Verisk Analytics, Inc. (NASDAQ:VRSK) Q4 2014 Earnings Call February 25, 2015 8:30 AM ET
Executives
Eva F. Huston - Senior Vice President, Treasurer and Chief Knowledge Officer
Scott G. Stephenson - President, Chief Executive Officer & Director
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Analysts
Tim J. McHugh - William Blair & Co. LLC
Manav Shiv Patnaik - Barclays Capital, Inc.
Joseph D. Foresi - Janney Montgomery Scott LLC
Toni M. Kaplan - Morgan Stanley & Co. LLC
Andrew Charles Steinerman - JPMorgan Securities LLC
David Mark Togut - Evercore Partners, Inc. (Broker)
Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker)
James Friedman - Susquehanna Financial Group LLLP
Andre Benjamin - Goldman Sachs & Co.
William Arthur Warmington - Wells Fargo Securities LLC
Oscar Turner - SunTrust Robinson Humphrey
Operator
Good day, everyone, and welcome to the Verisk Analytics Fourth Quarter 2014 Earnings Results 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 SVP and Treasurer, Ms. Eva Huston. Ms. Huston, please go ahead.
Eva F. Huston - Senior Vice President, Treasurer and Chief Knowledge Officer
Thank you, Shannon, and good morning to everyone. We appreciate you joining us today for a discussion of our fourth quarter 2014 financial results. With me on the call this morning are Scott Stephenson, President and Chief Executive Officer and Mark Anquillare, Chief Financial Officer. Following comments by Scott and Mark highlighting some key points about our strategic priorities and financial performance, we will open up the call for your questions.
All numbers we discussed today, unless otherwise stated, will reflect continuing operations and exclude the results from Interthinx. Interthinx is shown in discontinued operations reflecting the sale of the business in March 2014. The earnings release referenced on this call as well as the associated 10-K can be found in the Investors section of our website, verisk.com. The earnings release has also been attached to an 8-K, which we have furnished to the SEC. A replay of this call will be available for 30 days, until March 26, 2015, on our website and by dial-in.
Finally, as set forth in more detail in today's earnings release, I will remind everybody 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 will turn the call over to Scott Stephenson.
Scott G. Stephenson - President, Chief Executive Officer & Director
Thanks, Eva, and good morning, everyone.
We're very pleased with the results we reported last night with outstanding revenue growth and strong operating discipline. In the fourth quarter, we delivered excellent results with total revenue growth of about 12% and an increase in diluted adjusted EPS of about 18%. Full year revenue and diluted adjusted EPS both grew about 9%.
Excluding the costs associated with the FTC review of the EVT acquisition and the fourth quarter risk assessment reorganization costs that Mark will discuss in more detail, our diluted adjusted EPS growth in the quarter was 22%. Our consolidated organic revenue growth for the full year was 9.4%, Profitability was strong with an EBITDA margin of 46.2% in the quarter and 46% for the full year.
Adjusting for FTC-related costs and Decision Analytics and the reorganization and risk assessment, full year EBITDA margins were 46.6%. This is consistent with our expectations and previous comments that we would maintain margins at about the same level as 2013, while also investing in our business. As you know, in December, we concluded our efforts to acquire EVT following the vote by the FTC to challenge the transaction. We worked hard to come to a mutually agreeable solution with the FTC, but no agreement could be reached that was in the best interest of our shareholders.
While we were disappointed in the FTC's decision, we are committed to remote sensing and imagery analytics and intend to be the leader in these areas. For competitive reasons, we'll be measured today in our comments regarding our go-forward strategy. The solutions we have and will create over time will be based on a multi-tier, multi-spectral set of images. We are doing this today with satellites in our Verisk Climate division and with non-satellite images at Xactware. In fact, Xactware recently announced that Property InSight is now available for all residential, commercial and agricultural structures in the United States.
The Property InSight data bundle includes 3D property models, roof exterior and property measurements and property risk factors, among other critical data points, for professionals who work with properties. We also announced the launch of the Xactware Remote Sensing Lab, a collaborative industry group dedicated to developing remote sensing technologies specific to the property industry.
The Lab is a natural extension of Verisk's long history of partnering with customers on new technology and applications. Participants in the Lab include experts in remote-sensing, computer vision, geospatial intelligence and analysis, computer science, engineering and geology.
We expect to pursue our strategy through balanced investments, synchronized with revenue growth, and will remain within our typical margin expectations. As we had accumulated cash in anticipation of EVT transaction, we determined that a return of capital to our shareholders in the form of a $500 million accelerated share repurchase was appropriate.
This was in addition to the $90 million in the fourth quarter and $275 million for the full year we spent repurchasing shares in the open market. Our remaining authorization at the end of the quarter was $190 million. We continue to feel confident in our long-term opportunities to grow shareholder value, and the accelerated share repurchase is evidence of that confidence.
In addition to returning capital to our shareholders, we remain active in looking at M&A opportunities. We continue to focus on assets with a strong strategic fit, and as we've been discussing with you, we are interested in using acquisitions to support our international expansion efforts. We remain interested in both our existing verticals as well as potentially other global verticals that can leverage our existing intellectual property.
In the fourth quarter, we made two small acquisitions, both of which expanded our global footprint. One, DART, is in financial services and is now part of Argus. The other, Maplecroft, is in the area of country and political risk and an important complement to our existing supply chain initiatives.
DART is a leading provider of benchmarking and advisory solutions to financial services institutions in Australia, New Zealand and other Asia-Pacific markets. Argus and DART will serve financial institutions in lending and payment product optimization.
Maplecroft, which is based in the U.K., uses a proprietary data aggregation and analytical approach enabling its customers to assess, monitor and forecast a growing range of worldwide risks, including geopolitical and societal risks, many down to the local site level. Maplecroft's unique solutions are used by multinational companies, financial institutions, governments and NGOs. Maplecroft's research data and platforms complement our world-class capability in natural catastrophe and extreme weather impact assessment in order to form a comprehensive set of analytic solutions. The combination will enable organizations to make informed risk-adjusted decisions for their assets, operations and supply chains.
With the addition of Maplecroft, we are establishing ourselves as a leading provider of value chain optimization tools, providing comprehensive quantitative risk analytics and platforms by which our customers can visualize, quantify, mitigate and manage their risks. We have rebranded the company Verisk Maplecroft to reflect our growing international strategy. You'll have a chance to see Maplecroft's solutions at our Investor Day next week on March 5 in New York City.
As we look back over the past two years, we've been able to deliver very good results in the context of a temporary step-up in our investments and a sizable expansion of our healthcare business. Both our organic revenue growth and our operating profitability continue to be sector leading, and we remain committed to a prudent mix of M&A and share repurchases over time to complement and enhance our core businesses. This combination positions us very well to deliver the kinds of shareholder returns over the next several years that we expect of ourselves and that you expect of us.
So with that, let me turn it over to Mark to cover the financials in more detail.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Thank you, Scott.
For the fourth quarter, we again delivered both revenue and EBITDA growth, while also investing in the future. Revenue grew 11.6% for the quarter ended December 31, 2014 and 9.5% for the fiscal year 2014. Excluding the effect of recent acquisitions, revenue grew 11.4% for the fourth quarter and 9.4% for the fiscal year 2014. The strong organic growth reflects the health of our business and the value we deliver to our customers.
Within the Decision Analytics segment, revenue grew 15.2% for the fourth quarter of 2014 and 15% on an organic basis. Revenue growth in the quarter was driven by strong performance in financial services, healthcare and insurance. For the full year, Decision Analytics revenue grew 12.1% as reported and organically. Within Decision Analytics, our insurance category grew 12.3% for the fourth quarter of 2014. Underwriting solutions led the growth, followed by catastrophe modeling and loss quantification solutions. Insurance fraud claims solutions also contributed to the growth. Overall, growth was driven by the increased adoption of existing and new solutions and annual increases in invoices.
Touchstone, our next-generation catastrophe modeling platform, continued to drive growth, as did our GIS risk platform and property replacement cost underwriting solutions.
In the Financial Services category, revenue grew 25.2% in the fourth quarter 2014. The revenue increase was driven by demand of our analytic solutions and services. As you know, we sometimes see project revenue in the fourth quarter from our clients as they look to fully utilize their budgets, and again saw that in 2014. For the full year, Financial Services revenue grew 19.3%.
In the healthcare vertical, revenue in the fourth quarter grew 21.8%, all organic, with growth across all divisions led by Payment Accuracy Solutions. For the fiscal year 2014, revenue from healthcare grew 16.2% at the higher end of the direction we gave you for mid-teens growth. This is a strong outcome in the area of our business that is more transactional than the rest of Verisk.
As we look ahead to 2015, we want you to understand a change in one part of the revenue in the Medicare Advantage area of our RQI business at Verisk Health. We recently adjusted some of our contract language at Verisk Health to accommodate health plans that want to include prospective health assessment costs in their medical loss ratios.
We prefer changing the contract language instead of becoming a licensed medical provider. There is no impact to our bottom line as we've always netted out these revenues and expenses. The only result is a change in less pass-through revenue in 2015 than in prior years.
Overall, we expect to see good growth for the full year versus comparable 2014 revenue number of $279.5 million. Similar to 2014, revenue growth will be somewhat weighted to the latter part of the year, and while we don't breakout profitability of Verisk Health, we expect EBIT to grow faster than revenue in 2015 as we continue with our program of operational improvements.
In specialized markets category, revenue declined 0.5% in the fourth quarter 2014 and 0.8% for the full year. Good growth in Weather and Climate Analytics and Environmental Health and Safety Solution was more than offset by lower activity related to government customers. Verisk Climate continues to provide important analytic content for our insurance customers and our supply chain related initiatives. The specialized category will return to growth in 2015 both as reported and organically.
Turning to Risk Assessment, for the fourth quarter, we reported revenue growth of 5.5% indicating the value to our long-standing insurance customers. The overall increase within the segment was due, in part, to 5.1% revenue growth of our industry-standard insurance programs resulting primarily from growth in 2014 invoices effective January 1.
Property-specific rating and underwriting revenue increased 6.8% in the fourth quarter. Growth was a result of new sales with higher committed volumes. For the full year, Risk Assessment revenue grew 5.2% driven by 5.1% of growth in industry-standard programs and 5.7% of specific rating underwriting category.
For the fourth quarter 2014, EBITDA grew 13.4% to $214.6 million with an EBITDA margin of 46.2%. For the fiscal year 2014, EBITDA grew 7.8% to $803 million with an EBITDA margin of 46%. Excluding professional fees related to the FTC of $6.9 million for the full year 2014, including $1.7 million in the fourth quarter as well as risk assessment reorganization costs of $4.8 million in the fourth quarter 2014, EBITDA margin was 46.6% for the fiscal year 2014.
The fourth quarter 2014 EBITDA margin for Decision Analytics increased 41.1% from 38.5% in the fourth quarter of 2013. The fiscal year 2014 EBITDA margin in Decision Analytics was 39.6% versus 40.7% in the fiscal year 2013. Excluding the FTC-related costs, full year Decision Analytics EBITDA margin was 40.2%.
Over the past year, we've been working to position our core insurance business for sustained growth and innovation into the future. In the fourth quarter, we offered voluntary resignation packages to a group of our long-tenured employees to honor their solid contributions to the business. The risk assessment reorganization was a talent realignment rather than simply a cost reduction exercise. We intend to reinvest the savings from those taking these packages back into our core business in the areas like product strategy, advanced analytics, technology platform and customer engagements, which are crucial for sustained innovation.
The fourth quarter 2014 EBITDA margin Risk Assessment decreased 55.4% from 57% in fourth quarter of 2013. Reported fiscal year 2014 EBITDA margin for Risk Assessment was 56.7% versus 56.1% in the fiscal year 2013. Excluding the reorganization costs, EBITDA margin Risk Assessment was 58.3% and 57.4% in the fourth quarter of 2014 and fiscal year of 2014 respectively, an increase versus the comparable periods in 2013.
Our interest expense was down nominally in the first quarter versus the respective period in 2013. This decrease was due to repayment of private placement debt of $180 million during 2013. Our reported effective tax rate was $37.8 million for the fourth quarter. For the full year 2014, the effective tax rate was 37.2%.
Net income increased 15% in the fourth quarter of 2014 driven by growth in the business, and net income grew 8.3% for the fiscal year of 2014. Adjusted net income increased 13.5% for the fourth quarter of 2014 and increased 6.4% for the fiscal year 2014. Diluted adjusted EPS in the quarter was $0.65 and $2.40 for the full year reflecting growth of 18.2% and 8.6% respectively. The average diluted share count was 167.1 million shares in the quarter. On December 31, 2014, we had 161.1 million diluted shares outstanding reflecting the execution of the accelerated share repurchase.
In the fourth quarter of 2014, the company executed a $500 million accelerated share repurchase. Under the ASR program, we received an aggregate initial delivery of approximately 6.4 million shares, which represented an estimated 80% of the ASR at the then current prices. The total number of shares repurchased under the ASR were based on a discount from the daily volume weighted average price of our common stock over the course of the program, which will be run up to six months or conclude earlier at the broker's option. At final settlement, we expect to receive additional shares of our stock.
In the fourth quarter, we also repurchased an additional 1.5 million shares for $90.5 million prior to the announcement of the ASR. For those shares purchased in the quarter, the average price we paid was $62.54. At December 31, 2014, the company had about $190 million remaining under our share repurchase authorization. Our share repurchase program has been successful to date, generating annualized IRRs of about 20%.
Turning to the balance sheet, as of December 31, 2014, our cash and cash equivalents were $39.4 million. Total debt, both short-term and long-term, totaled $1.4 billion including about $160 million of revolver borrowings. Today, our incremental debt capacity is about $1 billion and will grow with our EBITDA and free cash flow. Our total debt to EBITDA at December 31 was 1.8 times, below our steady state target.
In 2014, free cash flow defined as cash provided by operating activities less capital expenditures, adjusted for the sale of our Mortgage Services business grew 3.4% compared with the prior period to $329.5 million and represented 41% of EBITDA conversion in 12 months of 2014. Growth in free cash flows was driven by improved profitability of the business and stable CapEx partially offset by shifts in the timing of tax benefits in 2013, previously discussed, as well as other timing items.
Capital expenditures were $146.8 million in the 12 months ended December 31, 2014, an increase of $0.8 million over the same period in 2013. Capital expenditures were 8.4% of revenue for the 12 months ended December 31, 2014.
As you think about your models for the full year 2015, let me give you what our quarterly Verisk Health revenues for 2014 would have been if reported on the basis of the new contract language. First quarter, $58.4 million. Second quarter, $56 million. Third quarter, $81.1 million. Fourth quarter, $84 million. That's $279.5 million for the full year.
Turning to our full company P&L, we anticipate the amortization of intangibles of about $53 million, fixed assets depreciation and amortization of about $100 million, and the tax rate around 38%. Because of the ASR, our share count will be down year-over-year in 2015. But we will continue to evaluate additional repurchases in the context of our broader capital allocation program and market conditions.
Based on the current debt balances and maturities, full year interest expense will be about $66 million with the first quarter interest expense around $18 million declining through the year. We expect CapEx of about $115 million up modestly from 2014.
Overall, we are pleased to report that our business is performing very well. We are seeing growth from multiple verticals and we are executing on our operational plans.
With that, let me turn it back over to you for comment before Q&A.
Eva F. Huston - Senior Vice President, Treasurer and Chief Knowledge Officer
Thanks, Mark. We appreciate all the interest in Verisk. Given the large number of analysts we have covering us, we ask that you limit your questions to one question and one follow-up. This will give more people an opportunity to ask their questions.
And with that, I'll ask the operator to open up the line.
Question-and-Answer Session
Operator
Your first question comes from the line of Tim McHugh from William Blair and Company. Your line is now open.
Tim J. McHugh - William Blair & Co. LLC
Yes. Thanks. I guess the first question just on the margins, and I guess as we think towards next year, if I adjust for the new revenue presentation for healthcare I guess, my quick math, which could be wrong, tells me that's about a 90 basis point boost to the margin just because that's pass-through revenue. And then there's another 60 basis points from stripping out the professional fees in restructuring. So between those two that puts you above the 45% to 47% range, I guess. You've talked about being within. Is that still the range, then, that we should we think about next year, or are there factors offsetting it that the underlying margins would be coming down?
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
So, Tim, thanks for the question. I think your math is good. To the extent you think about the FTC costs, which we do agree are onetime, and the nature of the change in accounting, the 90 bps is about right in both cases.
I'll continue to just to highlight that we have a high degree of good feelings about the business into 2015, especially around margin performance. We think that we have scale in all of those businesses. What we continue to, obviously, balance is the investment in the business to make sure that we grow into the future. So our view is, we're feeling very positive about where margins should be anticipated in 2015, moderated by what I would say is some overlap in investment.
The other thing I'll highlight to the team, I think we tried to bring it out inside of the conversation, the script is that the iPass reorganization, albeit a $4.8 million number, is probably something that will come back into the P&L in 2015. We are looking to redeploy those resources.
Tim J. McHugh - William Blair & Co. LLC
Okay. And the healthcare comment was – I guess, I wasn't clear what you, from a revenue growth perspective on, I guess, the new revenue presentation. Are you still looking for double-digit growth or mid-teens growth like you were talking about last year in that business or, I guess, on an underlying basis, how are you thinking about the outlook there?
Scott G. Stephenson - President, Chief Executive Officer & Director
Yeah. We feel good about the business. The growth in 2014 was broadly based across many different solution sets. We expect the growth in 2015 to be broadly based across several solution sets.
One of the metrics that, among several, but one that some folks follow is the rate of growth in the Medicare Advantage population. It's been the case, and we expect it will continue to be the case, that in that segment of what we do, we would grow faster than the underlying market, which is actually true of a lot of what Verisk does across our many solution sets. So we feel very good about our growth into 2015.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
And we would take that growth and grow it off of the $279.5 million that we were describing throughout the day.
Tim J. McHugh - William Blair & Co. LLC
Okay. Thanks.
Operator
Your next question comes from the line of Manav Patnaik from Barclays. Your line is now open.
Manav Shiv Patnaik - Barclays Capital, Inc.
Yeah. Thank you. Good morning, guys. So just to follow up on the healthcare, like thinking longer term, one of your competitors obviously just went public and they've thrown out long-term targets of 20%-plus with some mid-30%s margins and so forth. I was just curious if you guys could provide us any color. I know anecdotally you guys are very positive on the space, but just trying to get a sense of how we should think about this over the next, call it, five years.
Scott G. Stephenson - President, Chief Executive Officer & Director
Well, our mix is by degrees different from theirs. And so we're certainly interested in an (24:14) company with whom we compete in some categories. But our reference point is really us and the solutions that we've got and the customers that we're serving.
And this is one of the places inside of Verisk where, as we've said in the past, we've actually got secular tailwinds in the form of just kind of the underlying demand in the market, and it causes us to feel good about where we sit. We have strengthened the business operationally and expect to continue to do that. So it's a positive outlook for us inside of the healthcare space.
Manav Shiv Patnaik - Barclays Capital, Inc.
Okay. Fair enough. And then just on your M&A pipeline, so for a couple of years, I guess, we've heard you talk about a very active M&A pipeline and maybe the last year, the pending EVT deals that have held you guys back. But what's the roadblock or what's the delay in terms of executing some of these deals that you have in your pipeline?
Scott G. Stephenson - President, Chief Executive Officer & Director
Well, maybe other than sort of the obvious one about the FTC process last year. I wouldn't call it a road block, but I would describe us as a very thoughtful acquirer. There are any number of transactions that we could have closed over the course of the last 12 months to 18 months, some of which you actually would have heard about if you observed the space around us where, just based upon our sense of valuation versus the sellers' ambitions, we were definitely positioned to buy businesses, but for valuation considerations chose not to. So we don't actually feel constrained and are leaning very heavily into the M&A agenda.
Manav Shiv Patnaik - Barclays Capital, Inc.
Okay. Thanks a lot, guys. Congrats on the quarter.
Scott G. Stephenson - President, Chief Executive Officer & Director
Thank you.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Thank you.
Operator
Your next question comes from the line of Joseph Foresi from Janney Montgomery. Your line is now open.
Joseph D. Foresi - Janney Montgomery Scott LLC
Hi. I was wondering, could we dig a little deeper as to why the change in the accounting methodology and what opportunities it either opens or changes from a demand perspective in the healthcare business?
Scott G. Stephenson - President, Chief Executive Officer & Director
Yeah. So just to go back to fundamentally why we're making this change, our customers in the context of the Accountable (sic) [Affordable] Care Act, are being measured and managed on their medical loss ratios. And they need to make sure that they don't fall below levels that the government has identified as the benchmark.
So what they're interested to do is to have as many costs reflected in the expense line, which is the numerator of the calculation. One of those expenses that our customers would like to have in that numerator is the cost of prospective health assessments, and that's the product line that Mark was describing.
In order for us to provide the service and book the gross revenue, we would have to have – we would have to be treated as if we were a provider. We would have to have a provider ID. We're not interested in being that. We're not interested in having the liability associated with being a provider.
So all we've done is we've said that the pass-through revenue associated with that service, we're just not going to book as revenue anymore. Otherwise, we're still providing the service just as much as we did before. We're simply changing the way that we account for it, and that is the only change. And it really has zero interaction with our business going forward.
Joseph D. Foresi - Janney Montgomery Scott LLC
Got it. That's very helpful. And then on the insurance business, maybe you could talk a little bit about what you're seeing from an underlining demand trends. I know that there's been no correlation between premium movements. But how do you feel about that, and how long does it take, you think, to create that imagery business as opposed to the acquisition? Thanks.
Scott G. Stephenson - President, Chief Executive Officer & Director
Yeah. Okay. So let me – two very different questions, both good questions. So the insurance market has its ebbs and its flows. We're in a place right now where it certainly is not growing at high rates. It cycles around a little bit, but as we've often described, our opportunity is really based on the amount of value that we can create for our customers, the amount of innovation we can put into existing and new solutions.
And so our situation is very similar to what it has always been, which is we love the insurance market and our customers. It's a steady market, which is of course what we all look to insurance for, and our performance is going to be a function of the innovation and value that we can bring.
On the Aerial Imagery front, I just really want to emphasize two things that I hope are clear, but just to make sure. The first one is we've got fully dimensioned analytics already; the analytics are already built. And the second is that we have a set of images that cover the entire country. So we're all dressed up and ready to go.
The ongoing issue with respect to imagery is that we would like to see the quality of the images improved and, in fact, that was part of the thought process around EVT was that we would start with their library but improve it. We're now discussing multiple additional ways that we could go about doing that, and we will inform you when we have chosen which of those paths we're going to go down. But we feel very good about where we sit, and we feel very bullish about the business going forward.
Joseph D. Foresi - Janney Montgomery Scott LLC
Thank you.
Operator
Your next question comes from line of Toni Kaplan of Morgan Stanley. Your line in now open.
Toni M. Kaplan - Morgan Stanley & Co. LLC
Hi. Thanks for taking my question. So in healthcare, just conceptually, how should we think about the trajectory of healthcare growth rates in 2015 given seasonality but also given the fact that the comps are easier in the first half of the year?
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Toni, so I just want to try to catch the question. Very similar to what we've talked in the past, from a seasonal perspective, the suites (30:32) regarding Medicare Advantage and the work that we do with RQI is second-half weighted. So we have talked about 60% at the end of the second half, 40% in the first. And I think you'll see that same type of ramp as we progress through the year.
If your question is a little broader kind of to the one we had earlier, I think I'll kind of reinforce Scott's position. I think we're feeling good about the business as a whole. I think we're feeling good about healthcare. And one of the things I think you probably noted in the way we described the growth, RQI, which is more transactional, has been strong but so is the payment accuracy side of the business which is a fundamental fraud fighting kind of expertise that we have and we felt good about that.
Final element or final component from the healthcare perspective, population management is the rage right now. Everyone's trying to find ways to better consume healthcare and probably get better outcomes for less cost. And that trend, that interest, I think will continue to spur our Enterprise Analytics business. So across the board, I think we look forward to 2015.
Scott G. Stephenson - President, Chief Executive Officer & Director
Maybe just to amplify a little bit on that point. There are a couple of sort of emerging customer sets in the healthcare world. One would be the accountable care organizations and integrated delivery networks and their ilk and the other would be the exchanges both public and private. And we feel very good about the territory we've been able to claim in both of those categories, which is a source of encouragement for us on where we're headed.
Toni M. Kaplan - Morgan Stanley & Co. LLC
Okay, terrific. And then I've been reading a lot about the increasing popularity of cat bond lite transactions. Can you just talk about how you expect that that trend may impact your business if at all? Thanks.
Scott G. Stephenson - President, Chief Executive Officer & Director
Well, I appreciate the qualifier on your question because it's just important to bear in mind that cat bonds are one of many ways that catastrophe risk gets managed and transferred. And in fact, it's one of the lesser ways, so it's identifiable because there are discreet transactions and we do very well on the category. In 2014, we had about 80% of all those transactions, but I just encourage you to keep it in context.
Overall, it is a small part, a very small part, of the revenue associated with what we do in catastrophe modeling. So that said, cat bonds lite, you're still going to need a calculation agent that's going to stand as a third party to render a dispassionate and technically deep view of what's going on. And so if that was to expand that market overall a little bit, that would be great. We expect to still be highly competitive with respect to what's going on there.
Toni M. Kaplan - Morgan Stanley & Co. LLC
Terrific. Great quarter. Thanks.
Scott G. Stephenson - President, Chief Executive Officer & Director
Okay. Thank you.
Operator
Your next question comes from the line of Andrew Steinerman of JPMorgan. Your line is open.
Andrew Charles Steinerman - JPMorgan Securities LLC
Hi. I want to talk a little bit about the Risk Assessment business, which accelerated in the fourth quarter. I remember third quarter commentary about some shift in annualizing or annualize contracts with reinsurance customers. It seems like somehow we've overcome that. So could you talk about how we accelerated in the fourth quarter, and given that 2015 invoices are out now, will the fourth quarter trajectory foray continue into 2015?
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Thanks, Andrew. Let me take that. This is Mark. First of all, I think we had a strong year from Risk Assessment. I think we have fundamentals in the businesses are as strong as ever and the position we have is strong as ever. A couple things to highlight if I think about the fourth quarter. First of all, some of our content is actually licensed through vendors, and that revenue is strong. It's been a component of a license and there's some royalties. So we saw some pickup there, so that's good news and hopefully that will continue into 2015.
And I think I've highlighted some other elements of Risk Assessment. We've talked about Risk Analyzer, which is our predicted modeling. We've moved from very much focused on personal auto but into homeowners as well as into the commercial line space and that has been up – the uptake there has been very strong and very good. We've had some good news around what is our electronic rating content. That's the way we take our loss cost and our rules and embed it deeply into our customers' workflows. And finally even Workers' Comp, which we haven't talked a lot about, had some good legs in the quarter and we think will continue. So those are the features of the fourth quarter, which I think will bode well into 2015.
And I think to answer the second part of your question, at this point you referenced about invoices; you're right there out. And I think we've done what we've consistently tried to do. We've tried to deliver value to our customers, reflect that in the invoices. At this point in time, though, you have to remember that more than 50% of the way we're contracted with customers, it really is about longer-term contracts now that they're committed to, they're multiple year. So it's not as much annual recalculations. And I think we're going to see a consistent growth reflecting the value we provide.
Scott G. Stephenson - President, Chief Executive Officer & Director
I'll just add those multi-year contracts Mark was referencing, they always increase year – they always carry year-over-year price escalators.
Andrew Charles Steinerman - JPMorgan Securities LLC
Perfect. Thanks, guys.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Thank you.
Operator
Your next question comes from the line of David Togut of Evercore. Your line is open.
David Mark Togut - Evercore Partners, Inc. (Broker)
Thanks. You saw a very nice acceleration in organic revenue growth in the quarter to 11% from what had really been trend line organic growth in the high single digits over the last couple years or so. So my question really is, are the drivers of the higher growth rate more specific to the fourth quarter, or are you generally seeing an improving demand trend that might support more of a low double-digit-type organic growth rate going forward?
Scott G. Stephenson - President, Chief Executive Officer & Director
Well, of course, what we do is extremely broadly based; we're in multiple verticals, et cetera. So I don't think there's one answer really to your question. I would say that the demand factors across the vertical markets that we serve are, at least, as strong as they have been. So if you think of that as foundational, I would say at least as strong as they have been in the recent and intermediate past.
And as is always the case with our company, in 2014, including in the fourth quarter, we found ways based upon value to grow our business at a rate which was greater than that of our customers and the underlying markets and we believe that that dynamic will continue to apply in 2015. And we have definitely been doing a lot of investing into the business to try to create new solutions, to try to re-platform existing solutions. All of these things are pro-growth, and we are definitely focused on the organic growth of our business.
David Mark Togut - Evercore Partners, Inc. (Broker)
I appreciate that. Just as a quick follow-up, you saw a nice acceleration in growth in financial services in the quarter; I think Mark called out some project-specific work behind that. But are there other factors that might support a more sustained higher growth like what we saw in the fourth quarter?
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
So thanks for the question. I think what we've seen inside of the financial services category is really the fundamentals of the business where we've been able to actually take that product and extend it internationally has helped. And that's progress, and I think that's something that we'll continue to see in 2015.
The other thing that is a little bit more project work, I don't want to suggest that's a big, big number, but that is a typical kind of bit of a surge at year end where people and customers have some dollars to spend and they try to get their money's worth at year end. So I wouldn't necessarily annualize that base. But the underlying fundamentals internationally is very good. And the other thing that I will highlight is the world of marketing and advertising effectiveness, which is a way to go about helping advertisers understand how good and how effective their advertising is based upon the consumer and the spend is a very big category for us, and that continues to grow nicely and will have legs into 2015.
David Mark Togut - Evercore Partners, Inc. (Broker)
Understood. Thanks so much.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Thank you.
Operator
Your next question comes from the line of Anj Singh of Credit Suisse. Your line is open.
Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker)
Hi. Thanks for taking my questions. So earlier in the call, you had referenced growth in Medicare Advantage. I'm just trying to balance that with some forecasts that we've seen indicate that growth may inflect negative in the coming years. Just wondering how you think about the impact from that. Is there any risk to the healthcare category's growth, or is it safe to say that demand for the analytics within that space should easily offset that?
Scott G. Stephenson - President, Chief Executive Officer & Director
Yeah. We don't see kind of what you're hypothesizing there. We don't actually see that. The long-term factor inside of Medicare Advantage is an aging population and a preference for the Medicare Advantage product. So I'm not quite sure whose projection you're referencing. First, the most recent look at growth in the enroll populations was actually very strong, high single-digits. So between that and our own work, to make what we do valuable for our customers, we feel good about the environment.
Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker)
Got it. Yeah, it's the CMS Office of the Actuary that I believe has those forecasts a little bit further out showing that the growth there dips. But I guess moving onto my next question. I'm wondering if you can discuss the head count reductions in Decision Analytics during the fourth quarter. Can you tell us which category this was attributable to? Is there more room for efficiency there and, perhaps, how you think about your SG&A going forward in light of it being remarkably flat the past few years.
Scott G. Stephenson - President, Chief Executive Officer & Director
So first of all, just to make sure you're clear, the head count reduction was in Risk Assessment, not Decision Analytics. And basically it was, we took the opportunity on a, really, on a one-time basis to reset the talent inside of that business. As Mark said, we're trying to make the unit more analytic and more capable of the kind of high-value growth that we're looking for.
So it really was a moment in time readjustment, and this is inside of what is really the oldest part of Verisk ISO. And so we just made our assessment. Clearly, what we did has made us stronger and will continue to make us stronger into the future. So we feel very, very good about it. The transition was quite smooth and in line with what we expected. So, Mark, do you want to talk about SG&A at all?
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Sure, and I believe your question there was on a broader context, the SG&A category throughout the corporation. I think we have a constant goal to try to be continuously improving those operations, and inside the SG&A category, I think we've been pretty successful there.
Couple things that I'll highlight. We've done some data center consolidation. We continue to see benefits from that. I'm not sure that those benefits will increase as much into 2015. The other thing that helped us in 2014 was pension, and the pension assets performed extremely well. So there was good news in a reduction to the pension cost in 2014. As we roll into 2015, the mortality tables have changed, offsetting what was good news inside of the pension asset returns. So the pension will actually cost us more into 2015. I think those couple things are more or less offsetting. I would just see some gradual increase in SG&A maybe up a little from what you've seen in 2014.
Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker)
Okay. That's helpful. Thank you.
Operator
Your next question comes from the line of James Friedman from SIG. Your line is open.
James Friedman - Susquehanna Financial Group LLLP
Great way to end the year, guys. I had a couple of questions, so I guess I'll ask them upfront. So, Mark, you had mentioned project-related work in financial service. I think we've become more accustomed to seeing that in insurance DA. Anything to call out there? And then the other one is, Scott, relative to DART and Maplecroft, as we're trying to figure out the contribution for 2015, I realize you gave an organic for the fourth quarter. Did those deals close early or late in the quarter so we can try and annualize those? Thank you.
Scott G. Stephenson - President, Chief Executive Officer & Director
Why don't you take the first question, Mark, and I'll take the second.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
So from a project-related work, the things that typically come to mind both in our cat modeling category and what we refer to as the loss quantification, which is Xactware, sometimes there's work that's done on behalf of a customer to more deeply integrate the models into their environments. Obviously, cat bonds is the other element. Although these are big, sometimes they do flux into fourth quarter. I don't think there was anything to call out in the fourth quarter inside the insurance category. It was probably a little bit more than other quarters, but nothing unusual.
Scott G. Stephenson - President, Chief Executive Officer & Director
And to your question, DART closed in November and Maplecroft closed in December.
James Friedman - Susquehanna Financial Group LLLP
Got it. Thank you.
Operator
Your next question comes from the line of Andre Benjamin from Goldman Sachs. Your line is open.
Andre Benjamin - Goldman Sachs & Co.
Thanks. Good morning. Two questions, one on energy, one on healthcare. First on energy, I know you said you're going to be measured in your comments, but I know at that time you bought EagleView, you were pretty clear you thought they were a very strong competitor. Now they're going to remain a competitor. So I was just wondering how we should think about how you're thinking about competing, how aggressively you're willing to spend to become a leader, and whether we should characterize imagery as remaining at the top of your priority list that you're going to pursue aggressively or if that's kind of overstating its importance relative to the whole business?
Scott G. Stephenson - President, Chief Executive Officer & Director
Imagery is a high priority for us, and we believe that imagery will play a number of roles inside of Verisk. So the first order role is the existing product set, which is using images in the process of responding to property claims. The next most important use will be as it relates to a higher degree of automation in the underwriting process, where imagery will play a role in that.
And beyond that, we think that the interpretation of images, whether they're taken from 50 miles above the Earth or a couple thousand feet above the Earth or a couple hundred feet above the Earth from a drone, all of those need to be brought together into a kind of one unified way of dealing with imagery so that you get to the best solution at the lowest cost. EagleView plays at one of those levels today, primarily. We intend to play at all of those levels. That is part of what we think is important here. And the other part is that just like with most of what we do, there's also a very important requirement to distinguish based on analytics and the workflow by which the analyzed output gets into the customers' own process.
We intend to be doing all of those things in order to make it happen for our customers. And so we believe the category is important. We believe that we will bring a lot of strength to this, and as I said, the only part of it that might register as a question is where will the images come from? Again, just want to underline, we already have the images for the entire country and the objective for us is to get, yet, more precise images. And we feel very confident that we are able to do that and we are really sorting among the options for doing that right now.
Andre Benjamin - Goldman Sachs & Co.
And the second question was on RQI. I was just wondering if you could talk about your level of penetration of the client base and the updated thoughts on the size of the market. I know you've got an Analyst Day coming up, so you may be looking to save it for then. And specifically, I was interested in how many of the country's biggest clients that have the large data and analytics firms are currently clients?
Scott G. Stephenson - President, Chief Executive Officer & Director
So we feel very good about the customer list. We have many of the name brand commercial carriers among customers for what it is that we do. Our sense is that we are a share leader in the business. It's also clear to us, however, that we don't work with everyone and we don't have all of the available business from those with whom we do work.
Operator
Your next question comes from the line of Bill Warmington from Wells Fargo. Your line is now open.
William Arthur Warmington - Wells Fargo Securities LLC
Good morning, everyone.
Scott G. Stephenson - President, Chief Executive Officer & Director
Good morning.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
Hey, Bill.
William Arthur Warmington - Wells Fargo Securities LLC
So I've got a question for you about what impact, if any, you think the severe weather in the Northeast potentially has on some different parts of your business, it seems like, near term, potentially you have some benefit from Xactware and XactContents from a transaction piece there. But could it also be impacting cat modeling demand and possibly even premium growth for the coming years?
Scott G. Stephenson - President, Chief Executive Officer & Director
So I think you answered your own question. I mean...
William Arthur Warmington - Wells Fargo Securities LLC
Does that make sense though?
Scott G. Stephenson - President, Chief Executive Officer & Director
Yeah, definitely. Those are the places where our business actually responds to events. Now that said, in the course of the year, there are lots of natural events, natural – and I'm trying not to say catastrophe. There's a lot of claims that are not related to catastrophes, and so the overall claims volume is going to be a function of not just one event, but a whole lot of events, some larger, some smaller, some that relate more to flooding, some that relate more to atmospherically driven events.
So I would encourage you not to get overly focused and think that there's some enormous surge based on any one event. But it is the case that when there are more property claims, there's more call upon the Xactware platform. We have, by the way, in that business, we've worked to have a balance between committed subscriptions and transaction-based revenues. And, in fact, the mix has shifted more towards the committed volume side so that dampens the effect somewhat.
Definitely it's the case that everybody gets more sensitized to the need for good modeling when there are large-scale events that go on and, yeah, rates generally tend to harden when there's more claims. So I think you did identify the cause-and-effect levers that are in there. Again, I would just say any one event or any one moment in the course of the year, don't overweigh it too much because there are a lot of different ways that there is damage to property and claims are being filed.
William Arthur Warmington - Wells Fargo Securities LLC
Excellent. Thank you very much.
Scott G. Stephenson - President, Chief Executive Officer & Director
Welcome.
Operator
. Your next question comes from the line of Oscar Turner of SunTrust. Your line is now open.
Oscar Turner - SunTrust Robinson Humphrey
Good morning. Thanks for taking my question.
Scott G. Stephenson - President, Chief Executive Officer & Director
You're welcome.
Oscar Turner - SunTrust Robinson Humphrey
I know you mentioned in the past that you continue to balance returns of capital versus M&A. Just wondering, can we expect returns of capital of a similar magnitude to the $500 million ASR in the future, or should this be viewed as a one-time in nature just given the EagleView?
Scott G. Stephenson - President, Chief Executive Officer & Director
It's one-time. I mean, we had earmarked capital for a $650 million acquisition, which we were in pursuit of for about a year. And we felt that when it was clear that for the reasons I stated earlier, we weren't going to do the transaction, that the responsible thing to do where our shareholder were concerned was to return the capital to them. It doesn't infringe our opportunity to do M&A in the future. But at the same time, we felt that it was a responsible move at a particular moment in time but definitely in response to the one-time event of the EVT transaction.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
I'll highlight...
Oscar Turner - SunTrust Robinson Humphrey
Okay.
Mark V. Anquillare - Group Executive, Risk Assessment, Chief Financial Officer & Executive Vice President
I think we've always said we have a preferenced investor in our business and we always balance between acquisitions and then share repurchases, and this was just the right time given market conditions.
Oscar Turner - SunTrust Robinson Humphrey
Okay. Thank you.
Operator
As there are no further questions on the phone lines at this time, I would now turn the call back to Mr. Scott Stephenson.
Scott G. Stephenson - President, Chief Executive Officer & Director
Thank You. We appreciate everybody joining us here for our Fourth Quarter 2014 Earnings Call. I appreciate your interest. And we look forward to seeing many of you at Investor Day next week, and of course we'll speak to you next quarter. Thanks for your time today.
Operator
This concludes today's conference call. You may now disconnect.
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