Verisk Analytics, Inc.

Good day and welcome to the Verisk Forward Quarter 2018 Earnings Resolve Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Verisk's Head of Investor Relations, Stacey Broadbar. Ms. Broadbar, please go ahead.

Thank you, Grace, and good morning, everyone. We appreciate you joining us for a discussion of our fourth quarter and full year 2018 financial results. With me on the call this morning are Scott Stevenson, Chairman, President, and Chief Executive Officer, Mark Anquilari, Chief Operating Officer, and Lee Shavel, Chief Financial Officer. Following comments by Scott, Mark, and Lee highlighting some key points about our financial performance, we will open up the call for your questions. The earnings release referenced on this call, as well as the associated 10K, can be found in the investor section of our website, Verisk.com. The earnings release has also been attached to an 8K that we have furnished to the SEC. A replay of this call will be available for 30 days on our website and by dial-in. Finally, as set forth in more detail in today's earnings release, I will remind everyone that today's call may include forward-looking statements about Verisk's future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance is contained in our recent SEC filings. Now I'll turn the call over to Scott.

Thank you, Stacey, and good morning, everyone. Apologies for my voice today. As we turn the page on 2018, I want to give you my bottom line view of the year just passed. We did well and see opportunity to improve. The single most important reflection of our vitality is our rate of organic revenue growth, and normalizing for the effect of exceptional storm-related revenues and a significant contract signing in financial services in 2017, our organic constant currency revenue growth was 7.2 percent ahead of our long-term financial target of 7 percent. Moreover, our growth was broadly based across our insurance vertical, along with Wood Mackenzie in the energy space, and our core consortium data analytics in the financial services vertical. The heart of our position in the three verticals is sound and forms the basis for cross-selling new solutions in the future. Looking more deeply into the organic revenue outcomes across the company, I see eight contributing factors. Number one, very high rates of customer retention. Two, growth in the number of products consumed by existing customers. Three, the introduction and adoption of new innovative solutions. Four, positive pricing due to enhanced value in many solutions. Five, in those places where we have head-to-head competition, share gains in most categories, including cap modeling, remote imagery, and underwriting decision support. Six, effective progress in non-domestic markets, especially the U.K. Seven, A high rate of capture of business with new entrants in the insurance vertical, including the insure tech companies. And eight, our position as a partner to our customers who continue to entrust Barrisk with their data, enabling us to build new solutions in new categories. For example, in insurance, we are working with our customers to repurpose some contributory policy data already used in our underwriting business to develop innovative claim solutions. One such solution will enable carriers to automate the subrogation process quickly and seamlessly. In energy and specialized markets, Wood Mackenzie is leveraging the consortium model developed by our insurance colleagues and bringing it to the energy sector where we believe it is in a nascent stage. We are currently finalizing an agreement to create an energy data consortium in one of the key U.S. tight oil places. And in financial services, we are working with our card issuer partners in Mexico to launch a fraud consortium to help combat the transaction-based fraud plaguing their system. An important underlying foundation to our growth is the agility of our technical infrastructure, which permits us to bring new solutions to market faster and with greater analytic content. On this front, I was pleased with the following in 2018. Our analytics community has grown substantially through our own program of cultivating data scientists along with industry hiring, and all of this supported by the naming of our new chief analytics officer. We saw a doubling of our consumption of public cloud capacity in 2018. We have made progress in advancing our data methods to support widespread tokenization, which contributes to our internal security and presents opportunities to access new data sets from equally security-minded data sources. On the innovation front, we introduced a wide variety of unique and customer-driven solutions across our verticals. In insurance, we launched programs to address new risk exposure, including cyber and flood. We also successfully introduced a variety of disruptive and award-winning innovations to the market, which Mark will talk to you about in more detail. In the energy and specialized market segment, we launched Lens, a cloud-based data and analytics platform. which allows customers to access, analyze, and model data in every major commodity in every market. And in our financial services sector, we deliver next-generation merchant analytics to retailers. As a complement to our innovation agenda, we are very focused on driving operational efficiency. As we shared with you in detail at our investor day in December, we worked diligently to advance our operational excellence initiative through Lean Six Sigma. With 3,100 employees trained and 85 active projects underway and more soon to be launched, Verisk is driving a culture of continuous improvement by measurably improving processes and meeting the critical customer needs of quality and speed. Another leading indicator for me comes from the many conversations I have with the CEOs of our leading customers. Are they thinking of Verisk as a partner or as a vendor? A consistent message across 2018 is that we are engaging our customers around some of their highest priority initiatives for the future, and they see Verisk as a distinctive and trusted partner in doing so. The result of many of my CEO visits is a request that their teams be placed in closer proximity to our innovation pipeline. A last comment about the year just passed regards the planning cycle we went through at the end of the year. I have never seen a higher volume of fresh ideas for new solutions and approaches for engaging our customers. We have the wonderful problem of needing to choose among a wide variety of opportunities. Finally, I'm pleased to announce, as you've seen, that our Board of Directors has approved the initiation of a cash dividend to shareholders. This represents an important milestone in what is the 10th year of our history as a public company and demonstrates the confidence we have in our ability to drive sustainable, profitable growth, generate significant free cash flow, and create long-term shareholder value through careful capital management. I'll now turn the call over to Mark to comment specifically on our insurance business.