credit Facility. Borrowings may be used for general corporate purposes, including working capital and capital expenditures, acquisitions and the share repurchase program (the “Repurchase Program”). As of December 31, 2014 and 2013, the Company had $160,000 and $0 outstanding borrowings under the Credit Facility, respectively. In January and February 2015, the Company repaid a total of $140,000 of the $160,000 outstanding borrowings under the Credit Facility.

The Company was in compliance with all financial covenants at December 31, 2014.

## Debt Maturities

The following table reflects the Company’s debt maturities:

<table><tr><td>Year</td><td>Amount</td></tr><tr><td>2015</td><td>$ 336,058</td></tr><tr><td>2016</td><td>$ 53,959</td></tr><tr><td>2017</td><td>$ 770</td></tr><tr><td>2018</td><td>$ 168</td></tr><tr><td>2019</td><td>$ 250,050</td></tr><tr><td>2020 and thereafter</td><td>$ 800,079</td></tr><tr><td>Total</td><td>$1,441,084</td></tr></table>

## 15. Stockholders' Equity (Deficit):

The Company has 1,200,000,000 shares of authorized Class A common stock. The common shares have rights to any dividend declared by the board of directors, subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all twelve members of the board of directors.

The Company has 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the Class A common shares with respect to dividends and net distribution upon liquidation. The Company did not issue any preferred shares as of December 31, 2014.

## Share Repurchase Program

Since May 2010, the Company has authorized repurchases of up to $2,000,000 of its common stock through its Repurchase Program, including the additional authorization of $300,000 announced on June 4, 2014 and the Accelerated Share Repurchase (“ASR”) program of $500,000 announced on December 16, 2014. Since the introduction of share repurchase as a feature of the Company’s capital management strategies in 2010, the Company has repurchased shares with an aggregate value of $1,810,193. As of December 31, 2014, the



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company had $189,807, excluding the ASR program, available to repurchase shares. The Company has no obligation to repurchase stock under this program and intends to use this authorization as a means of offsetting dilution from the issuance of shares under the ISO 401(k) Savings and Employee Stock Ownership Plan (“KSOP”), the Verisk 2013 Equity Incentive Plan (the “2013 Incentive Plan”), the Verisk 2009 Equity Incentive Plan (the “2009 Incentive Plan”), and the ISO 1996 Incentive Plan (the “1996 Incentive Plan”), while providing flexibility to repurchase additional shares if warranted. This authorization has no expiration date and may be increased, reduced, suspended, or terminated at any time. Shares that are repurchased under the Repurchase Program will be recorded as treasury stock and will be available for future issuance.

On December 17, 2014 and December 18, 2014, the Company entered into two agreements, collectively the ASR agreement, to repurchase shares of its common stock for an aggregate purchase price of $500,000. Upon payment of the aggregate purchase price in December 2014, the Company received an initial delivery of 6,372,472 shares of the Company’s common stock at a price of $62.77 per share, representing approximately $400,000 of the aggregate purchase price. The aggregate purchase price was recorded as a reduction to stockholders’ equity, consisting of a $400,000 increase in treasury stock and a $100,000 decrease in additional paid-in capital, in the Company’s consolidated statements of changes in stockholders’ equity (deficit). Upon final settlement of the ASR agreement in June 2015, the Company may be entitled to receive additional shares of its common stock or, under certain limited circumstances, be required to deliver shares to the counterparties or, at the Company’s election, pay cash to the counterparties. As of December 31, 2014, the shares associated with the remaining portion of the aggregate purchase price have not yet been settled. These shares were not included in the calculation of the diluted weighted average common shares outstanding during the period, because their effect was anti-dilutive.

The ASR agreement was accounted for as an initial treasury stock transaction and a forward stock purchase agreement indexed to the Company’s own common stock. The forward stock purchase agreement is classified as an equity instrument under ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”) and was deemed to have a fair value of zero at the effective dates. The initial repurchase of 6,372,472 shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share (“EPS”).

During the years ended December 31, 2014 and 2013, the Company repurchased 10,802,087 and 4,532,552 shares of common stock as part of the Repurchase Program at a weighted average price of $62.53 and $61.54 per share, respectively. The Company utilized cash from operations and borrowings from its Credit Facility to fund these repurchases. As treasury stock purchases are recorded based on trade date, the Company has included $0 and $3,038 in “Accounts payable and accrued liabilities” in the accompanying consolidated balance sheets for those purchases that have not settled as of December 31, 2014 and 2013, respectively.

## Treasury Stock

As of December 31, 2014, the Company’s treasury stock consisted of 386,089,811 shares of Class A common stock. During the years ended December 31, 2014 and 2013, the Company reissued 1,257,387 and 4,263,406 shares of Class A common stock, under the 2013 Incentive Plan, 2009 Incentive Plan and the 1996 Incentive Plan, from the treasury shares at a weighted average price of $5.29 and $4.54 per share, respectively.

## Earnings Per Share

Basic EPS is computed by dividing income from continuing operations, income from discontinued operations and net income, respectively, by the weighted average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding,



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

using the treasury stock method, if the dilutive potential common shares, including stock options, nonvested restricted stock, nonvested restricted stock units, and the impact from the ASR program, had been issued.

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the years ended December 31:

<table><tr><td rowspan="2"></td><td colspan="2">2014</td><td colspan="2">2013</td><td colspan="2">2012</td></tr><tr><td colspan="6">(In thousands, except for share and per share data)</td></tr><tr><td>Numerator used in basic and diluted EPS:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$     370,865</td><td>$     342,314</td><td>$     317,463</td><td></td><td></td><td></td></tr><tr><td>Income from discontinued operations, net of tax of $25,305, $4,753 and $7,703, respectively</td><td>29,177</td><td>6,066</td><td>11,679</td><td></td><td></td><td></td></tr><tr><td>Net income</td><td>$     400,042</td><td>$     348,380</td><td>$     329,142</td><td></td><td></td><td></td></tr><tr><td>Denominator:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Weighted average number of common shares used in basic EPS</td><td>165,823,803</td><td>168,031,412</td><td>165,890,258</td><td></td><td></td><td></td></tr><tr><td>Effect of dilutive shares:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Potential common stock issuable from stock options and stock awards</td><td>3,308,620</td><td>4,244,948</td><td>5,819,260</td><td></td><td></td><td></td></tr><tr><td>Weighted average number of common shares and dilutive potential common shares used in diluted EPS</td><td>169,132,423</td><td>172,276,360</td><td>171,709,518</td><td></td><td></td><td></td></tr></table>

The potential shares of common stock that were excluded from diluted EPS were 1,633,670, 656,499 and 659,246 at December 31, 2014, 2013 and 2012, respectively, because the effect of including those potential shares was anti-dilutive.

## Accumulated Other Comprehensive Losses

The following is a summary of accumulated other comprehensive losses as of December 31:

<table><tr><td></td><td>2014</td><td>2013</td></tr><tr><td>Foreign currency translation adjustment</td><td>$ (3,086)</td><td>$ (1,800)</td></tr><tr><td>Unrealized losses on available-for-sale securities, net of tax</td><td>(110)</td><td>(75)</td></tr><tr><td>Pension and postretirement adjustment, net of tax</td><td>(77,318)</td><td>(41,613)</td></tr><tr><td>Accumulated other comprehensive losses</td><td>$ (80,514)</td><td>$ (43,488)</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The before tax and after tax amounts of other comprehensive income for the years ended December 31, 2014, 2013 and 2012 are summarized below:

<table><tr><td></td><td>Before Tax</td><td>Tax Benefit (Expense)</td><td>After Tax</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>$ (1,286)</td><td>$ —</td><td>$ (1,286)</td></tr><tr><td>Unrealized loss on available-for-sale securities before reclassifications</td><td>(314)</td><td>121</td><td>(193)</td></tr><tr><td>Amount reclassified from accumulated other comprehensive losses(1)</td><td>257</td><td>(99)</td><td>158</td></tr><tr><td>Unrealized loss on available-for-sale securities</td><td>(57)</td><td>22</td><td>(35)</td></tr><tr><td>Pension and postretirement adjustment before reclassifications</td><td>(56,635)</td><td>21,629</td><td>(35,006)</td></tr><tr><td>Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses(2)</td><td>(1,134)</td><td>435</td><td>(699)</td></tr><tr><td>Pension and postretirement adjustment</td><td>(57,769)</td><td>22,064</td><td>(35,705)</td></tr><tr><td>Total other comprehensive loss</td><td>$(59,112)</td><td>$ 22,086</td><td>$(37,026)</td></tr><tr><td>December 31, 2013</td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>$ (840)</td><td>$ —</td><td>$ (840)</td></tr><tr><td>Unrealized loss on available-for-sale securities before reclassifications</td><td>(1,122)</td><td>433</td><td>(689)</td></tr><tr><td>Amount reclassified from accumulated other comprehensive losses(1)</td><td>882</td><td>(340)</td><td>542</td></tr><tr><td>Unrealized loss on available-for-sale securities</td><td>(240)</td><td>93</td><td>(147)</td></tr><tr><td>Pension and postretirement adjustment before reclassifications</td><td>80,773</td><td>(30,611)</td><td>50,162</td></tr><tr><td>Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses(2)</td><td>(5,699)</td><td>2,196</td><td>(3,503)</td></tr><tr><td>Pension and postretirement adjustment</td><td>75,074</td><td>(28,415)</td><td>46,659</td></tr><tr><td>Total other comprehensive income</td><td>$ 73,994</td><td>$ (28,322)</td><td>$ 45,672</td></tr><tr><td>December 31, 2012</td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>$ 15</td><td>$ —</td><td>$ 15</td></tr><tr><td>Unrealized loss on available-for-sale securities before reclassifications</td><td>(727)</td><td>316</td><td>(411)</td></tr><tr><td>Amount reclassified from accumulated other comprehensive losses(1)</td><td>346</td><td>(132)</td><td>214</td></tr><tr><td>Unrealized loss on available-for-sale securities</td><td>(381)</td><td>184</td><td>(197)</td></tr><tr><td>Pension and postretirement adjustment before reclassifications</td><td>(13,082)</td><td>4,865</td><td>(8,217)</td></tr><tr><td>Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses(2)</td><td>(4,001)</td><td>1,527</td><td>(2,474)</td></tr><tr><td>Pension and postretirement adjustment</td><td>(17,083)</td><td>6,392</td><td>(10,691)</td></tr><tr><td>Total other comprehensive loss</td><td>$(17,449)</td><td>$ 6,576</td><td>$(10,873)</td></tr></table>

(1) This accumulated other comprehensive losses component, before tax, is included under “Investment income and others” in the accompanying consolidated statements of operations.

(2) This accumulated other comprehensive losses component, before tax, is included under “Cost of revenues” and “Selling, general and administrative” in the accompanying consolidated statements of operations. This component is also included in the computation of net periodic benefit (credit) cost (see Note 17. Pension and Postretirement Benefits for additional details).



# VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## 16. Compensation Plans:

## KSOP

The Company has established the KSOP for the benefit of eligible employees in the U.S. and Puerto Rico. The KSOP includes both an employee savings component and an employee stock ownership component. The purpose of the combined plan is to enable the Company’s employees to participate in a tax-deferred savings arrangement under Internal Revenue Service Code Sections 401(a) and 401(k) (the “Code”), and to provide employee equity participation in the Company through the employee stock ownership plan (“ESOP”) accounts.

Under the KSOP, eligible employees may make pre-tax and after-tax cash contributions as a percentage of their compensation, subject to certain limitations under the applicable provisions of the Code. The maximum pre-tax contribution that can be made to the 401(k) account as determined under the provisions of Code Section 401(g) is $18, $18 and $17 for 2014, 2013 and 2012, respectively. Certain eligible participants (age 50 and older) may contribute an additional $6 on a pre-tax basis for 2014, 2013 and 2012. After-tax contributions are limited to 10% of a participant’s compensation. The Company provides quarterly matching contributions in Verisk Class A common stock. The quarterly matching contributions are primarily equal to 75% of the first 6% of the participant’s contribution.

The Company established the ESOP component as a funding vehicle for the KSOP. The common shares acquired by the KSOP were pledged as collateral under an intercompany loan agreement (“ESOP loan”) between the KSOP and Company. The Company makes quarterly cash contributions to the KSOP equal to the KSOP’s debt service. As the debt is repaid, shares are released from collateral and are used to fund the quarterly 401(k) matching and profit sharing contributions before being allocated to active employees in proportion to their annual salaries in relation to total participant salaries. The Company accounts for its ESOP in accordance with ASC 718-40, Employee Stock Ownership Plans (“ASC 718-40”) and ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”). As shares are committed to be released from collateral, the Company reports compensation expense at the then-current fair value of the shares, and the shares become outstanding for EPS computations. For the years ended December 31, 2014, 2013 and 2012, there were no ESOP contributions.

In accordance with the ESOP loan, the Company is also required to contribute a total of $17,000, plus interest, of cash or shares to the KSOP by 2016. Earlier contribution is at the Company’s discretion. As of December 31, 2014, the ESOP loan collateral consisted of 145,007 shares of Verisk Class A common stock valued at $64.05 per share. As of December 31, 2014, the Company had 11,468,151 allocated ESOP shares.

In 2005, the Company established the ISO Profit Sharing Plan (the “Profit Sharing Plan”), a defined contribution plan, to replace the qualified pension plan for all eligible employees hired on or after March 1, 2005. The Profit Sharing Plan is a component of the KSOP. Eligible employees participated in the Profit Sharing Plan if they completed 1,000 hours of service each plan year and were employed on December 31 of that year. The Company can make a discretionary contribution to the Profit Sharing Plan based on the annual performance of the Company. Participants vest once they have completed four years and 1,000 hours of service. For fiscal years 2014, 2013 and 2012, there were no profit sharing contributions.

At December 31, 2014, 2013 and 2012, the fair value of Verisk Class A common stock was $64.05, $65.72, and $50.97 per share, respectively. KSOP compensation expense for 2014, 2013 and 2012 was approximately $15,351, $14,930 and $13,111, respectively.

## Equity Compensation Plans

All of the Company’s outstanding stock options and restricted stock are covered under the 2013 Incentive Plan, 2009 Incentive Plan or the 1996 Incentive Plan. Awards under the 2013 Incentive Plan may include one or



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share-based awards, and (vii) cash. Employees, directors and consultants are eligible for awards under the 2013 Incentive Plan. The Company issued common stock under these plans from the Company’s treasury shares. On May 15, 2013, the Company’s shareholders approved the 2013 Incentive Plan. The number of shares of Class A common stock available for issuance under the 2013 Incentive Plan is 15,700,000 and such amount shall be reduced on a 1-for-1 basis for every share issued that is subject to an option or stock appreciation right and on a 2.5-for-1 basis for every share issued that is subject to an award other than an option or stock appreciation right. Shares that were subject to an award under the 2013 Incentive Plan that become forfeited, expired or otherwise terminated shall again be available for issuance under the 2013 Incentive Plan on a 1-for-1 basis if the shares were subject to options or stock appreciation rights, and on an 2.5-for-1 basis if the shares were subject to awards other than options or stock appreciation rights. As of December 31, 2014, there were 12,771,637 shares of Class A common stock reserved and available for future issuance. Cash received from stock option exercises for the years ended December 31, 2014, 2013 and 2012 was $24,648, $80,368 and $68,388, respectively.

In 2014, the Company granted 1,145,976 nonqualified stock options to key employees. The nonqualified stock options have an exercise price equal to the closing price of the Company’s common stock on the grant date, with a ten-year contractual term and a service vesting period of four years. In addition, the Company granted 230,196 shares of restricted stock and 588 shares of common stock to key employees. The restricted stock is valued at the closing price of the Company’s common stock on the date of grant and has a service vesting period of four years. The Company recognizes the expense of the restricted stock ratably over the periods in which the restrictions lapse. The restricted stock is not assignable or transferrable until it becomes vested. Also in 2014, the Company granted 33,906 nonqualified stock options that were immediately vested, 62,546 nonqualified stock options with a one-year service vesting period, 3,387 shares of common stock, and 15,807 deferred stock units to the directors of the Company. The nonqualified stock options have an exercise price equal to the closing price of the Company’s common stock on the grant date and a ten-year contractual term.

The fair value of the stock options granted was estimated on the date of grant using a Black-Scholes option valuation model that uses the weighted-average assumptions noted in the following table during the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Option pricing model</td><td>Black-Scholes</td><td>Black-Scholes</td><td>Black-Scholes</td></tr><tr><td>Expected volatility</td><td>20.53%</td><td>29.27%</td><td>32.22%</td></tr><tr><td>Risk-free interest rate</td><td>1.48%</td><td>0.70%</td><td>0.90%</td></tr><tr><td>Expected term in years</td><td>4.4</td><td>4.5</td><td>4.7</td></tr><tr><td>Dividend yield</td><td>—%</td><td>—%</td><td>—%</td></tr><tr><td>Weighted average grant date fair value per stock option</td><td>11.86</td><td>15.58</td><td>13.59</td></tr></table>

The expected term for a majority of the awards granted was estimated based on studies of historical experience and projected exercise behavior. However, for certain awards granted, for which no historical exercise pattern exists, the expected term was estimated using the simplified method. The risk-free interest rate is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the expected term of the equity award. The volatility factor is calculated using historical daily closing prices over the most recent period that is commensurate with the expected term of the stock option awards. The volatility factor for stock options granted prior to 2014 was based on the average volatility of the Company’s peers as the Company did not have a history of stock price sufficient to cover the expected term of those awards. The volatility factor for stock options granted in 2014 was based on the volatility of the Company’s stock. The expected dividend yield was based on the Company’s expected annual dividend rate on the date of grant.



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of options outstanding under the Incentive Plan and the Option Plan and changes during the three years then ended is presented below:

<table><tr><td></td><td>Number of Options</td><td>Weighted Average Exercise Price Per Share</td><td>Aggregate Intrinsic Value</td></tr><tr><td></td><td colspan="3">(In thousands, except for share and per share data)</td></tr><tr><td>Outstanding at January 1, 2012</td><td>18,896,405</td><td>$16.55</td><td>$445,510</td></tr><tr><td>Granted</td><td>973,124</td><td>$47.38</td><td></td></tr><tr><td>Exercised</td><td>(6,880,678)</td><td>$9.09</td><td>$257,391</td></tr><tr><td>Cancelled or expired</td><td>(415,553)</td><td>$19.30</td><td></td></tr><tr><td>Outstanding at December 31, 2012</td><td>12,573,298</td><td>$22.21</td><td>$361,653</td></tr><tr><td>Granted</td><td>888,038</td><td>$61.10</td><td></td></tr><tr><td>Exercised</td><td>(4,076,750)</td><td>$19.79</td><td>$168,056</td></tr><tr><td>Cancelled or expired</td><td>(149,266)</td><td>$43.14</td><td></td></tr><tr><td>Outstanding at December 31, 2013</td><td>9,235,320</td><td>$26.67</td><td>$360,611</td></tr><tr><td>Granted</td><td>1,242,428</td><td>$59.83</td><td></td></tr><tr><td>Exercised</td><td>(1,091,746)</td><td>$22.29</td><td>$ 43,863</td></tr><tr><td>Cancelled or expired</td><td>(180,312)</td><td>$55.23</td><td></td></tr><tr><td>Outstanding at December 31, 2014</td><td>9,205,690</td><td>$31.11</td><td>$303,267</td></tr><tr><td>Options exercisable at December 31, 2014</td><td>7,159,895</td><td>$24.00</td><td>$286,728</td></tr><tr><td>Options exercisable at December 31, 2013</td><td>7,169,089</td><td>$20.98</td><td>$320,766</td></tr></table>

A summary of the status of the Company’s nonvested options and changes is presented below:

<table><tr><td></td><td>Number of Options</td><td>Weighted Average Grant-Date Fair Value Per Share</td></tr><tr><td>Nonvested balance at January 1, 2012</td><td>6,743,094</td><td>$ 7.52</td></tr><tr><td>Granted</td><td>973,124</td><td>$13.59</td></tr><tr><td>Vested</td><td>(3,524,363)</td><td>$ 7.38</td></tr><tr><td>Cancelled or expired</td><td>(415,553)</td><td>$ 5.62</td></tr><tr><td>Nonvested balance at December 31, 2012</td><td>3,776,302</td><td>$ 9.43</td></tr><tr><td>Granted</td><td>888,038</td><td>$15.58</td></tr><tr><td>Vested</td><td>(2,448,843)</td><td>$ 8.81</td></tr><tr><td>Cancelled or expired</td><td>(149,266)</td><td>$12.18</td></tr><tr><td>Nonvested balance at December 31, 2013</td><td>2,066,231</td><td>$12.61</td></tr><tr><td>Granted</td><td>1,242,428</td><td>$11.86</td></tr><tr><td>Vested</td><td>(1,082,552)</td><td>$11.71</td></tr><tr><td>Cancelled or expired</td><td>(180,312)</td><td>$13.56</td></tr><tr><td>Nonvested balance at December 31, 2014</td><td>2,045,795</td><td>$12.55</td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the quoted price of Verisk’s common stock as of the reporting date. The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2014 was $303,267 and $286,728, respectively. In accordance with ASC 718, excess tax benefit from exercised stock options is recorded as an increase to additional-paid-in capital and a corresponding reduction in taxes payable. This tax benefit is calculated as the excess of the intrinsic value of options exercised in excess of compensation recognized for financial reporting purposes. The amount of the tax benefit that has been realized, as a result of those excess tax benefits, is presented as a financing cash inflow within the accompanying consolidated statements of cash flows. For the years ended December 31, 2014, 2013 and 2012, the Company recorded excess tax benefit from exercised stock options of $15,988, $58,056 and $88,387, respectively. The Company realized $22,566, $109,946 and $60,672 of tax benefit within the Company’s tax payments through December 31, 2014, 2013 and 2012, respectively. The Company estimates expected forfeitures of equity awards at the date of grant and recognizes compensation expense only for those awards that the Company expects to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized over the requisite service period and may impact the timing of expense recognized over the requisite service period. Stock based compensation expense for 2014, 2013 and 2012 was $20,253, $21,087 and $24,696, respectively.

A summary of the status of the restricted stock awarded under the 2013 Incentive Plan and changes is presented below:

<table><tr><td></td><td>Number of Shares</td><td>Weighted Average Grant Date Fair Value Per Share</td></tr><tr><td>Outstanding at January 1, 2012</td><td>145,634</td><td>$33.32</td></tr><tr><td>Granted</td><td>244,397</td><td>$47.10</td></tr><tr><td>Vested</td><td>(41,120)</td><td>$34.51</td></tr><tr><td>Forfeited</td><td>(17,898)</td><td>$43.27</td></tr><tr><td>Outstanding at December 31, 2012</td><td>331,013</td><td>$42.78</td></tr><tr><td>Granted</td><td>241,674</td><td>$61.12</td></tr><tr><td>Vested</td><td>(150,668)</td><td>$37.82</td></tr><tr><td>Forfeited</td><td>(25,270)</td><td>$53.00</td></tr><tr><td>Outstanding at December 31, 2013</td><td>396,749</td><td>$52.82</td></tr><tr><td>Granted</td><td>246,003</td><td>$59.86</td></tr><tr><td>Vested</td><td>(163,280)</td><td>$49.94</td></tr><tr><td>Forfeited</td><td>(37,162)</td><td>$55.53</td></tr><tr><td>Outstanding at December 31, 2014</td><td>442,310</td><td>$56.84</td></tr></table>

For the year ended December 31, 2014, certain employees had restricted stock vesting and covered the aggregate statutory minimum tax withholding of $1,625 through a net settlement of 27,159 shares. The payment of taxes related to the vesting was recorded as a reduction to additional paid-in-capital. This transaction is reflected within “Net share settlement of restricted stock awards” within cash flows from financing activities in the accompanying consolidated statements of cash flows.

As of December 31, 2014, there was $41,576 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2013 Incentive Plan and the 2009 Incentive Plan. That cost is expected to be recognized over a weighted-average period of 2.51 years. As of December 31,



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2014, there were 2,045,795 and 442,310 nonvested stock options and restricted stock, respectively, of which 1,652,852 and 366,776 are expected to vest. The total grant date fair value of options vested during the years ended December 31, 2014, 2013 and 2012 was $12,780, $16,468 and $19,834, respectively. The total grant date fair value of restricted stock vested during the year ended December 31, 2014, 2013 and 2012 was $9,839, $7,153 and $3,206, respectively.

The Company also offers eligible employees the opportunity to participate in an employee stock purchase plan (“ESPP”). Under the ESPP, participating employees may authorize payroll deductions of up to 20.0% of their regular base salary and up to 50.0% of their short-term incentive compensation, both of which in total may not exceed $25 in any calendar year, to purchase shares of the Company’s Class A common stock at a 5.0% discount of its fair market value at the time of purchase. In accordance with ASC 718, the ESPP is noncompensatory as the purchase discount is 5.0% or less from the fair market value, substantially all employees that meet limited employment qualifications may participate, and it incorporates no option features. During the years ended December 31, 2014 and 2013, the Company issued 26,953 and 27,879 shares of common stock at a weighted average discounted price of $57.98 and $59.62, respectively.

## 17. Pension and Postretirement Benefits:

The Company maintained a qualified defined benefit pension plan for certain of its employees through membership in the Pension Plan for Insurance Organizations (the “Pension Plan”), a multiple-employer trust. The Company applied a cash balance formula to determine future benefits. Under the cash balance formula, each participant has an account, which is credited annually based on salary rates determined by years of service, as well as the interest earned on the previous year-end cash balance. The Company also has a non-qualified supplemental cash balance plan (“SERP”) for certain employees. The SERP is funded from the general assets of the Company. Effective February 29, 2012, the Company instituted a hard freeze, which eliminated all future compensation and service credits, to all participants in the Pension Plan and SERP. The freeze in 2012 reduced the unfunded pension liability by approximately $10,200 and the Company realized a curtailment gain of $780 in “Cost of revenues” and “Selling, general and administrative” expenses in the accompanying consolidated statements of operations.

The Pension Plan’s funding policy is to contribute annually at an amount between the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974 and the maximum amount that can be deducted for federal income tax purposes. In April 2012, the Company completed a voluntary prefunding to the Pension Plan of $72,000, which resulted in a total contribution of $78,837 for the year, of which $28,206 was the minimum contribution requirement for 2012. Due to the prefunding, the minimum contribution requirement was and is expected to be $0 in 2014 and 2015, respectively. The Company contributed $1,177 and $3,911 to the SERP in 2014 and 2013, respectively, and expects to contribute $777 in 2015.

The Company also provides certain healthcare and life insurance benefits for both active and retired employees. The Postretirement Health and Life Insurance Plan (the “Postretirement Plan”), which has been frozen, is contributory, requiring participants to pay a stated percentage of the premium for coverage. The Company expects to contribute $1,148 to the Postretirement Plan in 2015.



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the changes in the benefit obligations and the plan assets, the (funded) unfunded status of the Pension Plan, SERP and Postretirement Plan, and the amounts recognized in the Company’s consolidated balance sheets at December 31:

<table><tr><td rowspan="2"></td><td colspan="2">Pension Plan and SERP</td><td colspan="2">Postretirement Plan</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Change in benefit obligation:</td><td></td><td></td><td></td><td></td></tr><tr><td>Benefit obligation at January 1</td><td>$420,664</td><td>$460,482</td><td>$20,399</td><td>$22,434</td></tr><tr><td>Interest cost</td><td>19,073</td><td>17,860</td><td>593</td><td>608</td></tr><tr><td>Actuarial loss (gain)</td><td>61,804</td><td>(31,962)</td><td>(411)</td><td>(426)</td></tr><tr><td>Plan participants&#x27; contributions</td><td>—</td><td>—</td><td>2,635</td><td>1,748</td></tr><tr><td>Benefits paid</td><td>(30,282)</td><td>(25,716)</td><td>(4,834)</td><td>(4,225)</td></tr><tr><td>Federal subsidy on benefits paid</td><td>—</td><td>—</td><td>391</td><td>260</td></tr><tr><td>Benefit obligation at December 31</td><td>$471,259</td><td>$420,664</td><td>$18,773</td><td>$20,399</td></tr><tr><td>Accumulated benefit obligation at December 31</td><td>$471,259</td><td>$420,664</td><td></td><td></td></tr><tr><td>Change in plan assets:</td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value of plan assets at January 1</td><td>$467,912</td><td>$421,134</td><td>$16,601</td><td>$18,766</td></tr><tr><td>Actual return on plan assets, net of expenses</td><td>36,474</td><td>68,583</td><td>743</td><td>(198)</td></tr><tr><td>Employer contributions, net</td><td>1,177</td><td>3,911</td><td>(305)</td><td>250</td></tr><tr><td>Plan participants&#x27; contributions</td><td>—</td><td>—</td><td>2,635</td><td>1,748</td></tr><tr><td>Benefits paid</td><td>(30,282)</td><td>(25,716)</td><td>(4,834)</td><td>(4,225)</td></tr><tr><td>Subsidies received</td><td>—</td><td>—</td><td>391</td><td>260</td></tr><tr><td>Fair value of plan assets at December 31</td><td>$475,281</td><td>$467,912</td><td>$15,231</td><td>$16,601</td></tr><tr><td>(Funded) unfunded status at December 31</td><td>$ (4,022)</td><td>(47,248)</td><td>$ 3,542</td><td>$ 3,798</td></tr><tr><td>Amounts recognized in the consolidated balance sheets consist of:</td><td></td><td></td><td></td><td></td></tr><tr><td>Pension assets, noncurrent</td><td>$ (18,589)</td><td>(60,955)</td><td>$ —</td><td>$ —</td></tr><tr><td>Pension, SERP and postretirement benefits, current</td><td>762</td><td>700</td><td>1,132</td><td>1,737</td></tr><tr><td>Pension, SERP and postretirement benefits, noncurrent</td><td>13,805</td><td>13,007</td><td>2,410</td><td>2,061</td></tr><tr><td>Total Pension, SERP and Postretirement benefits</td><td>$ (4,022)</td><td>(47,248)</td><td>$ 3,542</td><td>$ 3,798</td></tr></table>

The pre-tax components included within accumulated other comprehensive losses as of December 31 are summarized below:

<table><tr><td rowspan="2"></td><td colspan="2">Pension Plan and SERP</td><td colspan="2">Postretirement Plan</td></tr><tr><td>2014</td><td>2013</td><td>2014</td><td>2013</td></tr><tr><td>Prior service benefit</td><td>$ —</td><td>$ —</td><td>(1,000)</td><td>(1,147)</td></tr><tr><td>Actuarial losses</td><td>120,735</td><td>62,226</td><td>8,321</td><td>9,208</td></tr><tr><td>Accumulated other comprehensive losses, pretax</td><td>$120,735</td><td>$62,226</td><td>$ 7,321</td><td>$ 8,061</td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The pre-tax components of net periodic benefit (credit) cost and the amounts recognized in other comprehensive loss (income) are summarized below for the years ended December 31:

<table><tr><td rowspan="2"></td><td colspan="4">Pension Plan and SERP</td><td colspan="4">Postretirement Plan</td></tr><tr><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td><td></td><td></td></tr><tr><td>Service cost</td><td>$ —</td><td>$ —</td><td>$ 282</td><td>$ —</td><td>$ —</td><td>$ —</td><td></td><td></td></tr><tr><td>Interest cost</td><td>19,073</td><td>17,860</td><td>19,888</td><td>593</td><td>608</td><td>779</td><td></td><td></td></tr><tr><td>Curtailment gain</td><td>—</td><td>—</td><td>(780)</td><td>—</td><td>—</td><td>—</td><td></td><td></td></tr><tr><td>Expected return on plan assets</td><td>(33,942)</td><td>(30,480)</td><td>(28,899)</td><td>(786)</td><td>(919)</td><td>(255)</td><td></td><td></td></tr><tr><td>Amortization of prior service benefit</td><td>—</td><td>—</td><td>(133)</td><td>(146)</td><td>(146)</td><td>(146)</td><td></td><td></td></tr><tr><td>Amortization of net actuarial loss</td><td>763</td><td>5,078</td><td>3,646</td><td>517</td><td>767</td><td>634</td><td></td><td></td></tr><tr><td>Net periodic benefit (credit) cost</td><td>(14,106)</td><td>(7,542)</td><td>(5,996)</td><td>178</td><td>310</td><td>1,012</td><td></td><td></td></tr><tr><td>Amortization of actuarial loss reclassified from accumulated other comprehensive losses</td><td>(354)</td><td>(1,320)</td><td>(279)</td><td>—</td><td>—</td><td>—</td><td></td><td></td></tr><tr><td>Amortization of prior service benefit reclassified from accumulated other comprehensive losses</td><td>—</td><td>—</td><td>133</td><td>146</td><td>146</td><td>146</td><td></td><td></td></tr><tr><td>Prior service benefit</td><td>—</td><td>—</td><td>(7,475)</td><td>—</td><td>—</td><td>—</td><td></td><td></td></tr><tr><td>Net loss recognized reclassified from accumulated other comprehensive losses</td><td>(409)</td><td>(3,758)</td><td>(3,368)</td><td>—</td><td>—</td><td>—</td><td></td><td></td></tr><tr><td>Actuarial gain (loss)</td><td>59,272</td><td>(70,065)</td><td>26,184</td><td>(886)</td><td>(77)</td><td>1,742</td><td></td><td></td></tr><tr><td>Total recognized in other comprehensive loss (income)</td><td>58,509</td><td>(75,143)</td><td>15,195</td><td>(740)</td><td>69</td><td>1,888</td><td></td><td></td></tr><tr><td>Total recognized in net periodic benefit (credit) cost and other comprehensive loss (income)</td><td>$ 44,403</td><td>(82,685)</td><td>$ 9,199</td><td>(562)</td><td>$ 379</td><td>$2,900</td><td></td><td></td></tr></table>

The estimated amounts in accumulated other comprehensive losses that are expected to be recognized as components of net periodic benefit (credit) cost during 2015 are summarized below:

<table><tr><td></td><td>Pension Plan And SERP</td><td>Postretirement Plan</td><td>Total</td></tr><tr><td>Amortization of prior service benefit</td><td>$ —</td><td>$(146)</td><td>$ (146)</td></tr><tr><td>Amortization of net actuarial loss</td><td>2,969</td><td>599</td><td>3,568</td></tr><tr><td>Total</td><td>$2,969</td><td>$ 453</td><td>$3,422</td></tr></table>

The weighted-average assumptions used to determine benefit obligations as of December 31, 2014 and 2013 and net periodic benefit (credit) cost for the years 2014, 2013 and 2012 are provided below:

<table><tr><td rowspan="2"></td><td colspan="4">Pension Plan and SERP</td><td colspan="2">Postretirement Plan</td></tr><tr><td>2014</td><td>2013</td><td></td><td>2014</td><td>2013</td><td></td></tr><tr><td>Weighted-average assumptions used to determine benefit obligations:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Discount rate</td><td>3.99%</td><td>4.74%</td><td></td><td>3.00%</td><td>3.45%</td><td></td></tr><tr><td>Expected return on plan assets</td><td>7.50%</td><td>7.50%</td><td></td><td>4.00%</td><td>5.00%</td><td></td></tr><tr><td></td><td>2014</td><td>2013</td><td>2012</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Weighted-average assumptions used to determine net periodic benefit (credit) loss:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Discount rate</td><td>4.73%</td><td>3.98%</td><td>4.98%</td><td>3.45%</td><td>2.75%</td><td>3.50%</td></tr><tr><td>Expected return on plan assets</td><td>7.50%</td><td>7.50%</td><td>7.50%</td><td>5.00%</td><td>5.00%</td><td>N/A</td></tr><tr><td>Rate of compensation increase</td><td>N/A</td><td>N/A</td><td>4.00%</td><td>N/A</td><td>N/A</td><td>N/A</td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the estimated future benefit payments for the respective plans. The future benefit payments for the Postretirement Plan are net of the federal Medicare subsidy.

<table><tr><td rowspan="2"></td><td rowspan="2">Pension Plan and SERP</td><td colspan="3">Postretirement Plan</td></tr><tr><td>Gross Benefit Amount</td><td>Gross Benefit Amount</td><td>Medicare Subsidy Payments</td></tr><tr><td>2015</td><td>$ 29,256</td><td>$2,825</td><td>$ (395)</td><td>$2,430</td></tr><tr><td>2016</td><td>$ 30,070</td><td>$2,660</td><td>$ (387)</td><td>$2,273</td></tr><tr><td>2017</td><td>$ 30,303</td><td>$2,480</td><td>$ (378)</td><td>$2,102</td></tr><tr><td>2018</td><td>$ 30,223</td><td>$2,291</td><td>$ (368)</td><td>$1,923</td></tr><tr><td>2019</td><td>$ 30,692</td><td>$2,093</td><td>$ (358)</td><td>$1,735</td></tr><tr><td>2020-2024</td><td>$149,595</td><td>$7,587</td><td>$(1,601)</td><td>$5,986</td></tr></table>

The healthcare cost trend rate for 2014 was 7.50% gradually decreasing to 5.00% in 2020. Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plan. A 1.00% change in assumed healthcare cost trend rates would have the following effects:

<table><tr><td></td><td>1% Increase</td><td>1% Decrease</td></tr><tr><td>Effect of total service and interest cost components of net periodic postretirement healthcare benefit cost</td><td>$ 12</td><td>$ (11)</td></tr><tr><td>Effect on the healthcare component of the accumulated postretirement benefit obligation</td><td>$516</td><td>$(477)</td></tr></table>

The expected subsidy from the Medicare Prescription Drug, Improvement and Modernization Act of 2003 reduced the Company’s accumulated postretirement benefit obligation by approximately $3,182 and $2,868 as of December 31, 2014 and 2013, and the net periodic benefit cost by approximately $10, $19 and $114 in fiscal 2014, 2013 and 2012, respectively.

The expected return on the Pension Plan assets for 2014 and 2013 was 7.50%, which was determined by taking into consideration the Company’s analysis of its actual historical investment returns to a broader long-term forecast after adjusting for the target investment allocation and reflecting the current economic environment. The Company’s investment guidelines target investment allocation of 60% equity securities and 40% debt securities. The Pension Plan assets consist primarily of investments in various fixed income and equity funds. Investment guidelines are established with each investment manager. These guidelines provide the parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Investment managers are prohibited from entering into any speculative hedging transactions. The investment objective is to achieve a maximum total return with strong emphasis on preservation of capital in real terms. The domestic equity portion of the total portfolio should range between 40% and 60%. The international equity portion of the total portfolio should range between 10% and 20%. The fixed income portion of the total portfolio should range between 20% and 40%. The asset allocation at December 31, 2014 and 2013, and target allocation for 2015 by asset category are as follows:

<table><tr><td rowspan="2">Asset Category</td><td rowspan="2">Target Allocation</td><td colspan="2">Percentage of Plan Assets</td></tr><tr><td>2014</td><td>2013</td></tr><tr><td>Equity securities</td><td>60.00%</td><td>56.80%</td><td>66.80%</td></tr><tr><td>Debt securities</td><td>40.00%</td><td>41.30%</td><td>33.20%</td></tr><tr><td>Other</td><td>—%</td><td>1.90%</td><td>—%</td></tr><tr><td>Total</td><td>100.00%</td><td>100.00%</td><td>100.00%</td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has used the target investment allocation to derive the expected return as the Company believes this allocation will be retained on an ongoing basis that will be commensurate with the projected cash flows of the plan. The expected return for each investment category within the target investment allocation is developed using average historical rates of return for each targeted investment category, considering the projected cash flow of the Pension Plan. The difference between this expected return and the actual return on plan assets is generally deferred and recognized over subsequent periods through future net periodic benefit costs. The Company believes that the use of the average historical rates of returns is consistent with the timing and amounts of expected contributions to the plans and benefit payments to plan participants. These considerations provide the basis for reasonable assumptions with respect to the expected long-term rate of return on plan assets.

The Company also maintains a voluntary employees beneficiary association plan (the “VEBA Plan”) under Section 501(c)(9) of the Internal Revenue Code to fund the Postretirement Plan. The asset allocation for the VEBA Plan at December 31, 2014 and target allocation for 2015 are 100% in debt securities.

The following table summarizes the fair value measurements by level of the Pension Plan and Postretirement Plan assets. Refer to Note 7. Fair Value Measurements for further discussion with respect to fair value hierarchy.

<table><tr><td></td><td>Total</td><td>Quoted Prices in Active Markets for Identical Assets (Level 1)</td><td>Significant Other Observable Inputs (Level 2)</td><td>Significant Unobservable Inputs (Level 3)</td></tr><tr><td>December 31, 2014</td><td></td><td></td><td></td><td></td></tr><tr><td>Equity</td><td></td><td></td><td></td><td></td></tr><tr><td>Managed equity accounts(1)</td><td>$ 83,690</td><td>$ 83,690</td><td>$ —</td><td>$ —</td></tr><tr><td>Equity — pooled separate account(2)</td><td>186,102</td><td>—</td><td>186,102</td><td>—</td></tr><tr><td>Equity — partnerships(3)</td><td>240</td><td>—</td><td>—</td><td>240</td></tr><tr><td>Debt</td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed income manager — pooled separate account(2)</td><td>196,034</td><td>—</td><td>196,034</td><td>—</td></tr><tr><td>Fixed income manager — government securities(4)</td><td>15,231</td><td>15,231</td><td>—</td><td>—</td></tr><tr><td>Other</td><td></td><td></td><td></td><td></td></tr><tr><td>Cash — pooled separate account(2)</td><td>9,215</td><td>—</td><td>9,215</td><td>—</td></tr><tr><td>Total</td><td>$490,512</td><td>$ 98,921</td><td>$391,351</td><td>$240</td></tr><tr><td>December 31, 2013</td><td></td><td></td><td></td><td></td></tr><tr><td>Equity</td><td></td><td></td><td></td><td></td></tr><tr><td>Managed equity accounts(1)</td><td>$110,852</td><td>$110,852</td><td>$ —</td><td>$ —</td></tr><tr><td>Equity — pooled separate account(2)</td><td>200,947</td><td>—</td><td>200,947</td><td>—</td></tr><tr><td>Equity — partnerships(3)</td><td>635</td><td>—</td><td>—</td><td>635</td></tr><tr><td>Debt</td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed income manager — pooled separate account(2)</td><td>165,157</td><td>—</td><td>165,157</td><td>—</td></tr><tr><td>Fixed income manager — government securities(4)</td><td>16,601</td><td>16,601</td><td>—</td><td>—</td></tr><tr><td>Other</td><td></td><td></td><td></td><td></td></tr><tr><td>Cash deficit — pooled separate account(2)</td><td>(9,679)</td><td>—</td><td>(9,679)</td><td>—</td></tr><tr><td>Total</td><td>$484,513</td><td>$127,453</td><td>$356,425</td><td>$635</td></tr></table>



# VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(1) Valued at the closing price of shares for domestic stocks within the managed equity accounts, and valued at the net asset value (“NAV”) of shares for mutual funds at either the closing price reported in the active market or based on yields currently available on comparable securities of issuers with similar credit ratings for corporate bonds held by the Pension Plan in these managed accounts.

(2) The pooled separate accounts invest in domestic and foreign stocks, bonds and mutual funds. The fair values of these stocks, bonds and mutual funds are publicly quoted and are used in determining the NAV of the pooled separate account, which is not publicly quoted.

(3) Investments for which readily determinable prices do not exist are valued by the General Partner using either the market or income approach. In establishing the estimated fair value of investments, including those without readily determinable values, the General Partner assumes a reasonable period of time for liquidation of the investment, and takes into consideration the financial condition and operating results of the underlying portfolio company, nature of investment, restrictions on marketability, holding period, market conditions, foreign currency exposures, and other factors the General Partner deems appropriate.

(4) The fund invested in the U.S. government, its agencies or instrumentalities or securities that are rated AAA by S&P, AAA by Fitch, or Aaa by Moody’s, including but not limited to mortgage securities such as agency and non-agency collateralized mortgage obligations, and other obligations that are secured by mortgages or mortgage backed securities, and valued at the closing price reported in the active market.

The following table sets forth a summary of changes in fair value of the Pension Plan’s Level 3 assets for the years ended December 31:

<table><tr><td rowspan="2"></td><td colspan="2">Equity-partnerships</td></tr><tr><td>2014</td><td>2013</td></tr><tr><td>Balance at January 1</td><td>$ 635</td><td>$1,022</td></tr><tr><td>Realized and unrealized loss on plan assets, net</td><td>(395)</td><td>(387)</td></tr><tr><td>Balance at December 31</td><td>$ 240</td><td>$ 635</td></tr></table>

## 18. Segment Reporting

ASC 280-10, Disclosures About Segments of an Enterprise and Related Information (“ASC 280-10”), establishes standards for reporting information about operating segments. ASC 280-10 requires that a public business enterprise reports financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s President and CEO is identified as the CODM as defined by ASC 280-10. To align with the internal management of the Company’s business operations based on service offerings, the Company is organized into the following two operating segments, which are also the Company’s reportable segments:

Decision Analytics: The Company develops solutions that its customers use to analyze key processes in managing risk. The Company’s combination of algorithms and analytic methods incorporates its proprietary data to generate solutions. In most cases, the Company’s customers integrate the solutions into their models, formulas or underwriting criteria in order to predict potential loss events, ranging from hurricanes and earthquakes to unanticipated healthcare claims. The Company develops catastrophe and extreme event models and offers solutions covering natural and man-made risks, including acts of terrorism. The Company also develops solutions that allow customers to quantify costs after loss events occur. Fraud solutions include data on claim histories, analysis of claims to find emerging patterns of fraud, and identification of suspicious claims in the insurance and healthcare sectors.



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On March 11, 2014, the Company sold the Company’s mortgage services business, Interthinx. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. Refer to Note 10 for more information.

Risk Assessment: The Company is the leading provider of statistical, actuarial and underwriting data for the U.S. P&C insurance industry. The Company’s databases include cleansed and standardized records describing premiums and losses in insurance transactions, casualty and property risk attributes for commercial buildings and their occupants and fire suppression capabilities of municipalities. The Company uses this data to create policy language and proprietary risk classifications that are industry standards and to generate prospective loss cost estimates used to price insurance policies.

The two aforementioned operating segments represent the segments for which separate discrete financial information is available and upon which operating results are regularly evaluated by the CODM in order to assess performance and allocate resources. The Company uses EBITDA as the profitability measure for making decisions regarding ongoing operations. EBITDA is net income before interest expense, provision for income taxes, depreciation and amortization of fixed and intangible assets. Operating expenses consist of direct and indirect costs principally related to personnel, facilities, software license fees, consulting, travel, and third-party information services. Indirect costs are generally allocated to the segments using fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. The Company does not allocate interest expense and provision for income taxes, since these items are not considered in evaluating the segment’s overall operating performance. The CODM does not evaluate the financial performance of each segment based on assets. On a geographic basis, no individual country outside of the U.S. accounted for 1.00% or more of the Company’s consolidated revenue for the years ended December 31, 2014, 2013 or 2012. No individual country outside of the U.S. accounted for 3.00% or more of total consolidated long-term assets as of December 31, 2014 and 1.00% as of December 31, 2013.

The following table provides the Company’s revenue and operating income performance by reportable segment for the years ended December 31, as well as a reconciliation to operating income for all periods presented in the accompanying consolidated statements of operations:

<table><tr><td rowspan="2"></td><td colspan="4">2014</td><td colspan="4">2013</td><td colspan="4">2012</td></tr><tr><td>Decision Analytics</td><td>Risk Assessment</td><td>Total</td><td>Decision Analytics</td><td>Risk Assessment</td><td>Total</td><td>Decision Analytics</td><td>Risk Assessment</td><td>Risk Assessment</td><td>Total</td><td></td><td></td></tr><tr><td>Revenues</td><td>$1,096,074</td><td>650,652</td><td>$1,746,726</td><td>$977,427</td><td>$618,276</td><td>$1,595,703</td><td>$828,342</td><td>$579,506</td><td>$1,407,848</td><td></td><td></td><td></td><td></td></tr><tr><td>Expenses:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of revenues (exclusive of items shown separately below)</td><td>508,411</td><td>208,187</td><td>716,598</td><td>427,978</td><td>194,545</td><td>622,523</td><td>334,280</td><td>182,428</td><td>516,708</td><td></td><td></td><td></td><td></td></tr><tr><td>Selling, general and administrative</td><td>153,453</td><td>73,853</td><td>227,306</td><td>151,557</td><td>77,425</td><td>228,982</td><td>139,122</td><td>80,946</td><td>220,068</td><td></td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>—</td><td>(158)</td><td>(158)</td><td>16</td><td>(625)</td><td>(609)</td><td>22</td><td>(128)</td><td>(106)</td><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA from discontinued operations</td><td>(55,588)</td><td>—</td><td>(55,588)</td><td>(15,466)</td><td>—</td><td>(15,466)</td><td>(24,737)</td><td>—</td><td>(24,737)</td><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA</td><td>489,798</td><td>368,770</td><td>858,568</td><td>413,342</td><td>346,931</td><td>760,273</td><td>379,655</td><td>316,260</td><td>695,915</td><td></td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>64,826</td><td>20,680</td><td>85,506</td><td>51,739</td><td>14,451</td><td>66,190</td><td>33,106</td><td>13,531</td><td>46,637</td><td></td><td></td><td></td><td></td></tr><tr><td>Amortization of intangible assets</td><td>56,517</td><td>353</td><td>56,870</td><td>63,388</td><td>353</td><td>63,741</td><td>52,207</td><td>—</td><td>52,207</td><td></td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>—</td><td>158</td><td>158</td><td>(16)</td><td>625</td><td>609</td><td>(22)</td><td>128</td><td>106</td><td></td><td></td><td></td><td></td></tr><tr><td>EBITDA from discontinued operations</td><td>55,588</td><td>—</td><td>55,588</td><td>15,466</td><td>—</td><td>15,466</td><td>24,737</td><td>—</td><td>24,737</td><td></td><td></td><td></td><td></td></tr><tr><td>Operating income</td><td>$ 312,867</td><td>$347,579</td><td>$ 660,446</td><td>$282,765</td><td>$331,502</td><td>$ 614,267</td><td>$269,627</td><td>$302,601</td><td>$ 572,228</td><td></td><td></td><td></td><td></td></tr></table>



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operating segment revenue by type of service is provided below for the years ended December 31:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Decision Analytics</td><td></td><td></td><td></td></tr><tr><td>Insurance</td><td>$ 598,757</td><td>$ 539,150</td><td>$ 493,456</td></tr><tr><td>Financial services</td><td>96,763</td><td>81,113</td><td>26,567</td></tr><tr><td>Healthcare</td><td>315,628</td><td>271,538</td><td>222,955</td></tr><tr><td>Specialized markets</td><td>84,926</td><td>85,626</td><td>85,364</td></tr><tr><td>Total Decision Analytics</td><td>1,096,074</td><td>977,427</td><td>828,342</td></tr><tr><td>Risk Assessment</td><td></td><td></td><td></td></tr><tr><td>Industry-standard insurance programs</td><td>495,065</td><td>471,130</td><td>450,646</td></tr><tr><td>Property-specific rating and underwriting information</td><td>155,587</td><td>147,146</td><td>128,860</td></tr><tr><td>Total Risk Assessment</td><td>650,652</td><td>618,276</td><td>579,506</td></tr><tr><td>Total consolidated revenues</td><td>$1,746,726</td><td>$1,595,703</td><td>$1,407,848</td></tr></table>

## 19. Related Parties:

The Company considers its Class A stockholders that own more than 5% of the outstanding stock within the class to be related parties as defined within ASC 850, Related Party Disclosures. The Company had no related parties owning more than 5% of the entire class of stock as of December 31, 2014 and 2013.

In addition, the Company had no revenues from related parties for the years ended December 31, 2014, 2013 and 2012.

## 20. Commitments and Contingencies:

The Company’s operations are conducted on leased premises. Approximate minimum rentals under long-term noncancelable leases for all leased premises, computer equipment and automobiles are as follows:

<table><tr><td>Years Ending</td><td>Operating Leases</td><td>Capital Leases</td></tr><tr><td>2015</td><td>$ 37,958</td><td>$ 6,295</td></tr><tr><td>2016</td><td>38,506</td><td>4,076</td></tr><tr><td>2017</td><td>37,350</td><td>791</td></tr><tr><td>2018</td><td>29,074</td><td>181</td></tr><tr><td>2019</td><td>31,775</td><td>59</td></tr><tr><td>2020 and thereafter</td><td>260,033</td><td>85</td></tr><tr><td>Net minimum lease payments</td><td>$434,696</td><td>11,487</td></tr><tr><td>Less amount representing interest</td><td></td><td>403</td></tr><tr><td>Present value of net minimum lease capital payments</td><td></td><td>$11,084</td></tr></table>

Most of the leases require payment of property taxes and utilities and, in certain cases, contain renewal options. Operating leases consist of office space. Capital leases consist of computer equipment, office equipment, and leased automobiles. Rent expense on operating leases approximated $35,149, $32,186 and $29,618 in 2014, 2013 and 2012, respectively.



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, the Company is a party to legal proceedings with respect to a variety of matters in the ordinary course of business, including the matters described below. With respect to ongoing matters, the Company is unable, at the present time, to determine the ultimate resolution of or provide a reasonable estimate of the range of possible loss attributable to these matters or the impact they may have on the Company’s results of operations, financial position or cash flows. This is primarily because the matters are generally in early stages and discovery has either not commenced or been completed. Although the Company believes it has strong defenses and intends to vigorously defend these matters, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations, financial position or cash flows.

## Interthinx, Inc. Litigation

On May 13, 2013, the Company was served with a putative class action titled Celeste Shaw v. Interthinx, Inc., Verisk Analytics, Inc. and Jeffrey Moyer. The plaintiff is a current employee of the Company’s former subsidiary Interthinx, Inc. based in Colorado, who filed the class action in the United States District Court for the District of Colorado on behalf of all fraud detection employees who have worked for Interthinx for the last three years nationwide and who were classified as exempt employees. The class complaint claims that the fraud detection employees were misclassified as exempt employees and, as a result, were denied certain wages and benefits that would have been received if they were properly classified as non-exempt employees. It pleads three causes of action against defendants: (1) Collective Action under section 216(b) of the Fair Labor Standards Act for unpaid overtime (nationwide class); (2) A Fed. R. Civ. P. 23 class action under the Colorado Wage Act and Wage Order for unpaid overtime and (3) A Fed. R. Civ. P. 23 class action under Colorado Wage Act for unpaid commissions/nondiscretionary bonuses (Colorado class). The complaint seeks compensatory damages, penalties that are associated with the various statutes, declaratory and injunctive relief interest, costs and attorneys’ fees.

On July 2, 2013, the Company was served with a putative class action titled Shabnam Shelia Dehdashtian v. Interthinx, Inc. and Verisk Analytics, Inc. in the United States District Court for the Central District of California. The plaintiff, Shabnam Shelia Dehdashtian, a former mortgage auditor at the Company’s former subsidiary Interthinx, Inc. in California, filed the class action on behalf of all persons who have been employed by Interthinx as auditors, mortgage compliance underwriters and mortgage auditors nationwide at any time (i) within 3 years prior to the filing of this action until trial for the Fair Labor Standards Act (FLSA) class and (ii) within 4 years prior to the filing of the initial complaint until trial for the California collective action. The class complaint claims that the defendants failed to pay overtime compensation, to provide rest and meal periods, waiting time penalties and to provide accurate wage statements to the plaintiffs as required by federal and California law. It pleads seven causes of action against defendants: (1) Failure to pay overtime compensation in violation of the FLSA for unpaid overtime (nationwide class); (2) Failure to pay overtime compensation in violation of Cal. Lab. Code sections 510, 1194 and 1198 and IWC Wage Order No. 4; (3) Failure to pay waiting time penalties in violation of Cal. Lab. Code sections 201-203; (4) Failure to provide itemized wage statements in violation of Cal. Lab. Code section 226 and IWC Order No. 4; (5) Failure to provide and or authorize meal and rest periods in violation of Cal. Lab. Code section 226.7 and IWC Order No. 4; (6) Violation of California Business and Professions Code sections 17200 et seq; and (7) a Labor Code Private Attorney General Act (PAGA) Public enforcement claim, Cal. Lab. Code section 2699 (California class). The complaint seeks compensatory damages, penalties that are associated with the various statutes, equitable and injunctive relief, interest, costs and attorneys’ fees.

On October 14, 2013, the Company received notice of a claim titled Dejan Nagl v. Interthinx Services, Inc. filed in the California Labor and Workforce Development Agency. The claimant, Dejan Nagl, a former mortgage auditor at the Company’s former subsidiary Interthinx, Inc. in California, filed the claim on behalf of himself and all current and former individuals employed in California as auditors by Interthinx, Inc. for



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

violations of the California Labor Code and Wage Order. The claimant alleges on behalf of himself and other auditors the following causes of action: (1) Failure to provide rest breaks and meal periods in violation of Cal. Lab. Code sections 226.7, 514 and 1198; (2) Failure to pay overtime wages in violation of Cal. Lab. Code sections 510 and 1194; (3) Failure to provide accurate wage statements in violation of Cal. Lab. Code section 226; (4) Failure to timely pay wages in violation of Cal. Lab. Code section 204; and (5) Failures to timely pay wages for violations of Cal. Lab. Code sections 201-203. The claim seeks compensatory damages and penalties that are associated with the various statutes, costs and attorneys' fees.

On March 11, 2014, the Company sold 100 percent of the stock of Interthinx (see Note 6 Discontinued Operations for additional details). Pursuant to the terms of the sale agreement, the Company is responsible for the resolution of these matters. In October 2014, the parties agreed to a Joint Stipulation of Settlement and Release resolving the Shaw, Dehadashtian and Nagl matters which provides for a payment of $6,000, the majority of which is to be paid by insurance. The United States District Court for the District of Colorado granted Preliminary Approval of the Joint Stipulation of Settlement and Release on November 21, 2014 and scheduled the Final Fairness Hearing for April 3, 2015.

## Mariah Re Litigation

On July 8, 2013, the Company was served with a summons and complaint filed in the United States District Court for the Southern District of New York in an action titled Mariah Re LTD. v. American Family Mutual Insurance Company, ISO Services, Inc. and AIR Worldwide Corporation, which was amended by the plaintiff on October 18, 2013 (the “Amended Complaint”). Plaintiff Mariah is a special purpose vehicle established to provide reinsurance to defendant American Family Insurance. Mariah entered into contracts with our ISO Services, Inc. and AIR Worldwide Corporation subsidiaries, pursuant to which, among other things, Mariah (i) licensed the right to utilize information published in Catastrophe Bulletins issued by the Property Claims Services division of ISO Services, Inc. and (ii) engaged AIR Worldwide Corporation as Calculation Agent to compute certain reinsured losses. The Amended Complaint alleges the following causes of action: (1) breach of contract against ISO Services, Inc, AIR Worldwide Corporation, and American Family; (2) unjust enrichment against American Family; (3) conversion against American Family; (4) tortious interference with contract against American Family; (5) declaratory judgment against all defendants and (6) specific performance against all defendants. The Amended Complaint seeks declaratory relief, specific performance, restitution, monetary damages and attorneys’ fees.

On November 20, 2013, the three defendants filed motions to dismiss the Amended Complaint.

On September 30, 2014, the District Court granted defendants’ motions and dismissed the Amended Complaint in its entirety, with prejudice. Mariah filed a Notice of Appeal on October 28, 2014. Briefing of the appeal was completed on February 13, 2015.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter.

## MediConnect Global, Inc. Litigation

On October 11, 2013, the Company was served with a summons and complaint in an action titled Naveen Trehan v. MediConnect Global, Inc., Amy Anderson and Verisk Health, Inc. filed on October 9, 2013 in the United States District Court for the District of Utah. The complaint, brought by a former minority shareholder of the Company’s subsidiary, MediConnect Global, Inc., arises from MediConnect’s buyout of Naveen Trehan and his family members’ shares on October 15, 2010. Plaintiff claims that the sale of the shares was based on



# VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

MediConnect’s representations concerning third parties that had expressed interest in an acquisition, merger or investment in MediConnect at that time. Plaintiff claims that MediConnect did not disclose the Company, which purchased MediConnect on March 23, 2012, as a possible suitor. The complaint alleges four causes of action: (1) Breach of fiduciary duty against MediConnect and Amy Anderson for failure to disclose the Company’s interest in acquiring, merging with or investing in MediConnect prior to the buyout of his shares; (2) Fraud against Amy Anderson and MediConnect for intentionally providing false information to plaintiff with the purpose of inducing him to agree to sell his shares at an artificially low price; (3) Negligent misrepresentation against Amy Anderson and MediConnect for their negligent failure to discover and disclose the Company’s interest in acquiring MediConnect prior to the buyout of plaintiff’s shares and (4) a Violation of SEC Rule 10b-5 against Amy Anderson and MediConnect for defrauding plaintiff and failing to disclose material information in connection with the sale of securities. The complaint seeks joint and several recovery from Amy Anderson and MediConnect for compensatory damages, punitive damages, and disgorgement of all profits earned through the investment of plaintiff’s funds, attorneys’ fees, interest and an order from the court that plaintiff’s funds be held in a constructive trust.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

## Insurance Services Office, Inc. Litigation

In October 2013, the Company was served with a summons and complaint filed in the United States District Court for the Southern District of New York in an action titled Laurence J. Skelly and Ellen Burke v. Insurance Services Office, Inc. and the Pension Plan for Insurance Organizations. The plaintiffs, former employees of the Company’s subsidiary Insurance Services Office, Inc. (“ISO”), bring the action on their own behalf as participants in the Pension Plan for Insurance Organizations and on the behalf of similarly situated participants of the pension plan and ask the court to declare that a certain amendment to the pension plan as of December 31, 2001, which terminated their right to calculate and define the value of their retirement benefit under the pension plan based on their compensation levels as of immediately prior to their “retirement” (the “Unlawful Amendment”), violated the anti-cuback provisions and equitable principles of ERISA. The First Amended Class Action Complaint (the “Amended Complaint”) alleges that (1) the Unlawful Amendment of the pension plan violated Section 502(a)(1)(B) of ERISA as well as the anti-cuback rules of ERISA Section 204(g) and Section 411(d)(6) of the Internal Revenue Code; (2) ISO’s failure to provide an ERISA 204(h) notice in a manner calculated to be understood by the average pension plan participant was a violation of Sections 204(h) and 102(a) of ERISA; and (3) the Living Pension Right was a contract right under ERISA common law and that by terminating that right through the Unlawful Amendment ISO violated plaintiffs’ common law contract rights under ERISA. The Amended Complaint seeks declaratory, equitable and injunctive relief enjoining the enforcement of the Unlawful Amendment and ordering the pension plan and ISO retroactive to the date of the Unlawful Amendment to recalculate the accrued benefits of all class members, indemnification from ISO to the pension plan for costs and contribution requirements related to voiding the Unlawful Amendment, bonuses to the class representatives, costs and attorney’s fees. On September 12, 2014, the District Court granted ISO’s motion to dismiss the Amended Complaint finding that ISO provided ample, clear and sufficient notice of the 2002 Amendment to the Plan and that plaintiffs’ claims were time barred. Plaintiffs filed their Notice of Appeal on October 14, 2014 and all briefing of the appeal is complete.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter.

On August 1, 2014 the Company was served with an Amended Complaint filed in the United States District Court for the District of Colorado titled Snyder, et. al. v. ACORD Corp., et al. The action is brought by nineteen individual plaintiffs, on their own behalf and on behalf of a putative class, against more than 120



## VERISK ANALYTICS, INC.

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

defendants, including the Company and its subsidiary, Insurance Services Office, Inc. (“ISO”). Except for the Company, ISO and the defendant Acord Corporation, which provides standard forms to assist in insurance transactions, most of the other defendants are property and casualty insurance companies that plaintiffs claim conspired to underpay property damage claims. Plaintiffs claim that the Company and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law. On September 8, 2014, the Court entered an Order striking the Amended Complaint and granting leave to the plaintiffs to file a new complaint. On October 13, 2014, plaintiffs filed their Second Amended Complaint that continues to allege that the defendants conspired to underpay property damage claims, but does not specifically allege what role the Company or ISO played in the alleged conspiracy. The Second Amended Complaint similarly alleges that the Company and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law, and seeks all available relief including, injunctive, statutory, actual and punitive damages as well as attorneys’ fees.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

## 21. Condensed Consolidated Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

In 2013 and 2012, the Parent Company registered senior notes with full and unconditional and joint and several guarantees by certain of its 100 percent wholly-owned subsidiaries and issued certain other debt securities with full and unconditional and joint and several guarantees by certain of its subsidiaries. Accordingly, presented below is condensed consolidating financial information for (i) the Parent Company, (ii) the guarantor subsidiaries of the Parent Company on a combined basis, and (iii) all other non-guarantor subsidiaries of the Parent Company on a combined basis, as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012. The condensed consolidating financial information has been presented using the equity method of accounting, to show the nature of assets held, results of operations, comprehensive income and cash flows of the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries assuming all guarantor subsidiaries provide both full and unconditional, and joint and several, guarantees to the Parent Company at the beginning of the periods presented. Effective as of December 31, 2014, ISO Strategic Solutions, (“ISOST”), a non-guarantor of the senior notes, merged with and into Insurance Services Office, Inc. (“ISO”), a guarantor of the senior notes, pursuant to which ISO is the surviving corporation and remains a guarantor of the senior notes. As a result, the condensed consolidated balance sheet of ISOST at December 31, 2014 was reclassified from the financial information of the non-guarantor subsidiaries to that of the guarantor subsidiaries. On March 11, 2014, the Company sold 100% of the stock of Company’s mortgage services business, Interthinx, Inc., a guarantor of the senior notes. Upon the sale, Interthinx, Inc. was relieved of all its guarantees of the senior notes. Effective as of December 31, 2013, Verisk Health, Inc. and Verisk Health Solutions, Inc., guarantors of the senior notes, merged with and into Bloodhound Technologies, Inc. (“Bloodhound”), a non-guarantor of the senior notes, pursuant to which Verisk Health, Inc. (formerly Bloodhound) was the surviving corporation. By virtue of the merger, the surviving corporation of Verisk Health, Inc. expressly assumed all of the obligations of the former Verisk Health, Inc. and Verisk Health Solutions, Inc., including the guarantee by them of the senior notes. As a result, the condensed consolidated balance sheet of the former Bloodhound subsidiary at December 31, 2013 was reclassified from the financial information of the non-guarantor subsidiaries to that of the guarantor subsidiaries.



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2014

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries (In thousands)</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td>ASSETS</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current assets:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 330</td><td>$ 4,131</td><td>$ 34,898</td><td>$ —</td><td>$ 39,359</td></tr><tr><td>Available-for-sale securities</td><td>—</td><td>3,801</td><td>—</td><td>—</td><td>3,801</td></tr><tr><td>Accounts receivable, net</td><td>—</td><td>148,944</td><td>71,724</td><td>—</td><td>220,668</td></tr><tr><td>Prepaid expenses</td><td>—</td><td>27,433</td><td>4,063</td><td>—</td><td>31,496</td></tr><tr><td>Deferred income taxes, net</td><td>—</td><td>3,334</td><td>1,438</td><td>—</td><td>4,772</td></tr><tr><td>Income taxes receivable</td><td>20,180</td><td>71,376</td><td>—</td><td>(26,044)</td><td>65,512</td></tr><tr><td>Intercompany receivables</td><td>706,138</td><td>1,250,827</td><td>194,565</td><td>(2,151,530)</td><td>—</td></tr><tr><td>Other current assets</td><td>5,147</td><td>13,352</td><td>376</td><td>—</td><td>18,875</td></tr><tr><td>Total current assets</td><td>731,795</td><td>1,523,198</td><td>307,064</td><td>(2,177,574)</td><td>384,483</td></tr><tr><td>Noncurrent assets:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed assets, net</td><td>—</td><td>258,238</td><td>44,035</td><td>—</td><td>302,273</td></tr><tr><td>Intangible assets, net</td><td>—</td><td>58,887</td><td>347,589</td><td>—</td><td>406,476</td></tr><tr><td>Goodwill</td><td>—</td><td>498,075</td><td>709,071</td><td>—</td><td>1,207,146</td></tr><tr><td>Investment in subsidiaries</td><td>1,772,222</td><td>909,565</td><td>—</td><td>(2,681,787)</td><td>—</td></tr><tr><td>Pension assets</td><td>—</td><td>18,589</td><td>—</td><td>—</td><td>18,589</td></tr><tr><td>Other assets</td><td>6,684</td><td>18,918</td><td>761</td><td>—</td><td>26,363</td></tr><tr><td>Total assets</td><td>$2,510,701</td><td>$3,285,470</td><td>$1,408,520</td><td>$(4,859,361)</td><td>$2,345,330</td></tr><tr><td>LIABILITIES AND STOCKHOLDERS&#x27; EQUITY</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current liabilities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Accounts payable and accrued liabilities</td><td>$ 14,220</td><td>$ 120,058</td><td>$ 46,448</td><td>$ —</td><td>$ 180,726</td></tr><tr><td>Short-term debt and current portion of long-term debt</td><td>—</td><td>335,993</td><td>65</td><td>—</td><td>336,058</td></tr><tr><td>Pension and postretirement benefits, current</td><td>—</td><td>1,894</td><td>—</td><td>—</td><td>1,894</td></tr><tr><td>Fees received in advance</td><td>—</td><td>212,765</td><td>39,827</td><td>—</td><td>252,592</td></tr><tr><td>Intercompany payables</td><td>1,239,590</td><td>888,752</td><td>23,188</td><td>(2,151,530)</td><td>—</td></tr><tr><td>Income taxes payable</td><td>—</td><td>—</td><td>26,044</td><td>(26,044)</td><td>—</td></tr><tr><td>Total current liabilities</td><td>1,253,810</td><td>1,559,462</td><td>135,572</td><td>(2,177,574)</td><td>771,270</td></tr><tr><td>Noncurrent liabilities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Long-term debt</td><td>1,045,848</td><td>54,729</td><td>297</td><td>—</td><td>1,100,874</td></tr><tr><td>Pension and postretirement benefits</td><td>—</td><td>16,215</td><td>—</td><td>—</td><td>16,215</td></tr><tr><td>Deferred income taxes, net</td><td>—</td><td>82,340</td><td>120,200</td><td>—</td><td>202,540</td></tr><tr><td>Other liabilities</td><td>—</td><td>40,795</td><td>2,593</td><td>—</td><td>43,388</td></tr><tr><td>Total liabilities</td><td>2,299,658</td><td>1,753,541</td><td>258,662</td><td>(2,177,574)</td><td>2,134,287</td></tr><tr><td>Total stockholders&#x27; equity</td><td>211,043</td><td>1,531,929</td><td>1,149,858</td><td>(2,681,787)</td><td>211,043</td></tr><tr><td>Total liabilities and stockholders&#x27; equity</td><td>$2,510,701</td><td>$3,285,470</td><td>$1,408,520</td><td>$(4,859,361)</td><td>$2,345,330</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2013

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td>ASSETS</td><td></td><td></td><td>(In thousands)</td><td></td><td></td></tr><tr><td>Current assets:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 20,226</td><td>$ 81,095</td><td>$ 64,480</td><td>$ —</td><td>$ 165,801</td></tr><tr><td>Available-for-sale securities</td><td>—</td><td>3,911</td><td>—</td><td>—</td><td>3,911</td></tr><tr><td>Accounts receivable, net</td><td>—</td><td>99,578</td><td>58,969</td><td>—</td><td>158,547</td></tr><tr><td>Prepaid expenses</td><td>—</td><td>22,582</td><td>3,075</td><td>—</td><td>25,657</td></tr><tr><td>Deferred income taxes, net</td><td>—</td><td>—</td><td>5,086</td><td>(9)</td><td>5,077</td></tr><tr><td>Income taxes receivable</td><td>20,045</td><td>66,274</td><td>—</td><td>(18,973)</td><td>67,346</td></tr><tr><td>Intercompany receivables</td><td>633,128</td><td>525,286</td><td>202,018</td><td>(1,360,432)</td><td>—</td></tr><tr><td>Other current assets</td><td>5,144</td><td>26,835</td><td>2,702</td><td>—</td><td>34,681</td></tr><tr><td>Current assets held-for-sale</td><td>—</td><td>12,421</td><td>883</td><td>521</td><td>13,825</td></tr><tr><td>Total current assets</td><td>678,543</td><td>837,982</td><td>337,213</td><td>(1,378,893)</td><td>474,845</td></tr><tr><td>Noncurrent assets:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed assets, net</td><td>—</td><td>198,112</td><td>35,261</td><td>—</td><td>233,373</td></tr><tr><td>Intangible assets, net</td><td>—</td><td>67,407</td><td>380,211</td><td>—</td><td>447,618</td></tr><tr><td>Goodwill</td><td>—</td><td>493,053</td><td>688,628</td><td>—</td><td>1,181,681</td></tr><tr><td>Investment in subsidiaries</td><td>1,375,128</td><td>848,124</td><td>—</td><td>(2,223,252)</td><td>—</td></tr><tr><td>Pension assets</td><td>—</td><td>60,955</td><td>—</td><td>—</td><td>60,955</td></tr><tr><td>Other assets</td><td>7,789</td><td>11,356</td><td>889</td><td>—</td><td>20,034</td></tr><tr><td>Noncurrent assets held-for-sale</td><td>—</td><td>85,945</td><td>—</td><td>—</td><td>85,945</td></tr><tr><td>Total assets</td><td>$2,061,460</td><td>$2,602,934</td><td>$1,442,202</td><td>$(3,602,145)</td><td>$2,504,451</td></tr><tr><td>LIABILITIES AND STOCKHOLDERS&#x27; EQUITY</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current liabilities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Accounts payable and accrued liabilities</td><td>$ 22,233</td><td>$ 102,477</td><td>$ 63,554</td><td>$ —</td><td>$ 188,264</td></tr><tr><td>Short-term debt and current portion of long-term debt</td><td>—</td><td>4,341</td><td>107</td><td>—</td><td>4,448</td></tr><tr><td>Pension and postretirement benefits, current</td><td>—</td><td>2,437</td><td>—</td><td>—</td><td>2,437</td></tr><tr><td>Fees received in advance</td><td>—</td><td>192,524</td><td>34,057</td><td>—</td><td>226,581</td></tr><tr><td>Intercompany payables</td><td>446,509</td><td>793,517</td><td>120,406</td><td>(1,360,432)</td><td>—</td></tr><tr><td>Deferred income taxes, net</td><td>—</td><td>9</td><td>—</td><td>(9)</td><td>—</td></tr><tr><td>Income taxes payable</td><td>—</td><td>—</td><td>18,973</td><td>(18,973)</td><td>—</td></tr><tr><td>Current liabilities held-for-sale</td><td>—</td><td>8,928</td><td>—</td><td>521</td><td>9,449</td></tr><tr><td>Total current liabilities</td><td>468,742</td><td>1,104,233</td><td>237,097</td><td>(1,378,893)</td><td>431,179</td></tr><tr><td>Noncurrent liabilities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Long-term debt</td><td>1,045,129</td><td>225,950</td><td>360</td><td>—</td><td>1,271,439</td></tr><tr><td>Pension and postretirement benefits</td><td>—</td><td>15,068</td><td>—</td><td>—</td><td>15,068</td></tr><tr><td>Deferred income taxes, net</td><td>—</td><td>70,897</td><td>127,707</td><td>—</td><td>198,604</td></tr><tr><td>Other liabilities</td><td>—</td><td>31,809</td><td>4,234</td><td>—</td><td>36,043</td></tr><tr><td>Noncurrent liabilities held-for-sale</td><td>—</td><td>4,529</td><td>—</td><td>—</td><td>4,529</td></tr><tr><td>Total liabilities</td><td>1,513,871</td><td>1,452,486</td><td>369,398</td><td>(1,378,893)</td><td>1,956,862</td></tr><tr><td>Total stockholders&#x27; equity</td><td>547,589</td><td>1,150,448</td><td>1,072,804</td><td>(2,223,252)</td><td>547,589</td></tr><tr><td>Total liabilities and stockholders&#x27; equity</td><td>$2,061,460</td><td>$2,602,934</td><td>$1,442,202</td><td>$(3,602,145)</td><td>$2,504,451</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Year Ended December 31, 2014

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td></td><td></td><td></td><td>(In thousands)</td><td></td><td></td></tr><tr><td>Revenues</td><td>$ —</td><td>$1,440,093</td><td>$357,249</td><td>$ (50,616)</td><td>$1,746,726</td></tr><tr><td>Expenses:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of revenues (exclusive of items shown separately below)</td><td>—</td><td>568,858</td><td>189,507</td><td>(41,767)</td><td>716,598</td></tr><tr><td>Selling, general and administrative</td><td>—</td><td>186,937</td><td>49,218</td><td>(8,849)</td><td>227,306</td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>—</td><td>72,254</td><td>13,252</td><td>—</td><td>85,506</td></tr><tr><td>Amortization of intangible assets</td><td>—</td><td>10,085</td><td>46,785</td><td>—</td><td>56,870</td></tr><tr><td>Total expenses</td><td>—</td><td>838,134</td><td>298,762</td><td>(50,616)</td><td>1,086,280</td></tr><tr><td>Operating income</td><td>—</td><td>601,959</td><td>58,487</td><td>—</td><td>660,446</td></tr><tr><td>Other income (expense):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>51</td><td>398</td><td>(291)</td><td>—</td><td>158</td></tr><tr><td>Interest expense</td><td>(54,550)</td><td>(15,401)</td><td>(33)</td><td>—</td><td>(69,984)</td></tr><tr><td>Total other expense, net</td><td>(54,499)</td><td>(15,003)</td><td>(324)</td><td>—</td><td>(69,826)</td></tr><tr><td>(Loss) income from continuing operations before equity in net income of subsidiaries and income taxes</td><td>(54,499)</td><td>586,956</td><td>58,163</td><td>—</td><td>590,620</td></tr><tr><td>Provision for income taxes</td><td>20,180</td><td>(222,147)</td><td>(17,788)</td><td>—</td><td>(219,755)</td></tr><tr><td>Net (loss) income from continuing operations before equity in net income of subsidiaries</td><td>(34,319)</td><td>364,809</td><td>40,375</td><td>—</td><td>370,865</td></tr><tr><td>Income (loss) from discontinued operations, net of tax</td><td>—</td><td>29,322</td><td>(145)</td><td>—</td><td>29,177</td></tr><tr><td>Equity in net income of subsidiaries</td><td>434,361</td><td>32,532</td><td>—</td><td>(466,893)</td><td>—</td></tr><tr><td>Net income</td><td>$400,042</td><td>$ 426,663</td><td>$ 40,230</td><td>$(466,893)</td><td>$ 400,042</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Year Ended December 31, 2013

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td></td><td></td><td></td><td>(In thousands)</td><td></td><td></td></tr><tr><td>Revenues</td><td>$ —</td><td>$1,259,884</td><td>$355,165</td><td>$ (19,346)</td><td>$1,595,703</td></tr><tr><td>Expenses:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of revenues (exclusive of items shown separately below)</td><td>—</td><td>451,393</td><td>179,196</td><td>(8,066)</td><td>622,523</td></tr><tr><td>Selling, general and administrative</td><td>1</td><td>183,717</td><td>56,544</td><td>(11,280)</td><td>228,982</td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>—</td><td>52,248</td><td>13,942</td><td>—</td><td>66,190</td></tr><tr><td>Amortization of intangible assets</td><td>—</td><td>13,593</td><td>50,148</td><td>—</td><td>63,741</td></tr><tr><td>Total expenses</td><td>1</td><td>700,951</td><td>299,830</td><td>(19,346)</td><td>981,436</td></tr><tr><td>Operating (loss) income</td><td>(1)</td><td>558,933</td><td>55,335</td><td>—</td><td>614,267</td></tr><tr><td>Other income (expense):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>43</td><td>636</td><td>(70)</td><td>—</td><td>609</td></tr><tr><td>Interest expense</td><td>(54,551)</td><td>(21,571)</td><td>(14)</td><td>—</td><td>(76,136)</td></tr><tr><td>Total other expense, net</td><td>(54,508)</td><td>(20,935)</td><td>(84)</td><td>—</td><td>(75,527)</td></tr><tr><td>(Loss) income from continuing operations before equity in net income of subsidiaries and income taxes</td><td>(54,509)</td><td>537,998</td><td>55,251</td><td>—</td><td>538,740</td></tr><tr><td>Provision for income taxes</td><td>20,045</td><td>(198,464)</td><td>(18,007)</td><td>—</td><td>(196,426)</td></tr><tr><td>Net (loss) income from continuing operations before equity in net income of subsidiaries</td><td>(34,464)</td><td>339,534</td><td>37,244</td><td>—</td><td>342,314</td></tr><tr><td>Income (loss) from discontinued operations, net of tax</td><td>—</td><td>6,230</td><td>(164)</td><td>—</td><td>6,066</td></tr><tr><td>Equity in net income of subsidiaries</td><td>382,844</td><td>29,262</td><td>—</td><td>(412,106)</td><td>—</td></tr><tr><td>Net income</td><td>$348,380</td><td>$ 375,026</td><td>$ 37,080</td><td>$(412,106)</td><td>$ 348,380</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Year Ended December 31, 2012

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td></td><td></td><td></td><td>(In thousands)</td><td></td><td></td></tr><tr><td>Revenues</td><td>$ —</td><td>$1,162,134</td><td>$266,427</td><td>$ (20,713)</td><td>$1,407,848</td></tr><tr><td>Expenses:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of revenues (exclusive of items shown separately below)</td><td>—</td><td>401,724</td><td>125,111</td><td>(10,127)</td><td>516,708</td></tr><tr><td>Selling, general and administrative</td><td>—</td><td>174,324</td><td>56,330</td><td>(10,586)</td><td>220,068</td></tr><tr><td>Depreciation and amortization of fixed assets</td><td>—</td><td>36,898</td><td>9,739</td><td>—</td><td>46,637</td></tr><tr><td>Amortization of intangible assets</td><td>—</td><td>17,943</td><td>34,264</td><td>—</td><td>52,207</td></tr><tr><td>Total expenses</td><td>—</td><td>630,889</td><td>225,444</td><td>(20,713)</td><td>835,620</td></tr><tr><td>Operating income</td><td>—</td><td>531,245</td><td>40,983</td><td>—</td><td>572,228</td></tr><tr><td>Other income (expense):</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Investment income and others</td><td>44</td><td>(130)</td><td>192</td><td>—</td><td>106</td></tr><tr><td>Interest expense</td><td>(42,848)</td><td>(29,619)</td><td>(41)</td><td>—</td><td>(72,508)</td></tr><tr><td>Total other (expense) income, net</td><td>(42,804)</td><td>(29,749)</td><td>151</td><td>—</td><td>(72,402)</td></tr><tr><td>(Loss) income from continuing operations before equity in net income of subsidiaries and income taxes</td><td>(42,804)</td><td>501,496</td><td>41,134</td><td>—</td><td>499,826</td></tr><tr><td>Provision for income taxes</td><td>15,833</td><td>(183,025)</td><td>(15,171)</td><td>—</td><td>(182,363)</td></tr><tr><td>Net (loss) income from continuing operations before equity in net income of subsidiaries</td><td>(26,971)</td><td>318,471</td><td>25,963</td><td>—</td><td>317,463</td></tr><tr><td>Income from discontinued operations, net of tax</td><td>—</td><td>11,679</td><td>—</td><td>—</td><td>11,679</td></tr><tr><td>Equity in net income of subsidiaries</td><td>356,113</td><td>19,159</td><td>—</td><td>(375,272)</td><td>—</td></tr><tr><td>Net income</td><td>$329,142</td><td>$ 349,309</td><td>$ 25,963</td><td>$(375,272)</td><td>$ 329,142</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For The Years Ended December 31, 2014, 2013 and 2012

<table><tr><td rowspan="2"></td><td colspan="5">December 31, 2014</td></tr><tr><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td>Net income</td><td>$400,042</td><td>$426,663</td><td>$40,230</td><td>$(466,893)</td><td>$400,042</td></tr><tr><td>Other comprehensive income (loss), net of tax:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>(1,286)</td><td>(589)</td><td>(697)</td><td>1,286</td><td>(1,286)</td></tr><tr><td>Unrealized holding loss on available-for-sale securities</td><td>(35)</td><td>(35)</td><td>—</td><td>35</td><td>(35)</td></tr><tr><td>Pension and postretirement adjustment</td><td>(35,705)</td><td>(35,705)</td><td>—</td><td>35,705</td><td>(35,705)</td></tr><tr><td>Total other comprehensive loss</td><td>(37,026)</td><td>(36,329)</td><td>(697)</td><td>37,026</td><td>(37,026)</td></tr><tr><td>Comprehensive income</td><td>$363,016</td><td>$390,334</td><td>$39,533</td><td>$(429,867)</td><td>$363,016</td></tr><tr><td rowspan="2"></td><td colspan="5">December 31, 2013</td></tr><tr><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td>Net income</td><td>$348,380</td><td>$375,026</td><td>$37,080</td><td>$(412,106)</td><td>$348,380</td></tr><tr><td>Other comprehensive income (loss), net of tax:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>(840)</td><td>(778)</td><td>(99)</td><td>877</td><td>(840)</td></tr><tr><td>Unrealized holding loss on available-for-sale securities</td><td>(147)</td><td>(147)</td><td>—</td><td>147</td><td>(147)</td></tr><tr><td>Pension and postretirement adjustment</td><td>46,659</td><td>46,659</td><td>—</td><td>(46,659)</td><td>46,659</td></tr><tr><td>Total other comprehensive income (loss)</td><td>45,672</td><td>45,734</td><td>(99)</td><td>(45,635)</td><td>45,672</td></tr><tr><td>Comprehensive income</td><td>$394,052</td><td>$420,760</td><td>$36,981</td><td>$(457,741)</td><td>$394,052</td></tr><tr><td rowspan="2"></td><td colspan="5">December 31, 2012</td></tr><tr><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td>Net income</td><td>$329,142</td><td>$349,309</td><td>$25,963</td><td>$(375,272)</td><td>$329,142</td></tr><tr><td>Other comprehensive income (loss), net of tax:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>15</td><td>172</td><td>46</td><td>(218)</td><td>15</td></tr><tr><td>Unrealized holding loss on available-for-sale securities</td><td>(197)</td><td>(197)</td><td>—</td><td>197</td><td>(197)</td></tr><tr><td>Pension and postretirement adjustment</td><td>(10,691)</td><td>(10,691)</td><td>—</td><td>10,691</td><td>(10,691)</td></tr><tr><td>Total other comprehensive (loss) income</td><td>(10,873)</td><td>(10,716)</td><td>46</td><td>10,670</td><td>(10,873)</td></tr><tr><td>Comprehensive income</td><td>$318,269</td><td>$338,593</td><td>$26,009</td><td>$(364,602)</td><td>$318,269</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2014

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td></td><td colspan="5">(In thousands)</td></tr><tr><td>Net cash provided by operating activities</td><td>$ 104</td><td>$ 336,094</td><td>$ 153,254</td><td>$ —</td><td>$ 489,452</td></tr><tr><td>Cash flows from investing activities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions, net of cash acquired of $304</td><td>—</td><td>(5,051)</td><td>(30,141)</td><td>—</td><td>(35,192)</td></tr><tr><td>Purchase of non-controlling equity investments in non-public companies</td><td>—</td><td>(5,000)</td><td>—</td><td>—</td><td>(5,000)</td></tr><tr><td>Proceeds from sale of subsidiary</td><td>—</td><td>151,170</td><td>—</td><td>—</td><td>151,170</td></tr><tr><td>Investment in subsidiaries</td><td>—</td><td>(30,609)</td><td>—</td><td>30,609</td><td>—</td></tr><tr><td>Intercompany dividends received from subsidiaries</td><td>—</td><td>114</td><td>—</td><td>(114)</td><td>—</td></tr><tr><td>Repayments received from other subsidiaries</td><td>20,000</td><td>224,447</td><td>19,289</td><td>(263,736)</td><td>—</td></tr><tr><td>Advances provided to other subsidiaries</td><td>—</td><td>(5,075)</td><td>—</td><td>5,075</td><td>—</td></tr><tr><td>Capital expenditures</td><td>—</td><td>(124,513)</td><td>(22,305)</td><td>—</td><td>(146,818)</td></tr><tr><td>Purchases of available-for-sale securities</td><td>—</td><td>(203)</td><td>—</td><td>—</td><td>(203)</td></tr><tr><td>Proceeds from sales and maturities of available-for-sale securities</td><td>—</td><td>513</td><td>—</td><td>—</td><td>513</td></tr><tr><td>Net cash provided by (used in) investing activities</td><td>20,000</td><td>205,793</td><td>(33,157)</td><td>(228,166)</td><td>(35,530)</td></tr><tr><td>Cash flows from financing activities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Proceeds from short-term debt, net</td><td>—</td><td>160,000</td><td>—</td><td>—</td><td>160,000</td></tr><tr><td>Proceeds from issuance of intercompany common stock</td><td>—</td><td>—</td><td>30,609</td><td>(30,609)</td><td>—</td></tr><tr><td>Intercompany dividends paid to subsidiaries</td><td>—</td><td>—</td><td>(114)</td><td>114</td><td>—</td></tr><tr><td>Repurchases of Class A common stock</td><td>—</td><td>(778,484)</td><td>—</td><td>—</td><td>(778,484)</td></tr><tr><td>Repayments of advances to other subsidiaries</td><td>(40,000)</td><td>(39,289)</td><td>(184,447)</td><td>263,736</td><td>—</td></tr><tr><td>Advances received from other subsidiaries</td><td>—</td><td>—</td><td>5,075</td><td>(5,075)</td><td>—</td></tr><tr><td>Payment of debt issuance costs</td><td>—</td><td>(465)</td><td>—</td><td>—</td><td>(465)</td></tr><tr><td>Excess tax benefits from exercised stock options</td><td>—</td><td>22,566</td><td>—</td><td>—</td><td>22,566</td></tr><tr><td>Proceeds from stock options exercised</td><td>—</td><td>24,648</td><td>—</td><td>—</td><td>24,648</td></tr><tr><td>Net share settlement of taxes from restricted stock awards</td><td>—</td><td>(1,625)</td><td>—</td><td>—</td><td>(1,625)</td></tr><tr><td>Other financing activities, net</td><td>—</td><td>(5,613)</td><td>(105)</td><td>—</td><td>(5,718)</td></tr><tr><td>Net cash used in financing activities</td><td>(40,000)</td><td>(618,262)</td><td>(148,982)</td><td>228,166</td><td>(579,078)</td></tr><tr><td>Effect of exchange rate changes</td><td>—</td><td>(589)</td><td>(697)</td><td>—</td><td>(1,286)</td></tr><tr><td>Decrease in cash and cash equivalents</td><td>(19,896)</td><td>(76,964)</td><td>(29,582)</td><td>—</td><td>(126,442)</td></tr><tr><td>Cash and cash equivalents, beginning of period</td><td>20,226</td><td>81,095</td><td>64,480</td><td>—</td><td>165,801</td></tr><tr><td>Cash and cash equivalents, end of period</td><td>$ 330</td><td>$ 4,131</td><td>$ 34,898</td><td>$ —</td><td>$ 39,359</td></tr><tr><td>Supplemental disclosures:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Increase in intercompany balances from the purchase of treasury stock by Verisk funded directly by ISO</td><td>$778,484</td><td>$ 778,484</td><td>$ —</td><td>$ —</td><td>$ —</td></tr><tr><td>Increase in intercompany balances from proceeds received by ISO related to issuance of Verisk common stock from options exercised</td><td>$ 24,648</td><td>$ 24,648</td><td>$ —</td><td>$ —</td><td>$ —</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2013

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td>Net cash provided by operating activities</td><td>$ 42</td><td>$ 287,956</td><td>$ 218,922</td><td>$ —</td><td>$ 506,920</td></tr><tr><td>Cash flows from investing activities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions</td><td>—</td><td>(983)</td><td>—</td><td>—</td><td>(983)</td></tr><tr><td>Investment in subsidiaries</td><td>—</td><td>(350)</td><td>—</td><td>350</td><td>—</td></tr><tr><td>Proceeds from release of acquisition related escrows</td><td>66</td><td>214</td><td>—</td><td>—</td><td>280</td></tr><tr><td>Repayments received from other subsidiaries</td><td>—</td><td>206,282</td><td>9,605</td><td>(215,887)</td><td>—</td></tr><tr><td>Advances provided to other subsidiaries</td><td>(30,000)</td><td>(68,692)</td><td>—</td><td>98,692</td><td>—</td></tr><tr><td>Capital expenditures</td><td>—</td><td>(118,307)</td><td>(27,669)</td><td>—</td><td>(145,976)</td></tr><tr><td>Purchases of available-for-sale securities</td><td>—</td><td>(5,870)</td><td>—</td><td>—</td><td>(5,870)</td></tr><tr><td>Proceeds from sales and maturities of available-for-sale securities</td><td>—</td><td>7,484</td><td>—</td><td>—</td><td>7,484</td></tr><tr><td>Other investing, net</td><td>—</td><td>(561)</td><td>—</td><td>—</td><td>(561)</td></tr><tr><td>Net cash (used in) provided by investing activities</td><td>(29,934)</td><td>19,217</td><td>(18,064)</td><td>(116,845)</td><td>(145,626)</td></tr><tr><td>Cash flows from financing activities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Repayment of current portion of long-term debt</td><td>—</td><td>(180,000)</td><td>—</td><td>—</td><td>(180,000)</td></tr><tr><td>Repayments of short-term debt, net</td><td>—</td><td>(10,000)</td><td>—</td><td>—</td><td>(10,000)</td></tr><tr><td>Proceeds from issuance of common stock</td><td>—</td><td>—</td><td>350</td><td>(350)</td><td>—</td></tr><tr><td>Repurchases of Class A common stock</td><td>—</td><td>(277,411)</td><td>—</td><td>—</td><td>(277,411)</td></tr><tr><td>Transfer of cash due to the Verisk Health, Inc. merger</td><td>—</td><td>2,877</td><td>(2,877)</td><td>—</td><td>—</td></tr><tr><td>Repayments of advances to other subsidiaries</td><td>(10,010)</td><td>(9,605)</td><td>(196,272)</td><td>215,887</td><td>—</td></tr><tr><td>Advances received from other subsidiaries</td><td>60,000</td><td>30,000</td><td>8,692</td><td>(98,692)</td><td>—</td></tr><tr><td>Payment of debt issuance costs</td><td>—</td><td>(605)</td><td>—</td><td>—</td><td>(605)</td></tr><tr><td>Excess tax benefits from exercised stock options</td><td>—</td><td>109,946</td><td>—</td><td>—</td><td>109,946</td></tr><tr><td>Proceeds from stock options exercised</td><td>—</td><td>80,368</td><td>—</td><td>—</td><td>80,368</td></tr><tr><td>Other financing activities, net</td><td>—</td><td>(6,478)</td><td>(292)</td><td>—</td><td>(6,770)</td></tr><tr><td>Net cash provided by (used in) financing activities</td><td>49,990</td><td>(260,908)</td><td>(190,399)</td><td>116,845</td><td>(284,472)</td></tr><tr><td>Effect of exchange rate changes</td><td>—</td><td>(741)</td><td>(99)</td><td>—</td><td>(840)</td></tr><tr><td>Increase in cash and cash equivalents</td><td>20,098</td><td>45,524</td><td>10,360</td><td>—</td><td>75,982</td></tr><tr><td>Cash and cash equivalents, beginning of period</td><td>128</td><td>35,571</td><td>54,120</td><td>—</td><td>89,819</td></tr><tr><td>Cash and cash equivalents, end of period</td><td>$ 20,226</td><td>$ 81,095</td><td>$ 64,480</td><td>$ —</td><td>$ 165,801</td></tr><tr><td>Supplemental disclosures:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Increase in intercompany balances from the purchase of treasury stock by Verisk funded directly by ISO</td><td>$277,411</td><td>$ 277,411</td><td>$ —</td><td>$ —</td><td>$ —</td></tr><tr><td>Increase in intercompany balances from proceeds received by ISO related to issuance of Verisk common stock from options exercised</td><td>$ 80,368</td><td>$ 80,368</td><td>$ —</td><td>$ —</td><td>$ —</td></tr><tr><td>Increase (decrease) in intercompany balances due to the merger of Verisk Health, Inc.</td><td>$ —</td><td>$ 85,953</td><td>$ (85,953)</td><td>$ —</td><td>$ —</td></tr></table>



## VERISK ANALYTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

## CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended December 31, 2012

<table><tr><td></td><td>Verisk Analytics, Inc.</td><td>Guarantor Subsidiaries</td><td>Non-Guarantor Subsidiaries</td><td>Eliminating Entries</td><td>Consolidated</td></tr><tr><td></td><td></td><td></td><td>(In thousands)</td><td></td><td></td></tr><tr><td>Net cash (used in) provided by operating activities</td><td>$ (20,115)</td><td>$ 329,845</td><td>$ 158,499</td><td>$ —</td><td>$ 468,229</td></tr><tr><td>Cash flows from investing activities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Acquisitions, net of cash acquired of $36,113</td><td>—</td><td>(762,596)</td><td>(6,917)</td><td>—</td><td>(769,513)</td></tr><tr><td>Purchase of non-controlling equity investments in non-public companies</td><td>(250)</td><td>(2,000)</td><td>—</td><td>—</td><td>(2,250)</td></tr><tr><td>Earnout payments</td><td>—</td><td>—</td><td>(250)</td><td>—</td><td>(250)</td></tr><tr><td>Escrow funding associated with acquisitions</td><td>—</td><td>(38,000)</td><td>(800)</td><td>—</td><td>(38,800)</td></tr><tr><td>Proceeds from release of acquisition related escrows</td><td>—</td><td>1,455</td><td>—</td><td>—</td><td>1,455</td></tr><tr><td>Repayments received from other subsidiaries</td><td>19,400</td><td>592,356</td><td>—</td><td>(611,756)</td><td>—</td></tr><tr><td>Advances provided to other subsidiaries</td><td>—</td><td>(52,000)</td><td>—</td><td>52,000</td><td>—</td></tr><tr><td>Capital expenditures</td><td>—</td><td>(60,525)</td><td>(13,848)</td><td>—</td><td>(74,373)</td></tr><tr><td>Purchases of available-for-sale securities</td><td>—</td><td>(1,784)</td><td>—</td><td>—</td><td>(1,784)</td></tr><tr><td>Proceeds from sales and maturities of available-for-sale securities</td><td>—</td><td>1,932</td><td>—</td><td>—</td><td>1,932</td></tr><tr><td>Net cash provided by (used in) investing activities</td><td>19,150</td><td>(321,162)</td><td>(21,815)</td><td>(559,756)</td><td>(883,583)</td></tr><tr><td>Cash flows from financing activities:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Proceeds from issuance of long-term debt, net of original issue discount</td><td>347,224</td><td>—</td><td>—</td><td>—</td><td>347,224</td></tr><tr><td>Repayment of short-term debt refinanced on a long-term basis</td><td>—</td><td>(347,224)</td><td>—</td><td>—</td><td>(347,224)</td></tr><tr><td>Proceeds from short-term debt, net</td><td>—</td><td>357,224</td><td>—</td><td>—</td><td>357,224</td></tr><tr><td>Payment of debt issuance costs</td><td>(2,557)</td><td>(1,348)</td><td>—</td><td>—</td><td>(3,905)</td></tr><tr><td>Repurchases of Class A common stock</td><td>—</td><td>(162,275)</td><td>—</td><td>—</td><td>(162,275)</td></tr><tr><td>Repayments of advances provided to other subsidiaries</td><td>(419,812)</td><td>(19,400)</td><td>(172,544)</td><td>611,756</td><td>—</td></tr><tr><td>Advances received from other subsidiaries</td><td>—</td><td>—</td><td>52,000</td><td>(52,000)</td><td>—</td></tr><tr><td>Excess tax benefits from exercised stock options</td><td>—</td><td>60,672</td><td>—</td><td>—</td><td>60,672</td></tr><tr><td>Proceeds from stock options exercised</td><td>—</td><td>68,388</td><td>—</td><td>—</td><td>68,388</td></tr><tr><td>Other financing activities, net</td><td>—</td><td>(5,931)</td><td>(618)</td><td>—</td><td>(6,549)</td></tr><tr><td>Net cash used in financing activities</td><td>(75,145)</td><td>(49,894)</td><td>(121,162)</td><td>559,756</td><td>313,555</td></tr><tr><td>Effect of exchange rate changes</td><td>—</td><td>(31)</td><td>46</td><td>—</td><td>15</td></tr><tr><td>(Decrease) increase in cash and cash equivalents</td><td>(76,110)</td><td>(41,242)</td><td>15,568</td><td>—</td><td>(101,784)</td></tr><tr><td>Cash and cash equivalents, beginning of period</td><td>76,238</td><td>76,813</td><td>38,552</td><td>—</td><td>191,603</td></tr><tr><td>Cash and cash equivalents, end of period</td><td>$ 128</td><td>$ 35,571</td><td>$ 54,120</td><td>$ —</td><td>$ 89,819</td></tr><tr><td>Supplemental disclosures:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Increase in intercompany balances from the purchase of MediConnect and Argus by ISO</td><td>$ 17,000</td><td>$ 790,174</td><td>$ 773,174</td><td>$ —</td><td>$ —</td></tr><tr><td>Increase in intercompany balances from the purchase of treasury stock by Verisk funded directly by ISO</td><td>$ 162,275</td><td>$ 162,275</td><td>$ —</td><td>$ —</td><td>$ —</td></tr><tr><td>Increase in intercompany balances from proceeds received by ISO related to issuance of Verisk common stock from options exercised</td><td>$ 68,388</td><td>$ 68,388</td><td>$ —</td><td>$ —</td><td>$ —</td></tr></table>



## Schedule II

## Valuation and Qualifying Accounts and Reserves
For the Years Ended December 31, 2014, 2013 and 2012
(In thousands)

<table><tr><td>Description</td><td>Balance at Beginning of Year</td><td>Charged to Expenses(1)</td><td>Deductions—Write-offs(2)</td><td>Adjustment(3)</td><td>Balance at End of Year</td></tr><tr><td>Year ended December 31, 2014</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for doubtful accounts</td><td>$4,415</td><td>$1,814</td><td>$ (161)</td><td>$ (73)</td><td>$5,995</td></tr><tr><td>Valuation allowance for income taxes</td><td>$ 741</td><td>$ 48</td><td>$ —</td><td>$ —</td><td>$ 789</td></tr><tr><td>Year ended December 31, 2013</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for doubtful accounts</td><td>$4,753</td><td>$2,468</td><td>$ (2,284)</td><td>$ (522)</td><td>$4,415</td></tr><tr><td>Valuation allowance for income taxes</td><td>$ 595</td><td>$ 673</td><td>$ (527)</td><td>$ —</td><td>$ 741</td></tr><tr><td>Year Ended December 31, 2012</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Allowance for doubtful accounts</td><td>$4,158</td><td>$1,065</td><td>$ (470)</td><td>$ —</td><td>$4,753</td></tr><tr><td>Valuation allowance for income taxes</td><td>$1,615</td><td>$ 73</td><td>$ (1,093)</td><td>$ —</td><td>$ 595</td></tr></table>

(1) Primarily additional reserves for bad debts

(2) Primarily accounts receivable balances written off, net of recoveries, and the expiration of loss carryforwards

(3) Related to discontinued operations



## SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2015.

VERISK ANALYTICS, INC.

(Registrant)

Scott G. Stephenson

Scott G. Stephenson
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 24, 2015.

<table><tr><td>Signature</td><td>Capacity</td></tr><tr><td>/s/ SCOTT G. STEPHENSON</td><td rowspan="2">President and Chief Executive Officer (principal executive officer and director)</td></tr><tr><td>Scott G. Stephenson</td></tr><tr><td>/s/ MARK V. ANQUILLARE</td><td rowspan="2">Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)</td></tr><tr><td>Mark V. Anquillare</td></tr><tr><td>/s/ FRANK J. COYNE</td><td rowspan="2">Non-Executive Chairman of the Board of Directors</td></tr><tr><td>Frank J. Coyne</td></tr><tr><td>/s/ J. HYATT BROWN</td><td>Director</td></tr><tr><td>J. Hyatt Brown</td><td></td></tr><tr><td>/s/ GLEN A. DELL</td><td>Director</td></tr><tr><td>Glen A. Dell</td><td></td></tr><tr><td>/s/ CHRISTOPHER M. FOSKETT</td><td>Director</td></tr><tr><td>Christopher M. Foskett</td><td></td></tr><tr><td>/s/ CONSTANTINE P. IORDANOU</td><td>Director</td></tr><tr><td>Constantine P. Iordanou</td><td></td></tr><tr><td>/s/ JOHN F. LEHMAN, JR.</td><td>Director</td></tr><tr><td>John F. Lehman, Jr.</td><td></td></tr><tr><td>/s/ SAMUEL G. LISS</td><td>Director</td></tr><tr><td>Samuel G. Liss</td><td></td></tr><tr><td>/s/ ANDREW G. MILLS</td><td>Director</td></tr><tr><td>Andrew G. Mills</td><td></td></tr><tr><td>/s/ THOMAS F. MOTAMED</td><td>Director</td></tr><tr><td>Thomas F. Motamed</td><td></td></tr><tr><td>/s/ THERESE M. VAUGHAN</td><td>Director</td></tr><tr><td>Therese M. Vaughan</td><td></td></tr><tr><td>/s/ DAVID B. WRIGHT</td><td>Director</td></tr><tr><td>David B. Wright</td><td></td></tr></table>



## EXHIBIT INDEX

<table><tr><td>Exhibit Number</td><td>Description</td></tr><tr><td>3.1</td><td>Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009.</td></tr><tr><td>3.2</td><td>Amended and Restated By-Laws, incorporated herein by reference to Exhibit 3.2 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009.</td></tr><tr><td>4.1</td><td>Form of Common Stock Certificate, incorporated herein by reference to Exhibit 4.1 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009.</td></tr><tr><td>4.2</td><td>Prudential Uncommitted Master Shelf Agreement, dated as of June 13, 2003, among Insurance Services Office, Inc., The Prudential Insurance Company of America, U.S. Private Placement Fund, Baystate Investments, LLC, United of Omaha Life Insurance Company and Prudential Investment Management, Inc., incorporated herein by reference to Exhibit 4.2 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.</td></tr><tr><td>4.3</td><td>Amendment No. 1 to the Prudential Uncommitted Master Shelf Agreement, dated February 1, 2005, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto, incorporated herein by reference to Exhibit 4.3 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.</td></tr><tr><td>4.4</td><td>Amendment No. 2 to the Prudential Uncommitted Master Shelf Agreement, dated June 1, 2005, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto, incorporated herein by reference to Exhibit 4.4 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.</td></tr><tr><td>4.5</td><td>Amendment No. 3 to the Prudential Uncommitted Master Shelf Agreement, dated January 23, 2006, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto, incorporated herein by reference to Exhibit 4.5 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.</td></tr><tr><td>4.6</td><td>Waiver and Amendment No. 4 to the Prudential Uncommitted Master Shelf Agreement, dated February 28, 2007, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto, incorporated herein by reference to Exhibit 4.6 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.</td></tr><tr><td>4.7</td><td>Amendment No. 5 to the Prudential Uncommitted Master Shelf Agreement, dated August 30, 2010, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto, incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-1, dated September 16, 2010.</td></tr><tr><td>4.8</td><td>Waiver, Consent and Amendment No. 6 to the Prudential Uncommitted Master Shelf Agreement, dated March 28, 2011, among Verisk Analytics, Inc., Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto, incorporated by reference to Exhibit 4.10 to the Company’s Registration Statement on Form S-3, dated March 29, 2011.</td></tr></table>



4.9 New York Life Uncommitted Master Shelf Agreement, dated as of March 16, 2007, among Insurance Services Office, Inc., New York Life Insurance Company and the other purchasers party thereto, incorporated herein by reference to Exhibit 4.7 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.

4.10 Waiver, Consent and Amendment No. 2 to the New York Life Uncommitted Master Shelf Agreement, dated March 28, 2011, among Verisk Analytics, Inc., Insurance Services Office, Inc., New York Life Insurance Company and the other purchasers party thereto, incorporated by reference to Exhibit 4.11 to the Company’s Registration Statement on Form S-3, dated March 29, 2011.

4.11 Third Amended and Restated Sharing Agreement, dated as of March 28, 2011, among Bank of America, N.A., as administrative agent, and the other Lenders party thereto, incorporated by reference to Exhibit 4.12 to the Company’s Registration Statement on Form S-3, dated March 29, 2011.

4.12 Senior Notes Indenture, dated as of April 6, 2011, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated April 6, 2011.

4.13 First Supplemental Indenture, dated as of April 6, 2011, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated April 6, 2011.

4.14 Second Supplemental Indenture, dated as of December 8, 2011, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated December 8, 2011.

4.15 Third Supplemental Indenture, dated as of September 12, 2012, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated September 12, 2012.

10.1 401(k) Savings Plan and Employee Stock Ownership Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1, dated August 12, 2008.

10.2 Verisk Analytics, Inc. 2009 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.2 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009.

10.3 Form of Letter Agreement, incorporated herein by reference to Exhibit 10.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, dated October 7, 2008.

10.4 Form of Master License Agreement and Participation Supplement, incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, dated October 7, 2008.

10.5 Schedule of Master License Agreements Substantially Identical in All Material Respects to the Form of Master License Agreement and Participation Supplement, incorporated herein by reference to Exhibit 10.5 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008.

10.6 Amended and Restated Credit Agreement dated October 25, 2011 among Verisk Analytics, Inc., as co-borrower, Insurance Services Office, Inc., as co-borrower, the guarantors party thereto, and the lenders party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 26, 2011.



10.7 Form of Change of Control Severance Agreement, incorporated herein by reference to Exhibit 10.8 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009.

10.8 Insurance Services Office, Inc. 1996 Incentive Plan and Form of Stock Option Agreement thereunder, incorporated herein by reference to Exhibit 10.9 to Amendment No. 7 to the Company’s Registration Statement on Form S-1, dated September 29, 2009.

10.9 Form of Stock Option Award Agreement under the Verisk Analytics, Inc. 2009 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, dated November 16, 2009.

10.10 First Amendment dated September 28, 2012 to the Amended and Restated Credit Agreement dated October 25, 2011 among Verisk Analytics, Inc., as co-borrower, Insurance Services Office, Inc., as co-borrower, the guarantors party thereto, and the lenders and agents party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated September 28, 2012.

10.11 Second Amendment dated October 25, 2013 to the Amended and Restated Credit Agreement dated October 25, 2011 among Verisk Analytics, Inc., as co-borrower, Insurance Services Office, Inc., as co-borrower, the guarantors party thereto, and the lenders and agents party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 28, 2013.

10.12 Third Amendment dated October 21, 2014 to the Amended and Restated Credit Agreement dated October 25, 2011 among Verisk Analytics, Inc., as co-borrower, Insurance Services Office, Inc., a co-borrower, the guarantors party thereto, and the lenders and agents party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 21, 2014.

10.13 Insurance Services Office, Inc. Supplemental Cash Balance Plan dated January 1, 2009 as amended by the Amendment to the Insurance Services Office, Inc. Supplemental Cash Balance Plan dated February 10, 2012 incorporated by reference to Exhibit 10.13 to the Company’s annual report on Form 10-K dated February 25, 2014

10.14 Insurance Services Office, Inc. Supplemental Executive Retirement Savings Plan dated January 1, 2009 incorporated by reference to Exhibit 10.14 to the Company’s annual report on Form 10-K dated February 25, 2014

10.15 Verisk Analytics, Inc. 2013 Equity Incentive Plan, incorporated herein by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A, dated April 1, 2013.

10.16 Form of Stock Option Award Agreement under Verisk Analytics, Inc. 2013 Equity Incentive Plan, incorporated herein by reference to Exhibit 99.2 to Company’s Registration Statement on Form S-8 dated May 15, 2013.

10.17 Form of Restricted Stock Award Agreement under Verisk Analytics, Inc. 2013 Equity Incentive Plan, incorporated herein by reference to Exhibit 99.3 to Company’s Registration Statement on Form S-8 dated May 15, 2013.

21.1 Subsidiaries of the Registrant incorporated by reference to Exhibit 21.1 to the Company’s annual report on Form 10-K dated February 25, 2014

23.1 Consent of Deloitte & Touche LLP.*

31.1 Certification of the Chief Executive Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*



31.2 Certification of the Chief Financial Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.*

32.1 Certification of the Chief Executive Officer and Chief Financial Officer of Verisk Analytics, Inc. pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS XBRL Instance Document.*

101.SCH XBRL Taxonomy Extension Schema.*

101.CAL XBRL Taxonomy Extension Calculation Linkbase.*

101.DEF XBRL Taxonomy Definition Linkbase.*

101.LAB XBRL Taxonomy Extension Label Linkbase.*

101.PRE XBRL Taxonomy Extension Presentation Linkbase.*

* Filed herewith.



## CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-194874 on Form S-3, and Nos. 333-188629, 333-183476, and 333-165912 on Form S-8 of our reports dated February 24, 2015, relating to the consolidated financial statements and financial statement schedule of Verisk Analytics, Inc. (the "Company") and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2014.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

February 24, 2015



# CERTIFICATION

I, Scott G. Stephenson, certify that:

1. I have reviewed this annual report on Form 10-K of Verisk Analytics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Scott G. Stephenson

Scott G. Stephenson

President and Chief Executive Officer

Date: February 24, 2015



## CERTIFICATION

I, Mark V. Anquillare, certify that:

1. I have reviewed this annual report on Form 10-K of Verisk Analytics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Mark V. Anquillare

Mark V. Anquillare

Executive Vice President

and Chief Financial Officer

Date: February 24, 2015



## CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the annual report on Form 10-K of Verisk Analytics, Inc. (the “Company”) for the year ending December 31, 2014, as filed with the Securities and Exchange Commission (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Scott G. Stephenson, the Chief Executive Officer of the Company, and Mark V. Anquillare, the Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Scott G. Stephenson

Scott G. Stephenson

President and Chief Executive Officer

Date: February 24, 2015

/s/ Mark V. Anquillare

Mark V. Anquillare

Executive Vice President

and Chief Financial Officer



[THIS PAGE INTENTIONALLY LEFT BLANK]



[THIS PAGE INTENTIONALLY LEFT BLANK]



Corporate Headquarters
545 Washington Boulevard
Jersey City, NJ 07310-1686
201-469-3000
www.verisk.com

Investor Relations
E-mail: ir@verisk.com
201-469-2142
http://investor.verisk.com

Stock Transfer Agent
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164
1-800-468-9716

Outside Legal Counsel
Davis Polk & Wardwell LLP

Independent Registered Public Accounting Firm
Deloitte & Touche LLP

The following is a reconciliation of net income to adjusted net income:

<table><tr><td></td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>Net income</td><td>$400,042</td><td>$348,380</td><td>$329,142</td></tr><tr><td>Amortization of intangibles</td><td>56,870</td><td>63,741</td><td>52,207</td></tr><tr><td>Income tax effect on amortization of intangibles</td><td>(21,611)</td><td>(24,222)</td><td>(20,883)</td></tr><tr><td>Discontinued operations, net of tax</td><td>(29,177)</td><td>(6,066)</td><td>(11,679)</td></tr><tr><td>Adjusted net income</td><td>$406,124</td><td>$381,833</td><td>$348,787</td></tr></table>

The following is a reconciliation of net income to EBITDA from continuing operations:

<table><tr><td>Net income</td><td>$400,042</td><td>$348,380</td><td>$329,142</td></tr><tr><td>Depreciation and amortization</td><td>142,376</td><td>129,931</td><td>98,844</td></tr><tr><td>Interest expense</td><td>69,984</td><td>76,136</td><td>72,508</td></tr><tr><td>Provision for income taxes</td><td>219,755</td><td>196,426</td><td>182,363</td></tr><tr><td>Discontinued operations, net of tax</td><td>(29,177)</td><td>(6,066)</td><td>(11,679)</td></tr><tr><td>EBITDA from continuing operations</td><td>$802,980</td><td>$744,807</td><td>$671,178</td></tr></table>

## Note regarding the use of non-GAAP financial measures

The company has provided certain non-GAAP financial information as supplemental information regarding its operating results. These measures are not in accordance with — or an alternative for — GAAP and may be different from non-GAAP measures reported by other companies. The company believes that its presentation of non-GAAP measures — such as adjusted net income, EBITDA, and adjusted EBITDA — provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. In addition, the company’s management uses these measures for reviewing the financial results of the company and for budgeting and planning purposes.



This annual report is printed on paper certified by the Forest Stewardship Council \( ^{*} \)  (FSC \( ^{\circledR} \) ). The FSC promotes environmentally sound, socially beneficial, and economically prosperous forest management.

## Annual Report cover concept winner: Isaac Gerke



Verisk Analytics, Inc.
545 Washington Boulevard
Jersey City, NJ 07310-1686
201-469-3000
www.verisk.com