EDGAR 10-K Filing

Company CIK: 1442145
Filing Year: 2022
Filename: 1442145_10-K_2022_0001437749-22-004083.json

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ITEM 1. BUSINESS
Item 1.
Business
Our Company
Verisk is a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using advanced technologies to collect and analyze billions of records, we draw on unique data assets and deep domain expertise to provide innovations that may be integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, natural resources intelligence, economic forecasting, commercial banking and finance, and many other fields. In the United States ("U.S.") 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 a comprehensive package. These solutions take various forms, including proprietary data assets, expert industry insight, statistical models, tailored analytic object, and robust software platforms all designed to allow our customers to make more informed risk decisions. We believe our solutions for analyzing risk have a positive impact on our customers’ revenues and help them better manage their costs. In 2021, our customers included all of the top 100 property and casualty ("P&C") insurance providers in the U.S. for the lines of P&C services we offer and the top 30 credit card issuers in North America, the United Kingdom, and Australia as well as nine of the top ten global energy producers around the world. We also work with a wide range of companies, governments, and institutions across the energy and metals and mining value chains. We believe that our commitment to our customers and the embedded nature of our solutions serve to strengthen and extend our relationships.
We believe that Verisk is uniquely positioned because of the set of Distinctives or competitive advantages we cultivate and continue to expand, as indicated below. Our existing businesses, in addition to new product innovations, integrate the following four singular qualities into the foundation of our strategy.
Our Distinctives
•Unique Data Assets - Data is at the core of what we do. We use our proprietary data assets to develop predictive analytics and transformative models for our customers.
•Deep Domain Expertise - We have specialized and in-depth knowledge in a number of defined vertical markets, including insurance, energy, financial services, and risk management. We understand that different verticals require different approaches, and our deep domain expertise adds value to our analytics in the markets we serve.
•Steady Stream of First-to-Market Innovations - We move quickly to be the first to market with new solutions. Typically, the marketplace assumes that those who are first to market are superior to the competition and better positioned to succeed.
•Deep Integration into Customer Workflows - By embedding our solutions into customer workflows, we help our customers better manage risk and optimize their bottom line. We achieve this goal by remaining closely connected to our customers at all times and serving their distinct needs.
We offer our solutions and services primarily through annual subscriptions or long-term agreements, which are typically prepaid and represented over 81% of our revenues in 2021. For the year ended December 31, 2021, we had revenues of $2,998.6 million and net income of $666.3 million. For the five-year period ended December 31, 2021, our consolidated revenues grew at a compound annual growth rate ("CAGR") of 8.7% and our net income grew at 4.7%.
Our History
We trace our history to 1971, when Insurance Services Office, Inc. ("ISO") started operations as a not-for-profit advisory and rating organization providing services to 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.
On May 23, 2008, in contemplation of our initial public offering ("IPO"), ISO formed Verisk Analytics, Inc. ("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. Verisk common stock began trading on the NASDAQ Global Select Market on October 7, 2009, under the ticker symbol “VRSK.”
Over the past two decades, 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. Our expansion into analytics began when we acquired the American Insurance Services Group ("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 business, in 2002, we acquired AIR Worldwide ("AIR"), the technological leader in catastrophe modeling. In 2006, to bolster our position in the insurance claims field, we acquired Xactware Solutions Inc., a leading supplier of estimation software for professionals involved in building repair and reconstruction. In 2012, we acquired Argus Information & Advisory Services, LLC ("Argus") to expand our global presence providing information, competitive benchmarking, analytics, and customized services to financial institutions in the payments space. In 2015, we acquired Wood Mackenzie Limited ("Wood Mackenzie") to advance our strategy to expand internationally and position us in the global energy market. In 2017, we acquired G2 Web Services, LLC ("G2"); Sequel Business Solutions Ltd. ("Sequel"); Lundquist Consulting, Inc. ("LCI"); and PowerAdvocate, Inc. ("PowerAdvocate") to further strengthen our position in their respective segments. G2 provides merchant risk intelligence solutions for acquirers, commercial banks, and other payment system providers. Sequel is a leading insurance and reinsurance software specialist based in London. LCI offers risk insight, prediction, and management solutions for banks and creditors. PowerAdvocate is a leading data analytics provider with a one-of-a-kind spend and cost data curated from millions of transactions across thousands of services, materials, and equipment categories in the energy industry. In 2018, we acquired Rulebook Limited ("Rulebook") to further our international insurance presence in the overseas market. In 2019, we acquired Genscape, Inc. ("Genscape") and Flexible Architecture and Simplified Technology, LLC ("FAST") to enhance our solutions within the Energy and Specialized Markets segment and Insurance segment, respectively. In 2020, we acquired Franco Signor, LLC to further our offerings in the Medicare space and Lead Intelligence, Inc. ("Jornaya") to grow our set of marketing solutions for the insurance and financial services markets. In 2021, we acquired Whitespace Software Limited ("Whitespace"), Ignite Software Systems Limited ("Ignite"), and Data Driven Safety, LLC ("Data Driven Safety") to enhance our solutions within the underwriting & rating category of our Insurance segment. We also acquired Roskill Holdings Limited ("Roskill") to reinforce our ability to provide comprehensive analysis across the energy and metals and mining value chain and ACTINEO GmbH to support the entire bodily injury settlement process.
Those acquisitions have added scale, geographic reach, highly skilled workforces, and a wide array of new capabilities to support our customers. They have helped 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.
Segments
We organize our business in three segments: Insurance, Energy and Specialized Markets, and Financial Services. 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. See Note 19. of our consolidated financial statements included in this annual report on Form 10-K for further information.
Insurance Segment
Our Insurance segment primarily serves our P&C insurance customers and focuses on the prediction of loss, the selection and pricing of risk, and compliance with their reporting requirements in each U.S. state in which they operate. We also develop and utilize machine learned and artificially intelligent models to forecast scenarios and produce both standard and customized analytics that help our customers better manage their businesses, including detecting fraud before and after a loss event and quantifying losses. Our customers include most of the P&C insurance providers in the U.S. In recent years, we have expanded our offerings to also serve certain non-U.S. markets. Finally, we have also expanded into the life and annuity sectors through the acquisition of FAST in December 2019, as well as internal solutions development, to enable the transformation of the industry across the policy lifecycle through no-code technology, data analytics, and modeling.
Underwriting & rating
We are the recognized leader in the U.S. for industry-standard insurance programs that help P&C insurers define coverages and issue policies. We provide policy language, prospective loss costs, policy writing rules, and a variety of underwriting solutions for risk selection and segmentation, pricing, and workflow optimization across 30 lines of insurance. 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. They must also make sure their policies remain competitive by promptly changing coverages in response to changes in statutes, case law, or regulatory requirements. To meet our insurers' needs, we process approximately 2,300 regulatory filings and interface with state regulators in all 50 states plus the District of Columbia, Guam, Puerto Rico, and the Virgin Islands each year to ensure smooth implementation of our rules and forms. When insurers choose to develop their own alternative programs, our industry-standard insurance programs also help regulators ensure that such insurers’ policies meet basic coverage requirements.
Standardized coverage language, which has been tested in litigation and tailored to reflect judicial interpretation, helps 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 offer. With these policy programs, insurers also benefit from economies of scale. We have more than 195 specialized lawyers and insurance experts reviewing changes in each state’s insurance rules and regulations, including an average of approximately 13,200 legislative actions, 8,500 regulatory actions, and 2,000 court decisions 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 homeowners line of insurance, we maintain policy language and rules for 6 basic coverages, 282 national endorsements, and 620 state-specific endorsements.
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 those regulatory requirements for more than 50 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 those 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 five decades, we have developed core expertise in acquiring, processing, managing, protecting, and operating large and comprehensive databases that are the foundation of our insurance offerings. 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.
In 2021 alone, P&C insurers sent us approximately 2.6 billion detailed individual records of insurance transactions, such as insurance premiums collected or losses incurred. We maintain a database of more than 29.7 billion statistical records, including approximately 8.2 billion commercial lines records and approximately 21.5 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 more than 2,900 separate checks to ensure that the data meets 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 customers 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 various customers in other markets, including reinsurance and government agencies.
We project customers' future losses and loss expenses using a broad set of data. Those projections tend to be more reliable than if our customers used their own data exclusively. 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 that 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.
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 allows our customers to understand, quantify, underwrite, mitigate, and avoid potential loss for residential and commercial properties. Our database contains data and analytics on approximately 15.4 million commercial properties in the U.S. We have a staff of approximately 520 field representatives strategically located around the U.S. 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 more than 368,000 commercial properties to collect information on new buildings and verify building attributes.
We are a leading provider of innovative solutions for the personal underwriting markets, including homeowners and auto lines. Drawing on an array of resources from proprietary and third-party data to geospatial imagery, we build and maintain widely used industry-standard tools that assist insurers in underwriting and rating-that is, measuring and selecting risks and pricing coverage appropriately to help ensure fairness to the consumer and a reasonable return for the insurer. Our solutions apply advanced predictive analytics to our deep reservoir of data and information to gauge the degree and cost of risk quickly and precisely, and our workflow tools help insurers increase speed and cost-efficiency while delivering superior customer experiences. These premier solutions span a range of applications-from using precise home reconstruction costs to ensure policyholders have the right amount of coverage, to providing auto insurers with data to bind policies in minutes with once-and-done quoting.
Our solutions span a wide range of P&C insurance, encompassing personal and commercial lines of coverage that protect private residences, private and commercial vehicles, and businesses.
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 approximately 40,000fire 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.
We are a leader in and pioneered the field of probabilistic catastrophe modeling used by insurers, reinsurers, financial institutions, and government to manage their risk from extreme events. Our models, which form the basis of our solutions, enable companies to identify, quantify, and plan for the financial consequences of catastrophes. We have developed models for hurricanes, earthquakes, winter storms, tornadoes, hailstorms, and floods in more than 110 countries as well as pandemics worldwide. We have developed a probabilistic terrorism model capable of quantifying the risk in the U.S. from this evolving threat, which supports pricing and underwriting decisions down to the level of an individual policy, as well as models for estimating losses to crop insurance programs in the U.S., Canada, and China. Our newest models offer risk management solutions for the cyber and casualty lines of business.
We help businesses and governments better anticipate and monitor risks in Earth’s natural environment. We prepare certain agencies and companies to anticipate, manage, react to, and profit from climate- and weather-related risk. We serve our customers by providing state-of-the-art research, development, and analysis delivered in reports, data streams, and software solutions. We are dedicated to the advancement of the atmospheric and remote sensing science disciplines and directly addressing problems regarding weather, climate, and air quality as well as oceanography and the 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 environmental properties and translate those measurements into actionable information.
We have begun to expand our footprint of data and solutions to include both U.S. and international markets. Our international insurance markets grew through acquisitions, and today serves a large proportion of those insurers operating in both the United Kingdom ("U.K.") and Irish property and casualty markets. Additionally, our international market provides services to much of the Lloyd's and London market, whilst also serving customers in Canada, Continental Europe, Singapore, China, Australia, and New Zealand. The international enhanced commercial and residential property models and enriched data sets help insurers with triage, reconstruction value, risk selection, pricing, benchmarking, and portfolio management across multiple insured segments, with an emphasis on residential and commercial property. Insurers also use our solutions to finetune the accuracy of their rating models, to drive underwriting results through a set of analytical products that predict the relative risk and variation of major insurance perils including theft, flood, storm, fire, freeze, etc. Our international small and medium size commercial lines casualty solutions help customers digitally transform, enabling straight through processing and underwriting. In addition to property data and solutions, customers benefit from decision and benchmarking analytics using firmographic, technographic, and business intelligence, and proprietary management competency scores.
Claims
Our claims insurance solutions provide our customers analytics in fraud detection, compliance reporting, subrogation, liability assessment, litigation, and repair cost estimation, including emerging areas of interest within these categories.
We are a leading provider of fraud-detection tools for the P&C insurance industry. Our anti-fraud solutions improve our customers’ profitability by predicting the likelihood that fraud may be occurring and detecting suspicious activity after it has occurred. When a claim is submitted, our system searches our all-claims database and returns information about other claims filed by the same individuals or businesses (either as claimants or insureds) that helps our customers determine if fraud may be occurring. 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 also have a suite of advanced fraud analytics solutions: a solution that uses predictive models to accurately score claims based on fraud indicators; an injury claims solution that uses predictive analytics to detect medical provider fraud, waste, and abuse; and a network analytics solution that helps detect patterns indicative of organized fraud. We also have a comprehensive case management system claims adjusters and investigation professionals use to manage claim investigations.
Our claims database is 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 also helps insurers fulfill their regulatory compliance reporting requirements at both the state and federal levels for delinquent child support liens and other required checks. The database contains information for more than 1.5 billion claims and is the world’s largest database of P&C claims information used for claims processing and investigations. Insurers and other participants submit more than 175,000 new claims a day on average across all U.S. P&C insurance industry categories.
We also offer solutions to help the P&C industry comply with the federal Medicare Secondary Payer ("MSP") Statute, mandating claims data reporting, conditional payments liabilities repayment, and ongoing protection of the Medicare Trust Fund. Our solutions include highly accurate Medicare reporting customized to the way insurers, self-insured employers, and third-party administrators ("TPAs") do business. We also provide integrated conditional payment processing and a full range of Medicare Set-Aside ("MSA") services. We have services that automatically extract unstructured medical records and demand packages for easy, efficient review and analysis. In addition to full compliance support-including First Report of Injury ("FROI")/Subsequent Report of Injury ("SROI") and other Electronic Data Interchange ("EDI") reporting-claims professionals can also access robust analytic solutions for workers' compensation and liability claims and leverage litigation analytics for improved claim results.
We also provide data, analytics, 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:
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quantifying the ultimate cost of repair or reconstruction of damaged or destroyed buildings,
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aiding in the settlement of insurance claims; and
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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 in estimating repairs using a patented plan-sketching program. The program allows our customers to manually sketch floor, roof, and wall framing plans based upon their own measurements and automatically calculates material and labor quantities for all desired construction or repairs to the structure.
We also provide our customers access to price lists, which include structural repair and restoration pricing for 468 separate economic areas in North America. We revise this information monthly, and as often as weekly in the aftermath of major disasters, to reflect rapid price changes. Our structural repair and cleaning database contains approximately 21,000 unit-cost line items. For each line item, we report time and material pricing, and improve our reported pricing data by several methods, including direct market surveys and an analysis of the actual claim experiences of our customers. We estimate that more than 80% of insurance repair contractors and service providers in the U.S. and Canada with computerized estimating systems use our building and repair pricing data. This large percentage leads to accurate reporting of pricing information, which we believe is unmatched in the industry.
Our virtual claims adjusting tools help improve policyholder satisfaction and save on loss adjustment expense. These tools simplify collaboration among claims professionals, contractors, and policyholders as they work together remotely and efficiently. Real-time video collaboration, remote measuring tools, AI-powered damage assessment, and image analytics fraud warnings are just a few of the advantages we deliver through these solutions.
Customers access our claims ecosystem to enhance their business and operations. For example, they can tap into our weather API for near-real-time updates and valuable insights for responding to weather perils that can impact their policyholders and their business. Plus, they can use our data insights to analyze and benchmark their performance against peers in the industry and manage claims assignments.
We continually pursue new solutions that help our customers keep abreast of changing markets and technology. For example, we developed a digital media database that allows customers to view prior-loss images on claim matches so they can detect pre-existing damage on new claims. Our cutting-edge image forensics can detect suspicious claim-related photos and our customers can flag stolen and synthetic identities in the database to help subscribers deter that type of fraud.
Energy and Specialized Markets Segment
We are a leading provider of data analytics across the natural resources value chain including the global energy, chemicals, metals and mining, and power and renewables sectors. We deliver analysis and advice on assets, companies, governments, and markets based on proprietary near real time data as well as historic information. This enables us to offer a comprehensive and integrated analysis of relevant commodities to our customers. We provide research and consulting services focusing on supporting customer capital allocation decisions, asset valuation and benchmarking, commodity markets, and corporate analysis. We offer consultancy in the areas of business environment, business improvement, business strategies, commercial advisory, and transaction support.
We differentiate our solutions in the market by continuously gathering and managing proprietary information, insight, and analysis on thousands of oil and gas assets, wind turbines and solar assets, mines, refineries, and other assets, as well as detailed assessments of the market fundamentals across each value chain. These market insights help our customers achieve operational excellence, increase profitability and optimize business performance. And our experts apply the data and work directly with customers to address their business challenges.
We also offer a comprehensive suite of data and information services that enable improved compliance with global environmental health and safety ("EH&S") requirements related to the safe manufacturing, distribution, transportation, usage, and disposal of chemicals and products. From the supply chain or solutions life cycle, we deliver a program specific to the EH&S compliance information and management needs of our customers. Our full-solutions life cycle and cross-supply chain approach provides a single, integrated solution for managing customers' EH&S capabilities, which results in improved processes and reduced cost, risk, and liability.
Financial Services Segment
We maintain the largest bank account consortia to provide competitive benchmarking, decisioning algorithms, business intelligence, and customized analytic services to financial institutions, payment networks and processors, alternative lenders, regulators, and merchants enabling better strategy, marketing, and risk decisions. Our teams are located across the U.S., U.K., Canada, Australia, New Zealand, the United Arab Emirates, Mexico, and India, delivering unique products and services to an expanding customer base that values the comprehensiveness of our data and solutions as well as our full wallet-spend view of a consumer. Complementing this, we leverage our partnerships with processors and credit bureaus not only to augment the richness of our data but also to provide expanded solutions across the broad span of consumer banking and retail products. Meanwhile, we offer services and a suite of solutions to satisfy growing customer needs for better forecasting and expense tools and regulatory-focused solutions. In addition, we provide solutions in the media effectiveness space given the unique nature and strength of our partnerships and through our developing Verisk Financial Marketview brand.
Our professionals have substantive industry knowledge about 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 customers’ 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 customers in making better business decisions through analysis and analytical solutions. We maintain a comprehensive and granular direct-observation financial services industry database for credit card, debit card, and deposit transactions as well as merchant and collections transactions.
Our Growth Strategy
Over the past five years, we have grown our revenues at a CAGR of 8.7% through the successful execution of our business plan. Those 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 the following:
Increase Solution Penetration with Customers. We expect to expand the application of our solutions in customers’ internal processes. Building on our deep knowledge of and embedded position in, various industries, we expect to sell more solutions to existing customers tailored to individual market segments. By increasing the breadth and relevance of our offerings, we believe that we can strengthen our relationships with customers and increase our value to their decision making in critical ways. We have opportunities to expand solution penetration to our insurance, energy, 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 more than five decades of intellectual property in risk management. We believe we can continue to expand the use of our intellectual capital profitably 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 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 acquired 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
The customers in our Insurance segment for the lines of P&C services we offer include the top 100 P&C insurance providers in the U.S. as well as domestic InsurTech companies and insurers in international markets. A substantial majority of P&C insurance providers in the U.S. use our statistical agent services to report to regulators, and the majority of insurers and reinsurers in the U.S. use our actuarial services and industry-standard insurance programs. 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. For life and annuity insurers, we offer digital solutions including electronic applications and policy administration systems to enable automated/accelerated triage, underwriting, fraud detection, and modeling. Our claims database serves thousands of customers, representing approximately 90% of the P&C insurance industry by premium volume, more than 500 self-insurers, approximately 400 third party administrators, several state fraud bureaus, and many law enforcement agencies involved in the investigation and prosecution of insurance fraud. We estimate that more than 80% of insurance repair contractors and service providers in the U.S. and Canada with computerized estimating systems use our building and repair cost estimation pricing data.
Our customers within the Energy and Specialized Markets segment include nine of the top ten global energy producers around the world. Our customer base includes international and national energy companies as well as renewables companies, power utilities, metals and mining, and chemicals companies; financial institutions; and governments, among others. Within these organizations, we work with a range of diverse teams. These include strategists and policy makers, business developers, market analysts, commodity traders, corporate finance, risk teams, and investors. Alongside large corporate and government clients, we also work with many small and medium-size enterprises, offering services tailored to each customer’s needs.
Within the Financial Services segment, our customers include financial institutions, payment networks and processors, alternative lenders, regulators, merchants, and the top 30 credit card issuers in North America, the United Kingdom, and Australia.
Our Competitors
We believe that 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.
Our Insurance 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 that develop internal technology and actuarial methods for proprietary insurance programs. Competitors also include other statistical agents, such as the National Independent Statistical Service, the Independent Statistical Service, Inc., and other advisory organizations, that provide underwriting rules, prospective loss costs, and coverage language, including the American Association of Insurance Services, Inc. and Mutual Services Organization. However, we believe that none of our competitors have 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., and emerging providers in the InsurTech space. 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. Finally, our underwriting products compete with Lexis Nexis and Core Logic in the marketplace. Our competitors also include information technology product and services vendors; management and strategy consulting firms; and smaller specialized information technology and analytical services firms, including Pinnacle Consulting and EMB, a unit of Willis Towers Watson. Finally, in the life insurance sector, our solutions compete against vendors such as Accenture, Oracle, DXC, Majesco and iPipeline, as well as the in-house technology departments of Life Insurers. In the P&C insurance claims and catastrophe modeling markets, certain products are offered by a number of companies, including Risk Management Solutions (catastrophe modeling), CoreLogic (repair cost estimating), LexisNexis® Risk Solutions (claims investigative reports), SAS (claims fraud analytics), and Enlyte (injury claims analytics). We believe that our P&C insurance industry expertise, and our ability to offer multiple applications, services, and integrated solutions to individual customers are competitive strengths.
In the Energy and Specialized Markets segment, certain products are offered by a number of companies, including IHS Markit (natural resources), Rystad Energy (upstream), Enverus (upstream), Energy Aspects (commodities), CRU Group (metals), and Bloomberg New Energy Finance (power and renewables). We believe that our global integrated value chain knowledge and insight, bottom-up proprietary data, and long-term trusted relationships enhance our competitive position in relation to those companies.
Within the Financial Services segment, our unique datasets and wallet solutions mean that we have no direct competitors, and we work closely to create partnerships for mutual clients with organizations such as the card networks and credit bureaus to deepen ongoing relationships and create new value solutions. Our key competitors for our major brands are EverCompliant, WebShield, Trustwave, LegitScript, Lexis Nexis, American Infosource, and Phin Solutions.
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 ("JDE") and Enterprise Data Management ("EDM") teams support our efforts to create new information and products from available data and explore 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 ("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 that 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 align our product development efforts with the needs of the market. We also use a variety of market research techniques to enhance our understanding of our customers and the markets in which they operate.
We add to our offerings through an active acquisition program. Since 2017, we have acquired 32 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 solutions and services primarily through direct interaction with our customers. We employ a three-tier sales structure that includes salespeople, technical consultants, and sales support. Within our company, several areas have sales teams that specialize in specific products and services. Those specialized sales teams sell specific, highly technical solution sets to targeted markets in coordination with account management.
To provide account management to our largest customers in the insurance, energy, and financial markets, we divide our customers into three groups. Tier One (“Global/National Accounts") comprises our largest customers. Tier Two (“Strategic Accounts") represents both large and middle-market customer groups. Tier Three is composed of small and specialized companies that may represent one line of business, may be regionally focused, or are recent new entrants into the marketplace. In Tier One and Tier Two segments, we have sales teams organized by the following specialties: personal or commercial lines underwriting and pricing, claims, catastrophe risk, and energy. In the Tier Three segment, we assign a sales generalist with overall account management responsibility. Our tiered approach has proven to be a successful sales model and approach to building customer relationships. Our senior executives regularly engage with the senior management of our customers to ensure customer satisfaction and strategic alignment and to support mutual partnership innovation opportunities.
Salespeople participate in both sales and customer service activities. They provide direct support, interacting frequently with assigned customers to ensure a satisfactory experience using our services. Salespeople primarily seek out new sales opportunities and work with the various product teams to coordinate sales activities and ensure our solutions fit the customer's needs. We believe our salespeople’s product knowledge, skills to develop relationships of trust, and local presence differentiate us from our competition. Technical consultants are subject matter experts and work with salespeople on specific opportunities for their assigned products and segments. Salespeople manage the overall sales process and technical consultants manage the rigorous integration and functional fit discussions to ensure mutual success and satisfaction. Both salespeople and technical consultants have responsibility for identifying new sales opportunities. A team approach and a common customer relationship management system allow for effective coordination among the groups.
Sources of Our Data
The data we use to perform our analytics and power our solutions is 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 from their data. Those agreements remain in effect unless the data contributor chooses to opt out. 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 their required levels of privacy, protection of data, and where necessary, de-identification of data. The agreements represent no cost to us, 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 use the claims settlement data generated inside our repair cost estimating solution to improve the cost factors used in our models. Again, those 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 members, who also perform property surveys at the request of, and facilitated by, property insurers. Sixth, we collect data, or license or purchase from third parties, on geographic and spatially referenced information relating to residential and commercial structures by using the latest remote sensing and machine learning technologies. Lastly, 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. We are the owners of the derivative solutions we create using the data we collect.
Information Technology
Technology
Our information technology systems and the more recent adoption of cloud computing are fundamental to our success. They are used for the storage, processing, access, and delivery of the data that forms the foundation of our business and the development and delivery of the solutions we provide to our customers. We generally own, or have secured ongoing rights to use for the purposes of our business, all the customer-facing applications that are material to our operations. We support and implement a mix of technologies and focus on implementing the most efficient technology for any given business requirement or task.
Data Centers
We have two primary data centers in Somerset, New Jersey, and Lehi, Utah, creating redundancy and back up capabilities. In addition, we have data centers located in other states dedicated to certain business units.
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. We also have documented disaster recovery plans in place for each of our major data centers and each of our solutions. The data center in Somerset, New Jersey is the recovery site for the Lehi, Utah, data center and vice versa. Business continuity planning is in place for all of our critical business processes to provide for the prompt and effective continuation of critical services in the event of a business disruption. Our business continuity program adheres to ISO 22301:2019, which is an international standard for business continuity. All business impact analysis and business continuity plans are reviewed and updated, at a minimum, annually or when significant business changes occur.
Security
We have adopted a wide range of measures to secure our IT infrastructure and data. Security measures generally cover the following key areas: security policies and governance committees, physical security, logical security of the perimeter, network security such as firewalls, logical access to applications and operating systems, deployment of endpoint anti-malware software, email security, and appropriate procedures relating to removable media such as laptops. Laptops are encrypted, and media leaving our premises and sent to third-party storage facilities are also encrypted. Our commitment to security has earned ISO 27001:2013 Certification for our core data centers, which is an international standard for best practices associated with our Information Security Management System.
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 (for example, copyright, trademark, trade secret, and patent) and contractual safeguards in a comprehensive intellectual property enforcement program to protect it wherever it is used.
We also own several patents and have several pending patent applications in the U.S. that complement our products. 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 that are material to our business.
To maintain control of our intellectual property, we enter into contractual agreements with our customers, granting each customer permission to use our products and services, including our software and databases. This helps 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.
Human Capital
Our global workforce is united by our mission to serve, add value, and innovate for our customers. We continue to invest in our people worldwide by encouraging all employees to reach their full potential through our focus on learning in the flow of work, competitive compensation and benefits, and our culture anchored on innovation, collaboration, and inclusivity.
As a knowledge-based business, we carefully integrate the skills and talents of 9,367 employees worldwide as of December 31, 2021. Most of our highly credentialed team holds advanced degrees and professional certifications specializing in actuarial science, chemistry and physics, commercial banking and finance, commodity analytics, data science and artificial intelligence, economics, engineering, GIS mapping, meteorology, natural resources, predictive analytics, supply chain, and other fields.
Approximately 64% of our employees are based in the United States, 15% in the United Kingdom, 7% in India, with the remainder serving in 35 other countries across the globe.
None of our employees are represented by unions or subject to collective bargaining agreements, other than a small number of employees in Germany who are represented by a works council. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.
We support and work to inspire our people with a collaborative and engaging culture, and career development opportunities at all levels, competitive compensation and benefits, an ongoing focus on well-being, and responsive leadership. Starting in 2021, we have introduced a common global wellbeing day across the enterprise to recognize the importance of the total wellbeing of our workforce. In addition, in 2022, we have introduced Juneteenth, as a U.S. holiday to recognize this significant milestone in U.S. history.
We have a culture of continuous learning and improvement. To help our employees grow in their careers, we curate self-paced learning resources, and create real-time opportunities for employees to connect and learn from each other. All employees have access to our world-class virtual learning platform, which features thousands of courses taught by industry experts, ranging from public speaking, to balancing work and personal life, to data science fundamentals. We also encourage our managers to provide guidance, support, and clarity for our employees - through group town halls, engagement events, and on-going one-on-one discussions about goals, progress, and development.
Our Leadership Institute also conducts leadership development programs tailored to leaders from first-time managers to senior executives. In 2021, 477 participants committed more than 10,000 total learning hours to gaining practical tools to lead themselves, others, and the business.
We offer competitive salaries, annual merit salary reviews, and the opportunity for advancement. In addition, our program includes an incentive compensation component for eligible job categories, paid time off (“PTO”), flextime and telecommuting options, and a 401(k) program with a 100% company cash match (up to 6%). We also offer health insurance plans, no-cost life insurance equivalent to annual salary (with the option to purchase more), a discounted stock purchase program, a variety of physical, mental, and financial well-being offerings and resources, and more. Terms vary by business unit and country.
Employees can also take advantage of our employee networks, grassroots groups that help support diversity-related programs and events and promote an inclusive community. As of 2021, there were eight networks: the Verisk Women's Network, the Verisk Pride Network, the Verisk Veterans and Military Service Members Network, the Verisk REACH Network (dedicated to empowering Black employees), the Verisk Parents Network, the Verisk Unidos Network (promoting awareness of Hispanic and Latinx culture), the Verisk Asian Network, and the Verisk Accessibility Network.
The enterprise sponsored over ten special events in 2021 through our various employee network groups focused on helping our employees find ways to continue conversations that center around equality and the employee experience. Included in these events were webcasts, author led book reviews, fundraisers and open discussions with topics ranging from “Teach Girls Bravery, Not Perfection” to the reflections of minority team members to how our Verisk Veterans have leveraged their skills in civilian life.
To support our goal to have a workforce that reflects the diversity of the communities we operate in, our Board of Directors adopted our Statement on Racial Equity and Diversity in 2020. Its purpose is to confront and overcome barriers to individual achievement based on race, ethnicity, gender, sexual orientation, identity, and beliefs.
We continually strive to encourage collaboration throughout the organization, involve and empower all of our employees, and develop a diverse workforce. Surveys conducted by outside organizations and our annual employee engagement survey measure our progress against these critical metrics. Starting in 2022, we will evaluate our senior leaders against an enterprise goal to attract and retain diverse talent across the globe. The performance goal is linked to leaders' annual compensation and leaders' performance will be assessed by the senior operating committee and the Board of Directors.
The health and safety of our people working around the globe is a top priority, and our facilities worldwide follow rigorous, internally and externally audited, occupational health and safety policies. We also recognize that protecting the health, safety and wellbeing of our employees is crucial to our ability to continue to address the impact of the global COVID-19 pandemic.
The majority of our people continued to work remotely in 2021. We continue to evolve our preparedness strategy for office reopenings to integrate key learnings, safety measures and employee feedback to rethink the future of work.
Our employee engagement score for 2021 is at 76%. Verisk continues to be recognized for our outstanding workplace culture by Great Place to Work® in the U.S., the United Kingdom, India, and Spain. The Great Place to Work Institute is a global authority on high-trust, high-performance workplaces.
Regulation
Because our business involves the distribution of certain personal, public, and nonpublic 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 U.S. and, to a lesser extent, in 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 nonpublic personal financial information held by financial institutions and applies indirectly to companies that provide services to financial institutions; 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.
Those 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, the 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 50 states, Puerto Rico, Guam, the U.S. 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 P&C 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 insurers' 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. Further, 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 U.S. Securities and Exchange Commission ("SEC"). For access to the filings, click the “SEC Filings” link on the “Financial Information” tab on our Investor Relations homepage. The contents of our website are not incorporated into this filing. Verisk trades on the NASDAQ Global Market in the Nasdaq Global Select Market segment under the ticker symbol “VRSK.” Our stock was first publicly traded on October 7, 2009.
The public may read any materials filed by Verisk with the SEC on the SEC's Internet site (www.sec.gov), which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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ITEM 1A. RISK FACTORS
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 common stock, could decline due to any of these risks, and you may lose all or part of your investment. In addition to the effects of the COVID-19 pandemic and resulting global disruptions on our business and operations discussed in Item 7 of Part II, "Management's Discussion Analysis of Financial Condition and Results of Operations," and in the risk factors below, additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of the risks discussed below.
Risks Related to Our Business
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 that allows us to legally use and/or process the data. In addition, some of our customers have been, and in the future may continue to be, stockholders of our company. If our customers’ percentage of ownership of our common stock decreases, or they cease to be stockholders of our company, 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 data 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, 2021, approximately 52% of our revenue was derived from solutions provided to U.S. P&C primary insurers. Also, our 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 that are 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:
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changes in the business analytics industry,
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changes in technology,
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our inability to obtain or use state fee schedule or claims data in our insurance solutions,
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saturation of market demand,
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loss of key customers,
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industry consolidation, and
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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, other strategic relationships and dispositions of our business, and related integration and separation risks, could result in operating difficulties and other harmful consequences, and we may not be successful in achieving the anticipated benefits of such transactions.
Our long-term business strategy includes growth through acquisitions and other strategic relationships. 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 or investments. Moreover, from time to time we may also undertake dispositions of certain businesses or assets. Any acquisitions, investments and dispositions will be accompanied by the risks commonly encountered in such transactions. Such risks include, among other things:
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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,
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paying more than fair market value for an acquired company or assets, or receiving less than fair market value for disposed businesses or assets,
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failing to integrate or separate the operations and personnel of the acquired or disposed businesses in an efficient, timely manner,
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assuming potential liabilities of an acquired company,
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managing the potential disruption to our ongoing business,
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distracting management focus from our core businesses,
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failing to retain management at the acquired company,
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difficulty in acquiring suitable businesses, including challenges in predicting the value an acquisition will ultimately contribute to our business,
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possibility of overpaying for acquisitions, particularly those with significant intangible assets that derive value using novel tools and/or are involved in niche markets,
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impairing relationships with employees, customers, and strategic partners,
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incurring expenses associated with the amortization of intangible assets particularly for intellectual property and other intangible assets,
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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
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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 could 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 could 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 sector. Any of these developments could materially 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 depend 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 typically face a long selling cycle to secure new contracts that require 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.
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 the 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.
However, as a general practice we do not enter into employee contracts with the members of our senior management operating team, except for certain limited situations. 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.
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 energy transition driven by climate change and decarbonization, the availability of short-term and long-term funding and capital, the level and volatility of interest rates, currency exchange rates, and inflation. 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.
We may incur substantial additional indebtedness in connection with future acquisitions.
In order to finance acquisitions, which are an important part of our long-term growth strategy, we may incur substantial additional indebtedness and such increased leverage could adversely affect our business. In particular, the increased leverage could increase our vulnerability to sustained, adverse macroeconomic weakness, limit our ability to obtain further financing and limit our ability to pursue other operational and strategic opportunities. The increased leverage, potential lack of access to financing and increased expenses could have a material adverse effect on our financial condition, results of operations and cash flows.
General economic uncertainties, including downward trends in the energy industry, could reduce demand by Wood Mackenzie’s customers for its products and services.
Demand for Wood Mackenzie’s products and services may be negatively influenced by general economic uncertainties, particularly any downward trends in the energy industry and the energy transition driven by climate change and decarbonization. Many factors could negatively affect the revenues, profits and discretionary spending of Wood Mackenzie’s customers. Such factors include commodity prices (in particular, oil and coal), the state of the local economy, interest rates, currency exchange rates, political uncertainty or restrictions and regulations, the availability of industry resources, and other matters. A downturn or perceived downturn in the economy, particularly the energy industry, could add pricing pressure, delay subscription renewals or lead to more challenging or protracted fee negotiations or generally lower acceptance of our solutions by Wood Mackenzie’s customers, which could cause a decline in our revenues and have a material adverse effect on our financial condition, results of operations and cash flows.
Risks Related to Our Intellectual Property and Cybersecurity
Fraudulent or unpermitted data access and other cyber-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. Many of our solutions involve the storage and transmission of proprietary information and sensitive or confidential data. As with other global companies, our systems are regularly subject to cyber-attacks, cyber-threats, attempts at fraudulent access, physical break-ins, computer viruses, attacks by hackers and similar disruptive problems. As cyber-threats continue to evolve, we are required to expend significant additional resources to continue to modify and enhance our protective measures and to investigate and remediate any information security vulnerabilities and incidents. Despite efforts to ensure the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate or detect all security breaches, nor may we be able to implement guaranteed preventive measures against such security breaches. Cyber-threats are rapidly evolving and we may not be able to anticipate, prevent or detect all such attacks and could be held liable for any security breach or loss.
Third-party contractors, including cloud-based service providers, 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. Our business relies on the secure processing, transmission, storage and retrieval of confidential, proprietary and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks.
In addition, customers’, employees’ or other’s misuse of and/or gaining fraudulent or 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:
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deterring customers from using our solutions;
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deterring data suppliers from supplying data to us;
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harming our reputation;
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exposing us to liability;
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increasing operating expenses to correct problems caused by the breach;
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affecting our ability to meet customers’ expectations; and/or
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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, have in the past occurred, and may in the future occur and could go undetected. The number of potentially affected consumers identified by any future incidents is inherently uncertain. Any such incident could materially adversely affect our business, reputation, financial condition, operating results and cash flows. In addition, media or other reports of perceived security vulnerabilities to our systems or those of our third-party suppliers, even if no breach has been attempted or occurred, could also adversely impact our reputation and materially impact our business.
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 U.S., 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 have, from time-to-time, been subject to litigation alleging intellectual property infringement. 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 adversely affect our business, reputation, financial condition, operating results, and cash flows.
We may lose key business assets, through the 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, whether in cloud or dedicated environments, 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 online 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 online servers may not be unavailable for specified periods of time. Any damage to our or our third-party service provider’s 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.
Risks Related to Legal, Regulatory and Compliance Matters
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. Businesses 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 U.S. 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.
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, the European Union’s General Data Protection Regulation, 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. We have implemented various measures to comply with the data privacy and protection principles of the European Union’s General Data Protection Regulation, however, there can be no assurances that such methods will be deemed fully compliant. If we are unable to comply with the data privacy and protection principles adopted pursuant to the General Data Protection Regulation, it will impede our ability to conduct business between the U.S. and the E.U. which could have a material adverse effect on our business, financial position, results of operations or cash flows.
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 and future laws and regulations; and
•
failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner.
Our financial position may be impacted by audit examinations or changes in tax laws or tax rulings.
Our existing corporate structure and tax positions have been implemented in a manner in which we believe is compliant with current prevailing tax laws. However, changes in existing tax laws or rulings, including Federal, State and International, could have a significant impact on our effective tax rate, cash tax positions and deferred tax assets and liabilities. Tax audit examinations with an adverse outcome could have a negative effect in the jurisdictions in which we operate. Furthermore, the Organization for Economic Co-operation and Development (OECD) released its Base Erosion and Profit Shifting (BEPS) action plans which may also lead to future tax reform that could affect our results. In addition, our tax positions are impacted by fluctuations in our earnings and financial results in the various countries in which we do business.
We are subject to antitrust, consumer protection, intellectual property and other litigation, as well as governmental investigations, and may in the future become further subject to such litigation and investigations; an adverse outcome in such litigation or investigations 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, consumer protection and intellectual property 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.
Our failure to successfully defend or settle any litigation or resolve any governmental investigation 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 litigation or investigation in the future. Even if the direct financial impact of such litigation or investigations is not material, settlements or judgments arising out of such litigation or investigations 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.
Risks Related to International Operations
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 pricing. 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.
Our operations are subject to additional risks inherent in international operations.
Wood Mackenzie is based in the United Kingdom and conducts its principal operations outside the U.S. Conducting extensive international operations subjects us to risks that are inherent in international operations, including challenges posed by different pricing environments and different forms of competition; lack of familiarity and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs and other barriers; unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties, or other trade restrictions; differing technology standards; difficulties in collecting accounts receivable; difficulties in managing and staffing international operations; varying expectations as to employee standards; potentially adverse tax consequences, including possible restrictions on the repatriation of earnings; and reduced or varied protection for intellectual property rights in some countries. In addition, our international operations subject us to obligations associated with anti-corruption laws and regulations, such as the U.K. Bribery Act 2010, the U.S. Foreign Corrupt Practices Act and regulations established by the U.S. Office of Foreign Assets Control. Government agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against companies for violations of export controls, anti-corruption laws or regulations, and other laws, rules, sanctions, embargoes, and regulations.
Moreover, international operations could be interrupted and negatively affected by economic changes, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, and other economic or political uncertainties. All of these risks could result in increased costs or decreased revenues, either of which could have a material adverse effect on our financial condition, results of operations and cash flows.
We are subject to the increased risk of exchange rate fluctuations.
As a result of our acquisition of Wood Mackenzie and other recent acquisitions outside of the U.S., we face greater exposure to movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. Our operating results could be negatively affected depending on the amount of revenue and expense denominated in foreign currencies. As exchange rates vary, revenue, cost of revenue, operating expenses, and other operating results, when remeasured in U.S. dollars, may differ materially from expectations. Although we may apply certain strategies to mitigate foreign currency risk, these strategies may not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications.
Risks Related to Our Common Stock
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 our 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, 2021, our ten largest shareholders owned 36.1% of our common stock, including 2.6% of our 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 5,608,239 shares of common stock were outstanding as of February 18, 2022. 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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B.
Unresolved Staff Comments
Not Applicable.

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ITEM 2. PROPERTIES
Item 2.
Properties
Our headquarters are in Jersey City, New Jersey. As of December 31, 2021, our principal offices consisted of the following properties:
Location
Square Feet
Lease Expiration Date
Jersey City, New Jersey
352,765
December 31, 2033
Lehi, Utah
200,000
January 31, 2024
Boston, Massachusetts
115,271
November 30, 2030
White Plains, New York
66,303
June 29, 2025
Houston, Texas
56,584
April 30, 2023
We also lease offices in 21 states in the U.S., and offices outside the U.S. to support our international operations in Australia, Bahrain, Brazil, Bulgaria, Canada, China, Czech Republic, Denmark, France, Germany, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Nepal, Netherlands, New Zealand, Poland, Russia, Singapore, South Africa, South Korea, Spain, the United Arab Emirates, and the U.K.
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.

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ITEM 3. LEGAL PROCEEDINGS
Item 3.
Legal Proceedings
See Note 21, Commitments and Contingencies, to the consolidated financial statements included in Item 8 Part II of this 10-K for information regarding certain legal proceedings in which we are involved.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4.
Mine Safety Disclosures
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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. As of February 18, 2022, there were approximately 66 stockholders of record. We believe the number of beneficial owners is substantially greater than the number of record holders because a large portion of common stock is held in “street name” by brokers.
On February 17, 2021, April 28, 2021, July 28, 2021, and October 27, 2021, our Board approved a cash dividend of $0.29 per share of common stock issued and outstanding to the holders of record as of March 15, 2021, June 15, 2021, September 15, 2021, and December 15, 2021, respectively. Cash dividends of $188.2 million and $175.8 million were paid during the years ended December 31, 2021 and 2020 and recorded as a reduction to retained earnings, respectively. We have a publicly announced share repurchase plan and repurchased a total of 64,753,581 shares since our IPO through December 31, 2021. As of December 31, 2021, we had 382,351,399 shares of treasury stock.
Performance Graph
The graph below compares the cumulative total stockholder return on $100 invested in our common stock, with the cumulative total return on $100 invested in the S&P 500 index and an aggregate of peer issuers in our industry. The peer issuers used for this graph are Black Knight, Inc., CoreLogic Inc. (as of June 3, 2021, CoreLogic was no longer a publicly-traded company), CoStar Group Inc., Equifax Inc., Fair Isaac Corp., Gartner, Inc., Global Payments, Inc., IHS Markit, Intercontinental Exchange, Inc., Jack Henry & Associates Inc., Moody’s Corporation, MSCI Inc., S&P Global, and TransUnion. The graph assumes that the value of investment in our common stock and each index was $100 at December 31, 2016 and that all cash dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
Assumes $100 Invested on December 31, 2016
Assumes Dividend Reinvested
Fiscal Year Ended December 31, 2021
Recent Sales of Unregistered Securities
We had no unregistered sales of equity securities during 2021.
Issuer Purchases of Equity Securities
Our Board of Directors has authorized a share repurchase program ("Repurchase Program"), of up to $4.6 billion, inclusive of the $500.0 million authorization approved by the board on August 17, 2021. As of December 31, 2021, $603.8 million remains available for share repurchases. In December 2020, March 2021, June 2021, and September 2021, we entered into four Accelerated Share Repurchase ("ASR") agreements to repurchase shares of our common stock for an aggregate purchase price of $400.0 million. These ASRs were settled in February 2021, May 2021, September 2021, and December 2021. In December 2021, we entered into an additional ASR agreement to repurchase shares of our common stock for an aggregate purchase price of $100.0 million. This ASR was settled in February 2022. Please refer to Note 22. Subsequent Events, for more information. 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. Since the introduction of share repurchase as a feature of our capital management strategies in 2010, we have repurchased shares with an aggregated value of $3,996.2 million. On February 16, 2022, our Board of Directors approved an additional share repurchase authorization of $1.0 billion. Our share repurchases for the quarter ended December 31, 2021 are set forth below:
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in millions)
October 1, 2021 through October 31, 2021
299,596 (1)
$ 200.27 (1)
299,596
$ 603.8
November 1, 2021 through November 30, 2021
-
$ -
-
$ 603.8
December 1, 2021 through December 31, 2021
52,815 (1)
$ 212.82 (1)
52,815
$ 603.8
352,411 (1)
$ 212.82 (1)
352,411
_______________
(1) In September 2021, we entered into an ASR agreement to repurchase shares of our common stock for an aggregate purchase price of $75.0 million with Wells Fargo Bank. The ASR agreement is accounted for as a treasury stock transaction and a forward stock purchase agreement indexed to our common stock. Upon the payment of the aggregate purchase price of $75.0 million on October 1, 2021, we received 299,596 shares of our common stock at a price of $200.27 per share. Upon final settlement in December 2021, we received an additional 52,815 shares as determined by the daily volume weighted average share price of our common stock during the term of the ASR agreement, bringing the total shares received under this ASR agreement to 352,411 and a final average price paid of $212.82 per share.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6.
[Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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. This discussion contains forward-looking statements that involve risks and uncertainties, including the impact of the 2019 novel coronavirus ("COVID-19"). 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.”
This discussion includes a comparison of our results of operations, liquidity and capital resources, financing and financing capacity and cash flow for the years ended December 31, 2021 and 2020. A discussion of changes in our results of operations and cash flows for the years ended December 31, 2020 and 2019 can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" within the annual report on Form 10-K for the year ended December 31, 2020 filed on February 23, 2021.
We are a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using advanced technologies to collect and analyze billions of records, we draw on unique data assets and deep domain expertise to provide innovations that may be integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, commercial banking and finance, and many other fields. In the U.S., and around the world, we help customers protect people, property, and financial assets. Refer to Item 1. Business for further discussion.
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 customers to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs.
Our Insurance segment provides underwriting and ratings, and claims insurance data for the U.S. P&C insurance industry. This segment's revenues represented approximately 73% and 72% of our revenues for the years ended December 31, 2021 and 2020, respectively. Our Energy and Specialized Markets segment provides research and consulting data analytics for the global energy, chemicals, and metals and mining industries. Our Energy and Specialized Markets segment's revenues represented approximately 22% of our revenues for the years ended December 31, 2021 and 2020. Our Financial Services segment provides competitive benchmarking, decisioning algorithms, business intelligence, and customized analytic services to financial institutions, payment networks and processors, alternative lenders, regulators and merchants. Our Financial Services segment's revenues represented approximately 5% and 6% of our revenues for the years ended December 31, 2021 and 2020, respectively.
COVID-19
Since January 2020, an outbreak of COVID-19 has evolved into a worldwide pandemic. We have modified our operations in line with our business continuity plans due to COVID-19. While our facilities generally remain open, we are making extensive use of the work-from-home model at this moment. On a daily basis, management is reviewing our operations and there have been to date minimal interruptions in our customer-facing operations. Given the digital nature of our business and the move toward cloud enablement, we expect to remain operationally stable and fully available to our customers. We are in compliance with all financial and non-financial covenants and have not observed a loss of any significant customers, a significant deterioration in the collectability of receivables, a significant reduction in our liquidity, nor a significant decline in the subscription renewal rates.
We have analyzed our solutions and services to assess the impact of COVID-19 on our revenue streams. We have not identified any material impact stemming from COVID-19 on approximately 85% of our revenues at this point, as much of these revenues are subscription in nature and subject to long-term contracts. These revenues grew approximately 6% for the year ended December 31, 2021.
Of the remaining 15%, we have identified specific solutions and services, largely transactional in nature, that are being impacted by COVID-19. The primary causal factors are lower auto and travel insurance activity, the inability to enter commercial buildings to perform engineering analyses, decreased capital expenditure in the energy sector, and reduced levels of advertising by financial institutions and marketers. The portion of our revenue that is attributable to these solutions has been negatively impacted by COVID-19 beginning in March 2020 with the onset of the pandemic. These revenues increased approximately 1% for the year ended December 31, 2021 as compared to the same period in 2020. As the global outbreak of COVID-19 continues to evolve, management continues to closely monitor its impact on our business.
Recent Developments
As of December 31, 2021, we reassessed the recoverability of the long-lived assets for our Financial Services reporting unit based upon the weaker than expected operating performance as a result of changing market conditions. These conditions constituted a triggering event, which resulted in a $134.0 million impairment to the long-lived assets for our Financial Services reporting unit including $88.2 million to intangible assets and $45.8 million to fixed assets. We based our analysis of the fair value of our long-lived assets on the indication of fair value provided by the offer to purchase such reporting unit, which was approved by our Board of Directors on February 16, 2022. This impairment is included within "Other operating loss (income)" in our accompanying consolidated statement of operations.
On January 12, 2022, our Board of Directors approved the action to make our environmental health and safety business within the Energy & Specialized Markets segment available for immediate sale at its current fair value. On January 21, 2022, we entered into a stock purchase agreement (the “Purchase Agreement”) to sell 3E Company Environmental, Ecological and Engineering ("3E") to Tamarack Buyer, L.L.C. (“Buyer”) in exchange for a potential aggregate cash consideration of up to $950.0 million. Buyer is an entity that was formed on behalf of, and is controlled by, certain investment funds affiliated with New Mountain Capital, L.L.C. (“New Mountain”).
The purchase price consists of $630.0 million of cash consideration to be paid at the closing of the transaction (subject to customary purchase price adjustments for, among other things, the cash, working capital and indebtedness of 3E as of the closing), up to $50.0 million of earnout payments based on 3E’s financial performance in 2023 and 2024, and up to $270.0 million of additional deferred payments based on New Mountain’s future return on its investment in 3E.
Buyer has secured financing, consisting of equity financing to be provided by certain investment funds affiliated with New Mountain and committed debt financing, to consummate the transaction. The closing of the transaction is not subject to a financing condition, but is subject to other customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act. There can be no assurance that these closing conditions will be satisfied.
The Purchase Agreement contains representations, warranties and covenants of the parties that are customary for transactions of this type and that are subject, in some cases, to specified exceptions and qualifications. Until the consummation of the transaction, we have agreed, subject to certain exceptions, to, conduct 3E’s business in the ordinary course consistent with past practice. The parties are required to use their respective commercially reasonable efforts to take, or cause to be taken, all actions necessary, proper or advisable under applicable laws to consummate the transaction. We will enter into a transition services agreement with Buyer at the closing of the transaction to ensure an orderly transition.
On February 11, 2022, we acquired 100 percent of the membership interest of Infutor Data Solutions, LLC ("Infutor"), for an aggregate net cash consideration of $223.5 million, of which $1.5 million represents a working capital escrow, plus a contingent earn-out payment of up to $25.0 million subject to the achievement of certain revenue and other performance targets. Infutor, a leading provider of identity resolution and consumer intelligence data, has become a part of the underwriting & rating category within our Insurance segment. We believe this acquisition further enhances Verisk’s marketing solutions offerings to companies across several industries including the insurance industry.
On February 16, 2022, our Board of Directors approved the action to make our financial services business within the Financial Services segment available for immediate sale at its current fair value. On February 21, 2022, we entered into a stock purchase agreement to sell our financial services business to TransUnion, a global information and insights company, for $515.0 million in cash consideration paid at closing. This transaction is subject to customary closing conditions, including regulatory approvals and working capital adjustments.
Executive Summary
Key Performance Metrics
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.
We believe our business’s ability to grow recurring revenue and generate positive cash flow is the key indicator of the successful execution of our business strategy. We use year-over-year revenue and EBITDA growth as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization of fixed and intangible assets. We calculate EBITDA margin as EBITDA divided by revenues. The respective nearest applicable GAAP financial measures are net income and net income margin. 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 operating income, net income, or cash flow from operating activities reported under GAAP. Management uses EBITDA and EBITDA margin in conjunction with traditional GAAP operating performance measures as part of its overall assessment company performance. We believe these measures are useful and meaningful because they help us allocate resources, make business decisions, allow for greater transparency regarding our operating performance, and facilitate period-to-period comparisons. Some of these limitations involved in the use of EBITDA 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.
• Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.
EBITDA growth. We use EBITDA growth as a measure of our ability to balance the size of revenue growth with cost management and investing for future growth. EBITDA growth allows for greater transparency regarding our operating performance and facilitate period-to-period comparison.
EBITDA margin. We use EBITDA margin as a performance measure 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 agreements for hosted subscriptions, advisory/consulting services, and for transactional solutions, recurring and non-recurring. 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.
Approximately 81% and 82% of the revenues in our Insurance segment for the years ended December 31, 2021 and 2020 were derived from hosted subscriptions through agreements (generally one to five years) for our solutions, respectively. Our customers in this segment include most of the P&C insurance providers in the U.S. Approximately 83% and 85% of the revenues in our Energy and Specialized Markets segment for the years ended December 31, 2021 and 2020 were derived from hosted subscriptions with long-term agreements for our solutions, respectively. Our customers in this segment include most of the top 10 global energy providers around the world. Approximately 83% and 77% of the revenues in our Financial Services segment for the years ended December 31, 2021 and 2020 were derived from subscriptions with long-term agreements for our solutions, respectively. Our customers in this segment include financial institutions, payment networks and processors, alternative lenders, regulators, merchants, and the top 30 credit card issuers in North America, the United Kingdom, and Australia.
We also provide advisory/consulting services, which help our customers get more value out of our analytics and their subscriptions. In addition, certain of our solutions are paid for by our customers on a transactional basis, recurring and non-recurring. For example, we have solutions that allow our customers to access property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance or a workers' compensation claim with information in our databases, or use our repair cost estimation solutions on a case-by-case basis. For the years ended December 31, 2021 and 2020, approximately 19% and 18%, respectively, of our consolidated revenues were derived from providing transactional and advisory/consulting solutions.
Principal Operating Costs and Expenses
Personnel expenses are a major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented approximately 55% and 59% of ourtotal operating expenses for each of the years ended December 31, 2021 and 2020, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.
We assign 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, salespeople, 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 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 and new businesses, 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 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: P&C insurance, energy and specialized markets, and financial services. The industry trends in each of those markets can affect our business.
A significant change in P&C insurers’ profitability could affect the demand for our solutions. For insurers, the keys to profitability include increasing investment income, premium growth and disciplined underwriting of risks. Investment income remains under pressure as a result of low interest rates. Growth in P&C 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, slowing down to 3.7% in 2015 and 2016, accelerating to 4.7% in 2017 and 5.5% in 2018, then again slowing down to 5.1% in 2019. 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. Direct premium growth slowed to 2.3% in 2020 due to COVID-19 pandemic, and premiums for personal automobile insurance actually declined. Based on the most recent results available, direct premium growth recovered in 2021, despite continuing disruptions and uncertainties associated with the COVID-19 pandemic. In 2020 and 2021, insurers were also challenged by heightened catastrophic losses associated with a record number of events ISO's Property Claims Service classified as catastrophes in each of the years. The catastrophes of 2020 included the hurricane Laura and the Midwest derecho, both in August 2020, and multiple wildfires in the Western states, while the most notable events of 2021 included the winter storm in February that left much of Texas without power and hurricane Ida in August. Both Ida and Laura are among the strongest hurricanes to ever make landfall in the United States. These events illustrate the need for broader coverages, such as flood to meet the changing needs of communities. We continue to provide the necessary resources to meet insurer needs. In the life insurance market, carriers are looking to modernize and digitize their core platforms, as well as offer streamlined underwriting decision-making process to expand the number of policies which can be offered more rapidly, and without cumbersome medical tests. Our no-code modular technology stack and advanced analytics (such as using electronic health records to model mortality and detecting of tobacco use through voice analysis) enable the digital transformation of our customers' core infrastructure and automate their decision-making processes across the policy lifecycle.
Trends in catastrophe and non-catastrophe losses (such as from weather, climate, cyber, casualty, terrorism, pandemics, and tsunamis) can have an effect on our customers’ profitability, and therefore on their appetite for buying analytics to help them manage their risks. Any increase or decrease in frequency or severity of these events over time could lead to an increased or decreased demand for our catastrophe modeling, catastrophe loss information, and repair cost solutions. Likewise, any structural changes in the reinsurance and related brokerage industry from alternative capital or newer technologies could affect demand for our products. 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 energy, chemicals, metals and mining sectors, and activity in financial markets can influence our revenues. In 2021, global economic growth, commodity flows and prices recovered strongly after being impacted negatively by the COVID-19 pandemic in 2020. Commodity markets performed impressively, with Brent oil averaging $71 dollars per barrel in 2021, compared to an average of $42 dollars per barrel in 2020. Gas prices also increased from their 2020 levels, as global energy demand recovered. Investment in the natural resources increased in 2021, following a sharp decline in 2020. We expect investment to continue to increase this year as natural resources companies reinvest the higher cashflows generated from their operations as a result of the significantly higher commodity prices seen in 2021. However, natural resources companies are also expected to demonstrate capital discipline, using higher commodity prices as an opportunity to build stronger balance sheets and to return capital to shareholders. The energy transition continues to gather pace. Governments and companies in all areas of our customer base globally are setting targets for the reduction in CO2 emissions and are adjusting their investment plans to take into account expected changes in energy demand, regulation and consumer behavior. The transition presents both a threat and an opportunity for the sector and our revenues. Fossil fuels will meet much of global demand for some decades, but investments in zero carbon energy (renewables and emerging technologies such as electric vehicles and energy storage) and the associated infrastructure will grow in importance. Electrification of economies will drive demand for base metals, some bulk commodities and battery raw materials. Climate change and decarbonization are rising up the agenda, and policy on environmental and social governance is intensifying. Attracting the capital needed to meet future energy demand is one of the industry’s challenges and data, analysis and insight will help our customers achieve this.
Trends in the banking and retail sectors, as well as material external factors can influence revenues in our Financial Services segment in many ways. COVID-19 has had a significant impact on our one-time consultative revenue streams over the past year as our clients sought to temporarily reduce external expenditure while they focused on critical customer needs. Additionally, governmental intervention and actions to support indebted consumers by extending credit terms has created a lag in bankruptcy and similar filings which have adversely impacted our credit analytics business, but we do believe this is a temporary impact which will reverse over time. As retailers saw reduced consumer spend due to COVID-19 however, this created an opportunity for our spend analytics businesses to work more closely with retailers to help them understand and target emerging spend as the economies in our markets re-emerged. Our sector specific trends have remained broadly consistent with fraud and similar financial crimes continuing to impact our customers in ways ranging from regulatory risk and credit loss for financial institutions, to counterfeit loss and inventory shrinkage for merchants, with risks being elevated at times of financial stress. This can strengthen demand for our credit risk and fraud solutions ranging from enhanced brand protection solutions for retailers, through to enhanced artificial-intelligence led models to identify cross bank and cross-border fraudulent transactions. We continue to see increasing competition for traditional retail banks and consumer lenders from financial technology companies and other on-line lending new entrants, which provides opportunities for us to support many existing and potential clients, with our enhanced digital solutions and analytical tools providing new ways for us to communicate and engage with our clients today in our remote environment, and in the future.
Description of Acquisitions
We acquired sixteen businesses since January 1, 2019. These acquisitions affect the comparability of our consolidated results of operations between periods. See a description of our 2021 acquisitions below and Note 10. Acquisitions to our consolidated financial statements included in this annual report on Form 10-K for further discussions.
2021 Acquisitions
On December 23, 2021, we acquired approximately 96.7 percent of the stock of ACTINEO GmbH ("ACTINEO") with an option to acquire the remaining shares at a future date, for a net cash purchase price of $148.9 million. ACTINEO offers a comprehensive portfolio of services, technology and data solutions to support the entire bodily injury settlement process. With this acquisition, we add ACTINEO's established claims management solutions to our leading data analytics and insurance ecosystem, providing customers with digitalization and medical expertise solutions throughout the entire claims process. ACTINEO is part of the claims vertical within our Insurance segment.
On November 2, 2021, we acquired 100 percent of the stock of Data Driven Safety, LLC ("Data Driven Safety") for a net cash purchase price of $93.5 million, of which $2.0 million represents indemnity escrows. Data Driven Safety, a leading public record data aggregation firm that specializes in driver risk assessment in the U.S., has become a part of the underwriting & rating category within our Insurance segment. We believe that Data Driven Safety will expand our robust auto insurance analytics, providing insurers with information to further refine underwriting, improve the customer experience and promote public safety.
On September 1, 2021, we acquired 100 percent of the stock of Ignite Software Systems Limited ("Ignite") for a net cash purchase price of $13.8 million. Ignite, a provider of insurance policy administration systems to brokers, managing general agents, and insurers, has become a part of the underwriting & rating category within our Insurance segment. We believe that Ignite's client focus and deep domain knowledge will fit into our business model providing new and existing clients with access to a broader expert advice and service.
On June 17, 2021, we acquired 100 percent of the stock of Roskill Holdings Limited ("Roskill") for a net cash purchase price of $22.1 million, of which $4.8 million represents indemnity escrows. Roskill, a provider of metals and materials supply chain intelligence, has become part of our Energy and Specialized Markets segment. Roskill’s capabilities reinforce our ability to provide comprehensive analysis across the energy, and metals and mining value chain while adding analysis, data, and insight on battery raw materials metals.
On March 2, 2021, we acquired a 51.0 percent ownership in Whitespace Software Limited ("Whitespace") for a net cash purchase price of $16.8 million. The remaining 49.0 percent ownership interest in Whitespace will be acquired by us, in three equal proportions over the next three years, at a purchase price determined based upon a fixed revenue multiple and adjusted for any free cash flow shortfall. Whitespace, a provider of digital placing technology to the (re)insurance market, has become part of the underwriting & rating category within our Insurance segment. We expect our investment in Whitespace to enable a seamless real-time quote-to-bind electronic placing and global distribution solution, with straight-through submissions for our customers.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Consolidated Results of Continuing Operations
Revenues
Revenues were $2,998.6 million for the year ended December 31, 2021 compared to $2,784.6 million for the year ended December 31, 2020, an increase of $214.0 million or 7.7%. Our recent acquisitions (Franco Signor, Jornaya, Whitespace, Ignite Software Systems, Data Driven Safety within the underwriting & rating category of the Insurance segment, ACTINEO within the claims category of the Insurance segment, and Roskill within the Energy and Specialized Markets segment) and dispositions (the aerial imagery sourcing group and the compliance background screening business within the claims category of the Insurance segment and the data warehouse business within the Financial Services segment) contributed net revenues of $53.7 million. The remaining growth in consolidated revenues of $160.3 million or 5.8% is related to the following: revenues within our Insurance segment increased $146.0 million or 7.3%; revenues within our Energy and Specialized Markets segment increased $26.8 million or 4.3%; offset by revenues within our Financial Services segment which decreased $12.5 million or 8.1%. Refer to the Results of Operations by Segment within this section for more information regarding our revenues.
Percentage change
Percentage change excluding recent acquisitions, businesses held for sale and disposition
(in millions)
Insurance
$ 2,206.9
$ 2,008.7
9.9 %
7.3 %
Energy and Specialized Markets
648.9
619.2
4.8 %
4.3 %
Financial Services
142.8
156.7
(8.9 )%
(8.1 )%
Total revenues
$ 2,998.6
$ 2,784.6
7.7 %
5.8 %
Cost of Revenues
Cost of revenues was $1,057.8 million for the year ended December 31, 2021 compared to $993.9 million for the year ended December 31, 2020, an increase of $63.9 million or 6.4%. Our recent acquisitions and dispositions accounted for a net increase of $14.9 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining increase in cost of revenues of $49.0 million or 4.9% was primarily due to increases in salaries and employee benefits of $24.3 million, information technology expenses of $18.9 million, professional consulting costs of $8.3 million, and other operating costs of $0.7 million. The increase in salaries and employee benefits was primarily due to a pause in our employee hiring activities in the prior year's period as a result of COVID-19, which have gradually resumed in the second half of 2020 through 2021. These increases were partially offset by decreases in travel expenses of $3.1 million and data costs of $0.1 million. The decrease in travel expense primarily resulted from travel restrictions in connection with the COVID-19 pandemic.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SGA") were $422.7 million for the year ended December 31, 2021 compared to $413.9 million for the year ended December 31, 2020, an increase of $8.8 million or 2.1%. Our recent acquisitions and dispositions accounted for an increase of $18.2 million in SGA primarily related to salaries and employee benefits. Our acquisition-related costs (earn-outs) accounted for a decrease of $2.0 million (See Note 10. Acquisitions to our consolidated financial statements included in this annual report on Form 10-K). The remaining SGA decrease of $7.4 million or 1.8% was primarily due to decreases in professional consulting costs of $36.4 million and travel expenses of $2.0 million. The decrease in professional consulting costs is primarily due to the release of the previously established Xactware Solutions Patent Litigation's ("EVT Litigation Reserve") reserve once the final payment was made in the fourth quarter of 2021 (the original accrual for this matter was recorded as part of SGA). See Note 21. Commitments and Contingencies. The decrease in travel expense primarily resulted from travel restrictions in connection with the COVID-19 pandemic. These decreases were partially offset by increases of salaries and employee benefits of $27.3 million, information technology expenses of $3.3 million, and other operating costs of $0.4 million. The increase in salaries and employee benefits was primarily due to a pause in our employee hiring activities in the first half of the prior year as a result of COVID-19, which have gradually resumed in the second half of 2020 through 2021.
Depreciation and Amortization of Fixed Assets
Depreciation and amortization of fixed assets was $206.9 million for the year ended December 31, 2021 compared to $192.2 million for the year ended December 31, 2020, an increase of $14.7 million or 7.6%. The increase was primarily driven by assets placed in service of $14.3 million to support data capacity expansion and revenue growth and due to recent acquisitions of $0.5 million. These increases were partially offset by our recent dispositions of $0.1 million.
Amortization of Intangible Assets
Amortization of intangible assets was $176.7 million for the year ended December 31, 2021 compared to $165.9 million for the year ended December 31, 2020, an increase of $10.8 million or 6.5%. This was primarily driven by the additional amortization of intangible assets incurred in connection with our recent acquisitions.
Other Operating (Loss) Income
Other operating (loss) income was a loss of $134.0 million for the year ended December 31, 2021 compared to a gain of $19.4 million for the year ended December 31, 2020. This decrease of $153.4 million was primarily related to the long-lived asset impairment loss associated with our Financial Services segment recorded in the current period and gains associated with the dispositions of our compliance background screening business and data warehouse business that were recorded in 2020.
Investment Income (Loss) and Others, Net
Investment income (loss) and others, net was a gain of $1.9 million for the year ended December 31, 2021 compared to a loss of $2.4 million for the year ended December 31, 2020. The increase was primarily due to a gain on foreign currencies.
Interest Expense
Interest expense was $127.0 million for the year ended December 31, 2021 compared to $138.2 million for the year ended December 31, 2020, a decrease of $11.2 million or 8.2%. We repaid our 5.800% senior notes in May 2021, which contributed to a lower interest expense.
Provision for Income Taxes
The provision for income taxes was $209.1 million for the year ended December 31, 2021 compared to $184.8 million for the year ended December 31, 2020, an increase of $24.3 million or 13.2%. The effective tax rate was 23.9% for the year ended December 31, 2021 compared to 20.6% for the year ended December 31, 2020. The increase in the effective tax rate in 2021 compared to 2020 was primarily due to the deferred tax impact of the tax rate increase in the United Kingdom that was enacted and recorded in 2021, the impact of the current year Global Intangible Low-taxed income inclusion ("GILTI"), and the impact of higher tax benefits from equity compensation in the prior period versus the current period.
Net Income Margin
The net income margin for our consolidated results was 22.2% for the year ended December 31, 2021 compared to 25.6% for each of the year ended December 31, 2020. The decrease in net income margin was primarily related to the long-lived asset impairment loss associated with our Financial Services segment.
EBITDA Margin
The EBITDA margin for our consolidated results was 46.2% for the year ended December 31, 2021 compared to 50.1% for the year ended December 31, 2020. The decrease in EBITDA margin was primarily related to the long-lived asset impairment loss associated with our Financial Services segment, partially offset by the release of the previously established EVT Litigation Reserve once the final payment was made in the fourth quarter of 2021.
Results of Continuing Operations by Segment
Insurance
Revenues
Revenues were $2,206.9 million for the year ended December 31, 2021 compared to $2,008.7 million for the year ended December 31, 2020, an increase of $198.2 million or 9.9%. Our underwriting & rating revenues increased $142.1 million or 10.1%. Our claims revenues increased $56.1 million or 9.4%.
Percentage change
Percentage change excluding recent acquisitions, businesses held for sale and disposition
(in millions)
Underwriting & rating
$ 1,555.1
$ 1,413.0
10.1 %
7.2 %
Claims
651.8
595.7
9.4 %
7.5 %
Total Insurance
$ 2,206.9
$ 2,008.7
9.9 %
7.3 %
Our recent acquisitions (Franco Signor, Jornaya, Whitespace, Ignite Software Systems, and Data Driven Safety within the underwriting & rating category and ACTINEO within the claims category) and dispositions (the aerial imagery sourcing group and the compliance background screening business within the claims category) contributed net revenues of $52.2 million and the remaining Insurance revenues increased $146.0 million or 7.3%. Our underwriting & rating revenues increased $101.7 million or 7.2% primarily due to an annual increase in prices derived from continued enhancements to the content of the solutions within our industry-standard insurance programs as well as selling expanded solutions to existing customers within commercial and personal lines. In addition, catastrophe modeling services contributed to the growth. Our claims revenues increased $44.3 million or 7.5%, primarily due to growth in our repair cost estimating solutions revenue and claims analytics revenue related to annual price as well as volume increases.
Cost of Revenues
Cost of revenues for our Insurance segment was $704.4 million for the year ended December 31, 2021 compared to $644.3 million for the year ended December 31, 2020, an increase of $60.1 million or 9.3%. Our recent acquisitions and dispositions represented a net increase of $14.7 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining increase in cost of revenues of $45.4 million or 7.1% was primarily due to increases in salaries and employee benefits of $24.3 million, information technology expenses of $16.4 million, professional consulting costs of $2.9 million, data costs of $2.0 million, and other operating costs of $0.9 million. The increase in salaries and employee benefits was primarily due to more robust employee hiring activities as stated above. These increases were partially offset by a decrease in travel expenses of $1.1 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Insurance segment were $239.1 million for the year ended December 31, 2021 compared to $248.1 million for the year ended December 31, 2020, a decrease of $9.0 million or 3.6%. Our recent acquisitions and dispositions accounted for an increase of $15.2 million primarily related to salaries and employee benefits. Our acquisition-related costs (earn-outs) accounted for a decrease of $2.0 million. The remaining decrease in SGA of $22.2 million or 9.1% was primarily due to decreases in professional consulting costs of $42.3 million, travel expenses of $1.3 million, and other operating costs of $0.7 million. The decrease in professional consulting fees was primarily due to the release of the previously established EVT Litigation Reserve once the final payment was made in the fourth quarter of 2021 (the original accrual for this matter was recorded as part of SGA). These decreases were partially offset by increases in salaries and employee benefits of $19.5 million and information technology expenses of $2.6 million.
Other Operating Income
Other operating income was $0.0 for the year ended December 31, 2021 compared to $15.9 million for the year ended December 31, 2020. This decrease was primarily related to the gain associated with the disposition of our compliance background screening business that was recorded in 2020.
Investment Income (Loss) and Others, Net
Investment income (loss) and others, net was a gain of $2.3 million for the year ended December 31, 2021 compared to a loss of $1.2 million for the year ended December 31, 2020. This change was primarily due to a gain on foreign currencies.
EBITDA Margin
EBITDA for our Insurance segment was $1,265.7 million for the year ended December 31, 2021 compared to $1,131.0 million for the year ended December 31, 2020. The EBITDA margin for our Insurance segment was 57.4% for the year ended December 31, 2021 compared to 56.3% for the year ended December 31, 2020. The increase in EBITDA margin was primarily due to the release of the previously established EVT Litigation Reserve once the final payment was made in the fourth quarter of 2021, a reduction in travel expenses as a result of COVID-19, and cost discipline.
Energy and Specialized Markets
Revenues
Revenues for our Energy and Specialized Markets segment were $648.9 million for the year ended December 31, 2021 compared to $619.2 million for the year ended December 31, 2020, an increase of $29.7 million or 4.8%. Our recent acquisition within this segment, Roskill, contributed revenues of $2.9 million. The remaining increase in revenue of $26.8 million or 4.3% was primarily due to increases in our core research subscription solutions, and environmental health and safety service subscription revenues.
Cost of Revenues
Cost of revenues for our Energy and Specialized Markets segment was $263.0 million for the year ended December 31, 2021 compared to $256.8 million for the year ended December 31, 2020, an increase of $6.2 million or 2.4%. Our recent acquisition accounted for an increase of $0.9 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining cost of revenues increase of $5.3 million or 2.1% was primarily due to increases in professional consulting fees of $6.5 million, information technology expenses of $2.3 million, and salaries and employee benefits of $0.7 million. These increases were partially offset by decreases in travel expenses of $1.3 million,and data costs of $0.6 million, and other operating costs of $2.3 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Energy and Specialized Markets segment were $154.4 million for the year ended December 31, 2021 compared to $146.1 million for the year ended December 31, 2020, an increase of $8.3 million or 5.6%. Our recent acquisition accounted for an increase of $3.7 million, primarily related to salaries and employee benefits. The remaining SGA increase of $4.6 million or 3.1% was primarily due to increases in salaries and employee benefits of $2.6 million, professional consulting costs of $2.1 million, information technology expenses of $0.2 million, and other operating costs of 0.3 million. These increases were partially offset by a decrease in travel expenses of $0.6 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic.
Investment Loss and Others, Net
Investment loss and others, net was a loss of $0.2 million for the year ended December 31, 2021 compared to a loss of $1.2 million for the year ended December 31, 2020.
EBITDA Margin
EBITDA for our Energy and Specialized Markets segment was $231.3 million for the year ended December 31, 2021 compared to $215.1 million for the year ended December 31, 2020. The EBITDA margin for our Energy and Specialized Markets segment was 35.6% for the year ended December 31, 2021 compared to 34.7% for the year ended December 31, 2020. The increase in EBITDA margin was primarily related to cost-discipline, a reduction in travel expenses as a result of COVID-19, and a decrease in acquisition-related costs (earn-outs).
Financial Services
Revenues
Revenues for our Financial Services segment were $142.8 million for the year ended December 31, 2021 compared to $156.7 million for the year ended December 31, 2020, a decrease of $13.9 million or 8.9%. Our recent disposition of the data warehouse business contributed a decrease in revenues of $1.4 million. The remaining decrease in revenue of $12.5 million or 8.1% was related to projects that did not reoccur and decrease in revenue in connection with the COVID-19 pandemic, which resulted in lower consulting revenue, and lower transactional bankruptcy revenue because of government support and forbearance programs.
Cost of Revenues
Cost of revenues for our Financial Services segment was $90.4 million for the year ended December 31, 2021 compared to $92.8 million for the year ended December 31, 2020, a decrease of $2.4 million or 2.6%. Our recent disposition of the data warehouse business represented a decrease of $0.7 million, which was primarily related to salaries and employee benefits. The remaining cost of revenues decrease of $1.7 million or 1.9% was primarily due to decreases in data costs of $1.5 million, professional consulting costs of $1.1 million, salaries and employee benefits of $0.7 million, and travel expenses of $0.7 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic. These decreases were partially offset by increases in information technology expenses of $0.2 million, and other operating costs of 2.1 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for our Financial Services segment were $29.2 million for the year ended December 31, 2021 compared to $19.7 million for the year ended December 31, 2020, an increase of $9.5 million or 48.6%. Our recent disposition represented a net decrease of $0.7 million. The remaining increase in SGA of $10.2 million or 53.9% was primarily due to increases in salaries and employee benefits of $5.2 million, professional consulting costs of $3.8 million, information technology expenses of $0.5 million, and other operating costs of 0.8 million. These increases were partially offset by a decrease in travel expenses of $0.1 million.
Other Operating (Loss) Income
Other operating (loss) income was a loss of $134.0 million for the year ended December 31, 2021 compared to a gain of $3.5 million for the year ended December 31, 2020. The decrease of $137.5 million was primarily due a long-lived asset impairment loss that was recorded in the current period and a gain generated from the sale of our data warehouse business that was recorded in 2020.
Investment Loss and Others, Net
Investment loss and others, net was a loss of $0.2 million for the year ended December 31, 2021 compared to $0.0 for the year ended December 31, 2020. The variance was primarily due to a loss on foreign currencies.
EBITDA Margin
EBITDA for our Financial Services segment was a loss of $111.0 million for the year ended December 31, 2021 compared to $47.7 million for the year ended December 31, 2020. The EBITDA margin for our Financial Services segment was -77.7% for the year ended December 31, 2021 compared to 30.4% for the year ended December 31, 2020. The decrease in EBITDA margin is primarily related to the long-lived asset impairment loss, decrease in revenue, and the gain generated from the sale of our data warehouse business that was recorded in 2020.
See Note 19. of our consolidated financial statements included in this annual report on Form 10-K.
Liquidity and Capital Resources
As of December 31, 2021 and 2020, we had cash and cash equivalents and available-for-sale securities of $285.3 million and $222.9 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, human 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 (deferred revenues). 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 consolidated capital expenditures as a percentage of consolidated revenues for the years ended December 31, 2021 and 2020, were 9.0% and 8.9%, respectively. 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 historically used a portion of our cash for repurchases of our common stock from our stockholders. For the years ended December 31, 2021, 2020, and 2019, we repurchased $475.0 million, $348.8 million and $300.0 million, respectively, of our common stock. For the years ended December 31, 2021, 2020, and 2019, we also paid dividends of $188.2 million, $175.8 million, and $163.5 million, respectively.
Financing and Financing Capacity
We had total debt, excluding finance lease obligations, unamortized discounts and premium, and debt issuance costs of $3,310.0 million and $3,200.0 million at December 31, 2021 and 2020, respectively. The debt at December 31, 2021 primarily consists of senior notes issued in 2020, 2019, 2015, 2012 and 2011 and borrowings outstanding under our committed senior unsecured Syndicated Revolving Credit Facility ("Credit Facility"), described below. Interest on the senior notes is payable semi-annually each year. The unamortized discount and debt issuance costs were recorded as "Long-term debt" in the accompanying consolidated balance sheets, and will be amortized to "Interest expense" in the accompanying consolidated statements of operations within this Form 10-K over the life of the respective senior note. The indenture governing the senior notes restricts our 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. As of December 31, 2021, we had senior notes with an aggregate principal amount of $2,700.0 million outstanding, and we were in compliance with our financial and non-financial debt covenants.
We have a Credit Facility with a borrowing capacity of $1,000.0 million with Bank of America N.A., HSBC Bank USA, N.A., JP Morgan Chase Bank, N.A., Wells Fargo Bank, National Association, Citibank, N.A., Credit Suisse AG, Cayman Islands Branch, Morgan Stanley Bank, N.A., First Commercial Bank, Ltd., Los Angeles Branch, TD Bank, N.A., and the Northern Trust Company. Interest on borrowings under the Credit Facility is payable at an interest rate of LIBOR plus 1.0% to 1.625%, depending upon the public debt rating. A commitment fee on any unused balance is payable periodically and may range from 8.0 to 20.0 basis points based upon the public debt rating. The Credit Facility also contains certain financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants place restrictions on mergers, asset sales, sale/leaseback transactions, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated funded debt leverage ratio of less than 3.5 to 1.0. At our election, the maximum consolidated funded debt leverage ratio could be permitted to increase one time each to 4.0 to 1.0 and 4.25 to 1.0. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividends and the share repurchase program (the "Repurchase Program"). As of December 31, 2021, we were in compliance with all financial and other debt covenants under the Credit Facility. As of December 31, 2021 and 2020, the available capacity under the Credit Facility was $384.9 million and $944.6 million, net of the letters of credit of $5.1 million and $5.4 million, respectively. Subsequent to December 31, 2021 we have made repayments of $130.0 million under the Credit Facility resulting in $480.0 million in borrowings under the Revolving Credit Facility.
Cash Flow
The following table summarizes our cash flow data for the years ended December 31:
(in millions)
Net cash provided by operating activities
$ 1,155.7
$ 1,068.2
Net cash used in investing activities
$ (592.0 )
$ (595.8 )
Net cash used in financing activities
$ (498.9 )
$ (445.2 )
Operating Activities
Net cash provided by operating activities was $1,155.7 million for the year ended December 31, 2021 compared to $1,068.2 million for the year ended December 31, 2020, an increase of $87.5 million or 8.2%. The increase was primarily due to an increase in customer collections, partially offset by the prior year deferral of certain employer payroll taxes resulting from the CARES Act and a payment to settle the EVT litigation.
Net cash provided by operating activities was $1,068.2 million for the year ended December 31, 2020 compared to $956.3 million for the year ended December 31, 2019, an increase of $111.9 million or 11.7%. The increase was primarily due to an increase in collections, the deferral of certain employer payroll taxes resulting from the CARES Act and a reduction in travel payments as a result of COVID-19.
Investing Activities
Net cash used in investing activities of $592.0 million for the year ended December 31, 2021 was primarily related to acquisitions of $299.0 million including escrow funding, capital expenditures of $268.4 million, and investments in nonpublic companies of $23.6 million.
Net cash used in investing activities of $595.8 million for the year ended December 31, 2020 was primarily related to acquisitions of $285.1 million including escrow funding and capital expenditures of $246.8 million.
Financing Activities
Net cash used in financing activities of $498.9 million for the year ended December 31, 2021 was driven by repurchases of common stock of $475.0 million, repayment of our $450.0 million 5.800% senior notes on May 3, 2021, and dividend payments of $188.2 million, partially offset by proceeds, net of repayments, from our Credit Facility of $560.0 million and proceeds from stock options exercised of $84.3 million.
Net cash used in financing activities of $445.2 million for the year ended December 31, 2020 was driven by net debt repayments on our Credit Facility of $445.0 million, repurchases of common stock of $348.8 million, and dividend payments of $175.8 million, partially offset by proceeds from the issuance of long-term debt, inclusive of original issue premium and net of original discount, of $494.8 million, and proceeds from stock options exercised of $88.0 million.
Contractual Obligations
The following table summarizes our contractual obligations at December 31, 2021 and the future periods in which such obligations are expected to be settled in cash:
Payments Due by Period
Total
Less than 1 year
2-3 years
4-5 years
More than 5 years
(in millions)
Contractual obligations
Long-term debt, current portion of long-term debt and interest
$ 4,591.6
$ 1,068.9
$ 196.3
$ 1,040.7
$ 2,285.7
Operating leases
351.9
51.5
88.9
65.7
145.8
Pension and postretirement plans (1)
14.5
2.3
3.3
2.8
6.1
Finance lease obligations
14.8
13.0
1.7
0.1
-
Total (2)
$ 4,972.8
$ 1,135.7
$ 290.2
$ 1,109.3
$ 2,437.6
(1)
Our funding policy is to contribute at least equal to the minimum legal funding requirement.
(2)
Unrecognized tax benefits of approximately $3.4 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 $0.5 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 postretirement benefits, stock-based compensation, and income taxes. Actual results may differ from these assumptions or conditions.
Revenue Recognition
We recognize revenue based on the transfer of promised goods or services to customers for the amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recognized in a five-step model: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; and 5) recognize revenue when or as the company satisfies a performance obligation. Revenues for hosted subscription services are recognized ratably over the subscription term. Revenues from certain discrete project based advisory/consulting services are recognized over time by measuring the progress toward complete satisfaction of the performance obligation, based on the input method of consulting hours worked; this aligns with the results achieved and value transferred to the customer. Revenues from transactional solutions are recognized as the solutions are delivered or services performed at point in time.
We invoice our customers in annual, quarterly, or monthly installments. Amounts billed and collected in advance are recorded as deferred revenues on the balance sheet and are recognized as the services are performed and revenue recognition criteria are met.
Stock-Based Compensation
Stock-based compensation cost, including stock options, restricted stock, and performance share units ("PSUs"), 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. The fair value of stock options is measured 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. The fair value of the restricted stock is determined using the closing price of our common stock on the grant date. The fair value of PSUs is determined on the grant date using the Monte Carlo Simulation model.
Option grants and restricted stock awards are generally expensed ratably over the four-year vesting period. PSUs are generally expensed ratably over the three-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, 2021, we had goodwill of $4,331.2 million, which represents 55.5% of our total assets. During 2021, we performed an impairment test as of June 30, 2021 and confirmed that no impairment charge was necessary as the fair value of each reporting unit exceeded its carrying value. There are many assumptions and estimates used that directly impact the results of impairment testing, including an estimate of future expected revenues, EBITDA, EBITDA margins and cash flows, useful lives and discount rates, and an estimate of value using multiples derived from the stock prices of publicly traded guideline companies applied to such expected cash flows and market approaches 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. As of December 31, 2021, we reassessed the recoverability of long-lived assets for our Financial Services reporting unit based upon the weaker than expected operating performance as a result of changing market conditions. These conditions constituted a triggering event, which resulted in a $134.0 million impairment to the long-lived assets in our Financial Services operating segment including $88.2 million to intangible assets and $45.8 million to fixed assets. We based our analysis of the fair value of our long-lived assets on the indication of fair value provided by the offer to purchase such reporting unit, which was approved by our Board of Directors on February 16, 2022. This impairment is included within "Other operating loss (income)" in our accompanying consolidated statement of operations. Please refer to Note 9. Fixed Assets and Note 12. Goodwill and Intangible assets for more information.
We allocate the fair value of the purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. The estimates used in valuing the intangible assets are determined with the assistance of third-party specialists, a discounted cash flow analysis and estimates made by management. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
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 $0.6 million that may be recognized by December 31, 2022, due to expiration of statutes of limitations and resolution of audits with taxing authorities, net of additional uncertain tax positions.
As of December 31, 2021, we have gross federal, state, and foreign income tax net operating loss carryforwards of $154.6 million, which will expire at various dates from 2022 through 2041. Such net operating loss carryforwards expire as follows:
Years Ending
(In millions)
2022 - 2029
$ 21.9
2030 - 2034
20.5
2035 - 2041
112.2
Total
$ 154.6
The net deferred income tax liability of $463.9 million consists primarily of timing differences involving amortization.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, refer to Note 2(s) to the audited consolidated financial statements included elsewhere in this annual report on Form 10-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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, 2021, we had borrowings outstanding under our credit facility of $610.0 million. A total of $130.0 million of this outstanding balance has been paid in the first three weeks post year end. The borrowings bear interest at variable rates based on LIBOR plus 1.0% to 1.625% depending on the public debt rating defined in the credit agreement. The current margin is 1.25% as a result of the current public debt rating. 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, 2021, a one percent change in interest rate would result in a change in annual pre-tax interest expense of approximately $6.1 million based on our current borrowing levels.
We have started to consider the implications of the transition of LIBOR to alternative reference rate measures that will likely become effective post December 2021. We believe that there is still some uncertainty over what these rates will be but one possibility for U.S. dollar LIBOR would be the Secured Overnight Financing Rate ("SOFR"). As this decision has not been finalized at the time of amending our Credit Facility agreement, there is no definitive alternative rate proposed in the current contract. We are, however, reviewing the potential impact on the application of this rate on our interest expense once it becomes applicable. As our only current contract extending beyond 2021, that is subject to the LIBOR rate is the Credit Facility, the impact will be dependent on what the outstanding borrowing amount is on the Credit Facility and the relevant interest rate that will be contractually applicable. Should we amend our Credit Facility to reflect SOFR, based on recent borrowings and applicable SOFR, we do not anticipate to have a material impact on the business.
Foreign Currency Risk
Our foreign-based businesses and results of operations are exposed to movements in the U.S. dollar to British pounds and other foreign currency exchange rates. A portion of our revenue is denominated in British pounds and other foreign currencies. If the U.S. dollar strengthens against British pounds and other foreign currencies, our revenues reported in U.S. dollars would decline. With regard to operating expense, our primary exposure to foreign currency exchange risk relates to operating expense incurred in British pounds and other foreign currencies. If British pounds and other foreign currencies strengthen, costs reported in U.S. dollars will increase. Movements in the U.S. dollar to British pounds and other foreign currency exchange rates did not have a material effect on our revenue for the year ended December 31, 2021. A hypothetical ten percent change in average exchange rates versus the U.S. dollar would not have resulted in a material change to our earnings.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8.
Consolidated Financial Statements and Supplementary Data
The information required by this Item is set forth on pages 51 through 96 of this annual report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
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 our 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 for our company and subsidiaries other than our recent acquisitions in 2021 (See Note 10. of our consolidated financial statements included in this annual report on Form 10-K). Management excluded from its assessment the internal control over financial reporting of these acquisitions and collectively represents less than 0.5% of total assets (excluding goodwill and intangible assets which were integrated into our systems and control environment) and less than 0.5% of revenues as of and for the year ended December 31, 2021. Based upon the foregoing assessments, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
The information required by this Item is set forth on page 47 of this annual report on Form 10-K.
Attestation Report of the Registered Public Accounting Firm
The information required by this Item is set forth on page 48 of this annual report on Form 10-K.
Changes in Internal Control over Financial Reporting
We are in the process of integrating our recent acquisitions in 2021 into our overall internal control over financial reporting process. Other than this ongoing integration, 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 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL 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 control 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, 2021.
Management excluded from its assessment the internal control over financial reporting for our acquisitions in 2021 (See Note 10. of our consolidated financial statements included in this annual report on Form 10-K). The excluded financial statements of these acquisitions constitute approximately 0.5% of total assets (excluding goodwill and intangible assets which were integrated into our systems and control environment) and 0.5% of revenues collectively included within our consolidated financial statements as of and for the year ended December 31, 2021. Due to the timing of the acquisitions, management did not assess the effectiveness of internal control over financial reporting for these acquisitions.
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, 2021, as stated in their report which is included herein.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Verisk Analytics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Verisk Analytics, Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 22, 2022, expressed an unqualified opinion on those consolidated financial statements.
As described in Management’s Report on Internal Controls over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Whitespace Software Limited which was acquired on March 2, 2021, Roskill Holdings Limited on June 17, 2021, Ignite Software Systems Limited on September 1, 2021, Data Driven Safety, LLC on November 2, 2021, and ACTINEO GmbH on December 23, 2021 (collectively the “2021 Acquisitions”). The financial statements of the 2021 Acquisitions constitute less than 0.5% of total assets (excluding goodwill and intangible assets which were integrated into the Company's systems and control environment) and 0.5% of revenues collectively of the consolidated financial statement amounts as of and for the year ended December 31, 2021. Accordingly, our audit did not include the internal control over financial reporting at the 2021 Acquisitions.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 22, 2022

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ITEM 9B. OTHER INFORMATION
Item 9B.
Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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, 2021 (the “Proxy Statement”).
Our Board of Directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors and employees, which is available on our website (investor.verisk.com) under "Corporate Governance". We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on the website address and location specified above.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11.
Executive Compensation
The information required to be furnished by this Item 11 is incorporated herein by reference to our Proxy Statement.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15.
Exhibits and Financial Statement Schedule
(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 Schedule. See Schedule II. Valuation and Qualifying Accounts and Reserves.
(3)
Exhibits. See Index to Exhibits in this annual report on Form 10-K.