Statement on Long-Term Value Creation
Our strategy for long-term value creation guides all our actions. In a global environment of growing demand, we produce solutions that combine data, analytic methods for finding meaning in the data, and software for delivering data and analysis to customers’ workflows. Customers use our solutions to make better decisions about risk, investments, and operations with greater precision, efficiency, and discipline. And we help customers across the globe protect and increase the value of people, property, and financial assets.
We create shareholder value by pursuing opportunities to grow our operating cash flow and generating attractive returns on capital through thoughtful investment and execution against our operating priorities.
Much of what we do frequently demonstrates two qualities:
- Our solutions often become the standard for all participants in a vertical market to perform their data and analytic work.
- Most of our solutions are “ready to use” and don’t require significant servicing or implementation support.
As a result, our business is often characterized by high incremental and total margins and relatively low capital intensity. Moreover, we enjoy strong relationships with most, if not all, participants in the vertical markets we serve.
Given those qualities, the key to long-term value creation for Verisk is organic revenue growth leading to scaled margins and better returns on invested capital. We’re in an excellent position to continue to deliver organic growth consistent with our historical performance of approximately 7 percent per annum over the last ten years.
In turn, organic growth depends on:
- deepening the reach and quality of our analytics so that our existing solutions yield more insight and value for customers
- creating a steady stream of new solutions that meet customers’ emerging needs
- reaching new customers through geographic expansion
The company’s ability to deepen our analytics and create new solutions in ways that differentiate us from our competition is contingent on Verisk being distinctive along four dimensions:
- having unique data assets
- exhibiting deep expertise in our customers’ domains
- providing a steady stream of first-to-market innovations
- being deeply integrated into customer workflows
Much of our thinking and work goes into protecting and extending those Four Distinctives. The Distinctives tend to reside in specific verticals, supporting Verisk’s organization in the core markets of insurance, energy, and financial services.
To amplify the Distinctives that come with being the leading provider of data and analytics to specific vertical markets, we invest in our people and infrastructure to become increasingly accomplished in four core capabilities:
- Large-scale data integration: Advanced capabilities to manage and integrate structured and unstructured data sets from all relevant sources
- Advanced analytics and interpretation of remote sensed data: Technologies and advanced methods to capture and interpret imagery, telemetry data, sensory data, and other emergent data sets in real time and at scale
- Visualization of data and analytics: Superior methods to use data, visualize it, and make it meaningful—with a focus on geolocation
- Predictive analytics: Advanced methods and machine learning methods leading to prediction in complex environments, such as natural catastrophes, insurance mitigation and loss, fraud detection, and consumer behavior
In turn, our approach to long-term value creation centers on enhancing the Four Distinctives leading to differentiation, investing in our core capabilities, and deeply committing to specific vertical markets to provide scalable data and analytic solutions. We’ve added one more theme to this approach: the globalization of our business. Our business has been historically focused in the United States, yet our methods are applicable worldwide. We’re thoughtfully and steadily positioning people and operations in overseas markets to create local data sets and leverage our preexisting analytic methods.
Current Trends and Their Relationship to Long-Term Value Creation
The regulatory environment remains generally stable while at the same time responding to data analytic developments. In a world of emerging technologies such as artificial intelligence and machine learning, regulations need to adapt and keep up. Verisk supports smart regulation and works closely with regulatory bodies to understand how that landscape will affect our data collection and aggregation methods, consumer-facing analytics, and the ESG considerations facing the energy markets. While we always remain focused on achieving long-term value for our shareholders, we do this within the context of understanding and collaborating with regulators—a set of key stakeholders.
Another trend impacting our productivity is automation. The industries in which we operate need to automate to remain competitive and be profitable. Factors such as evolving demographics of the ultimate buyers of our solutions and nontraditional entrants in some of our markets can be opportunities to help our customers automate. We’re capitalizing on technologies such as machine learning, artificial intelligence, natural language processing, and computer vision to improve productivity and efficiencies and enhance the customer experience.
Such technologies benefit our customers and increase the precision of our analyses and the productivity of our analysts. These methods will become increasingly expressed in our operations over the next five years, contributing greater value to our solutions and customers.
Investing for Growth with Discipline
Because of the profitability and scalability of our solutions, we’re highly capital-generative. We manage that capital carefully by identifying and prioritizing investments that will generate growth while also returning capital to our shareholders. Our strategy for value creation includes reinvestment in our business, both for building new solutions ourselves and acquiring solution sets meaningful to our customers that help accelerate us to market.
We’re active managers of our portfolio and are always alert to accelerating investment where growth is imminent while withdrawing or terminating investment when ideas don’t prove out.
Verisk invests internally at a high rate—with CapEx as a percent of revenue above 8 percent in 2020, resulting from the internal development of software and new solutions. We’re also at record levels of investment in our people through enhanced training and development offerings and virtual programs for all levels, including leadership, data science, and Lean Six Sigma certifications.
Despite the remote work environment, the Verisk team increased productivity and boosted connection and collaboration. Our emphasis on attracting and retaining the best talent also intensified and will continue to drive innovation and play a significant role in delivering consistent and solid financial results. We refined our talent acquisition operating model globally and successfully hired and onboarded remotely across the enterprise. All of these investments—in solutions, people, and methods—support our sustained performance into the foreseeable future.
We continue to pursue a program of open-market share repurchases. In 2020, we repurchased approximately 2.16 million Verisk shares for a total cost of $348.8 million at a weighted-average price of $161.84, bringing the total to $1.7 billion returned over the past six years.
We returned more than $500 million in cash through share repurchases and dividends, reflecting our commitment to returning capital to shareholders. On February 23, 2021, we announced an increase in our cash dividend by 7 percent.