Verisk Analytics: Durable Competitive Advantage Intact After Courtroom Setback

Nov. 12, 2019 1:02 PM ETVerisk Analytics, Inc. (VRSK)16 Comments


  • Verisk Analytics is a leading data analytics provider serving customers in the insurance, energy and specialized markets, and financial services industries.
  • Verisk nearly enjoys a monopoly in the data analytics for P/C insurers. It has expanded into energy and specialized markets and financial services industries, which share the same business model.
  • Its operating model is characterized by recurring revenue, scalable solutions, and low capital intensity.
  • Its courtroom loss to Eagle View Technologies, along with the $125 million penalties, does not impact its sustainable competitive advantage.
  • That makes the sharp decline of the share price a potential entry opportunity.
  • This idea was discussed in more depth with members of my private investing community, The Natural Resources Hub. Get started today »

Verisk Analytics is a leading data analytics provider serving customers in: insurance energy and specialized markets financial services

Verisk Analytics (NASDAQ:VRSK) stock went into a parabolic fall following the jury verdict in the U.S. District Court for the District of New Jersey on September 25, 2019. The verdict states that Verisk and its Xactware Solutions subsidiary infringed the proprietary intellectual property of Eagle View Technologies, a provider of aerial imagery and data analytics. The jury awarded Eagle View $125 million in damages. The Court has also issued a temporary restraining order stopping, among other things, Verisk's sale of Property InSight, Roof InSight, Geomni Roof, and Geomni Property, as well as its sale or use of Aerial Sketch version 2, after September 25, 2019, and until October 8, 2019, when the Court will hold a hearing on a permanent injunction (see here). Since the newsbreak, the share price of Verisk has dropped by some 13%.

Such a steep share price decline may provide a rare entry opportunity into this company. However, before rushing to buy the dip, it is prudent to assess whether the courtroom setback has permanently damaged the core competency of the company. To that end, in this article, I provide an overview of its business model and competitive advantage, hoping to lay a foundation for an in-depth survey.

Business model

Verisk is a leading data analytics provider serving customers in the insurance, energy and specialized markets, and financial services industries (Fig. 1). Verisk reports in three segments, insurance, energy and specialized markets, and financial services, which contributed 71.8%, 21.4%, and 6.8% of the revenue as of the quarter ended June 30, 2019, respectively (see here).

Fig. 1. Business domains served by Verisk. Source.

  • Verisk's root dates back to 1971 when Insurance Services Office (or ISO) was created as a not-for-profit advisory and rating organization through the consolidation of various state, regional, and national property/casualty (aka, P/C or PC) insurance rating bureaus.

Verisk is a complex business in what I call the 'Digital Resources' space. A thorough understanding of it involves a holistic analysis from multiple angles. To access our in-depth survey of Verisk and many companies like it, you are invited to join The Natural Resources Hub.

Sign up today at The Natural Resources Hub and benefit from our private investment community right away!

This article was written by

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Disclosure: Besides myself, TNRH is fortunate enough to have multiple other contributing authors who post articles for and share their views with our thriving community. These authors include Silver Coast Research, ..., among others. I'd like to emphasize that the articles contributed by these authors are the product of their respective independent research and analysis.

Disclosure: I am/we are long VRSK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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