Recommendation: Buy Verisk Analytics (VRSK)

Secular risk trends Exposure in risk transactions are increasing Number of participants is large and asymmetry

of information among participants is substantial Failure to understand risk can lead to large and

rapid declines in financial performance

Verisk is the leading provider of risk management solutions and analytics to the insurance, mortgage, and healthcare industries.

Helps customers understand, evaluate, and weigh the consequences of risk

Segments of VRSK’s business Risk Assessment Decision Analytics

Risk Assessment Revenue were $140.5M in 2Q11, grew revenue 4.6% Y/Y, 43% of

VRSK Provides statistical, actuarial, and underwriting data for the US

Property & Casualty (P&C) insurance industry Very stable, slower growing 84% of business is subscription and long term agreement based

Decision Analytics Revenue were $186.8M in 2Q11, grew revenue 26.7% Y/Y (12.5%

organic), 57% of VRSK Provides analytic solutions by combining algorithms and analytic

methods, which incorporate VRSK’s proprietary data to help customers in Insurance, Mortgage, Healthcare, and Supply chain

Very dynamic, fast growing, increasing acquisitions & international exposure

58% of revenue is subscription based

1. Customers who also use the solutions created by VRSK’s data

2. Agreements with data contributors in which the particular uses of data are specified

3. “Mining” data found inside transactions supported by VRSK’s solutions

4. Source data from public sources including Federal, State, and Local governments

5. Physically gathering data at the request of property insurers

6. Purchasing data from data aggregators under contract

Historically, VRSK’s costs to source data are < 2% of revenues

1. No competitor can rival the breadth and depth of data

2. Data is key, because the more data, the easier it is to draw conclusions from valid and precise trends

3. Verisk is embedded into the insurance company's structure, software, systems

US Customers All of the top 100 P&C insurance

providers 4 of the 10 largest Blue Cross Blue

Shield plans 4 of the 6 leading mortgage insurers 14 of the top 20 mortgage lenders The 10 largest global reinsurers

VRSK Investment Information

6 Month Price Graph (StockCharts)

SWOT analysis, and how each point impacts company EPS/valuation multiple

SWOT Analysis

StrengthsHighly scalable, leverageable modelServices critical to clients’ workflowsEmbedded solutions support pricing powerSubscription revenue model = recurring, profitable revenueHigh rates of customer retentionVeteran C - level management

WeaknessesSignificant exposure to US P&C IndustryDepend on new verticals, acquisitions for growthOnly 5% exposure to international markets

OpportunitiesSecular trends, “Mastery of risk”Deeper penetration of existing verticals with high growth potentialOrganic growth: New ProductsAcquisitionsDecision Analytics: Key to international marketsShare buybacks

ThreatsWeak P&C Insurance cycle continuingAcquisition integration risk in Decision Analytics businessSelling shareholders trimming business relationships with VRSKPotential loss of access to key data

Investment Thesis

•We should own Verisk Analytics now because of it’s profitable subscription based revenue streams, strong pricing power, rapid Analytics expansion, and the secular trends today of increasing risk based management and analytics in the P&C Insurance, Mortgage, Healthcare, and Supply-chain industries.

•Potential catalysts are acquisitions, organic growth in both Risk Assessment and Decision Analytics, and share buybacks.

Sector : Financials Industry Group: Insurance Current Holdings: XLF, GE, ASPS Target Sector Allocation: 10.47%, $47,989 Current Sector Allocation: 6.80%, $31,168 Remaining Allocation: 3.67%, $16,821

BUY 200 shares of VRSK at a Limit Price of $33 ($6600, 1.44% of portfolio), Set another limit order for 200 shares at $31

2012 year end target price: $45.00

Portfolio Placement / Recommendation