Verisk Analytics, Inc. (VRSK) Earnings

Management highlights

Overall Q2 2026 Performance - Delivered organic constant currency revenue growth of 5.8%, with sequential acceleration across both segments as previously anticipated, modestly ahead of internal expectations - 8% OCC growth in high-margin subscription revenue demonstrates the stability of Verisk's business model and value proposition for insurance clients - Cost discipline and efficiency initiatives drove healthy adjusted EBITDA margin expansion excluding non-recurring prior-year FX impacts Industry and Operating Environment - 2026 YTD global catastrophe losses are tracking below $100 billion, the lowest level since 2020, driving improved insurance industry combined ratios and profitability - Improved profitability and rate adequacy have led to increased price competition and a softening market, particularly for commercial property, with carriers shifting focus from broad rate increases to underwriting discipline and risk selection AI Product and Strategic Development - Verisk is focused on deploying AI to deliver measurable ROI for clients, combining its proprietary high-quality data, deep industry expertise, and established workflows with frontier large language model capabilities - Key AI deployments include: * MCP connectors for Anthropic's Claude model, bringing Verisk's regulatory-grade underwriting and claims data into natural language AI workflows; one top 10 carrier is already live on the platform, with additional connectors in development for other frontier model providers * Premium Audit AI, which has delivered stronger renewal growth in its first post-launch renewal cycle * Exact AI for claims workflows: user count grew nearly 10x since March 2026, with almost 7,000 current licensees and overwhelmingly positive client feedback * In-development agentic AI capabilities: a next-generation agentic underwriting platform with a global carrier, and new autonomous capabilities for Verisk's life solutions Ask Max feature Catastrophe and Risk Solutions Milestones - Launched the re-engineered U.S. tropical cyclone model and cloud-native Verisk Synergy Studio on schedule and on budget, with first clients already onboarded and a robust migration pipeline for the remainder of 2026 - Completed a strategic tuck-in acquisition of McKinsey Intelligence Services (MIS), a geospatial intelligence and real-time catastrophe/conflict event analysis firm, to enhance end-to-end catastrophe response capabilities for clients Organizational Update - Longtime Chief Information Officer Nick Daffan is leaving Verisk after 20 years; Chief Technology Officer Jeff McRett will serve as Interim CIO while a permanent replacement is recruited Capital Return - Increased the quarterly cash dividend by 11% YoY to 50 cents per share - Retired 8.5 million shares in the first half of 2026 via accelerated share repurchase programs, with approximately $800 million remaining under the current repurchase authorization

Guidance

- Management reaffirmed its full-year 2026 financial guidance, in line with previous targets and long-term Investor Day goals: * Consolidated revenue: $3.19 billion to $3.24 billion * Adjusted EBITDA: $1.79 billion to $1.83 billion, with adjusted EBITDA margins of 56% to 56.5% * Net interest expense: $190 million to $200 million * Effective tax rate: 23% to 26% * Adjusted EPS: $7.45 to $7.75 - Management continues to expect a gradual sequential recovery in OCC revenue growth through the second half of 2026, with acceleration more likely to occur in Q4 2026 than Q3 2026 - The strong Q2 2026 ILS revenue contribution will not repeat in Q3 2026, as ILS issuance is seasonal - The base case for guidance assumes an average full-year level of weather and hurricane activity; slower-than-average start to hurricane season creates headwinds for transactional revenue in the second half that remains within the existing guidance range - The work stoppage on a federal government contract, which impacted H1 2026 results, has been lifted, with work resumed in Q3 2026 in line with prior base case assumptions

Segment performance

Verisk reported consolidated GAAP revenue of $806 million in Q2 2026, up 4% year-over-year. Organic constant currency (OCC) total revenue grew 5.8% year-over-year, a sequential improvement from Q1 2026, with 5.6% OCC growth in Underwriting and 6.1% OCC growth in Claims. - Subscription revenues: 83% of total Q2 2026 revenue, grew 8% on an OCC basis. Growth was driven by strong price realization in renewals, expanded client relationships, and new client wins across Forms Rules and Loss Costs, Catastrophe and Risk Solutions, and Anti-Fraud Analytics. - Transactional revenues: 17% of total Q2 2026 revenue, declined 4.2% on an OCC basis (a sequential improvement from Q1). The decline was driven by tough year-over-year comparisons, lower commercial property transaction volumes, carryover impacts of low 2025 weather activity, and reduced volumes in international travel due to Middle East travel disruptions, offset partially by strong insurance-linked securitization (ILS) activity in Catastrophe and Risk Solutions. GAAP net income was $229 million (down 10% YoY), and diluted GAAP EPS was $1.75 (down 3% YoY). OCC adjusted EBITDA grew 7.4% YoY, with total adjusted EBITDA margins of 57.5% (down 10 bps YoY, with 120 bps of non-recurring FX benefit in the year-ago quarter; excluding that, the company delivered net margin expansion). Adjusted diluted EPS grew 5.3% YoY to $1.98 per share, driven by a 6.8% reduction in the weighted average share count from capital return programs.

Risks & headwinds

- Softening market conditions, particularly in commercial property, have led to lower transaction volumes that are expected to persist through the second half of 2026, pressuring transactional revenue - An extended period of lower-than-average hurricane/catastrophe activity would continue to pressure transactional revenue in property restoration solutions, though the impact remains within the full-year guidance range - Many insurance clients maintain internal restrictions on general LLM access to proprietary and client data, leading to elongated sales cycles for new AI-enabled products as both sides work through data governance, security, and usage right agreements - Higher interest rates and an increased debt balance have driven higher year-over-year net interest expense - The divestiture of a business in late 2025, higher legal fees for ongoing litigation, and a higher effective tax rate from lower employee stock option exercise activity have weighed on full-year net income results

Analyst Q&A

• Q: In the current soft insurance market, should we expect multi-year growth at the lower end of Verisk's target range, or can new product launches and AI offset cyclical headwinds? /

  A: Historically, Verisk has delivered ~6.8% OCC organic growth in soft markets and ~7.3% in hard markets, both within the long-term target range shared at Investor Day. In soft markets, carriers place higher value on Verisk's data and analytics to support disciplined risk selection, which drives increased client engagement. New AI-enabled functionality is already improving price realization in renewals, creating incremental growth offset that differentiates the current cycle from prior soft periods. (308 characters)

• Q: What is the monetization model for new AI tools like MCP connectors, and how should we think about incremental margins as adoption scales? /

  A: MCP connector access is included in existing client subscriptions, with no separate transactional or volumetric charge. Verisk maintains strict enterprise governance over AI-related spending, and incremental costs (such as vectorized data storage) are not material to current margins. AI adoption across the insurance industry is expected to build gradually as clients work through internal data governance requirements, leading to a slow, steady pace of margin accretion as adoption scales. (376 characters)

• Q: How does Verisk plan to monetize AI innovation over time, and what is the current contribution of AI to organic growth? /

  A: Verisk is pursuing three primary monetization paths: 1) improving the value of existing subscription products to support stronger price realization in renewals, which is already delivering incremental growth; 2) potential transactional pricing for early adopter testing of new AI applications, with plans to migrate these to subscriptions over time; 3) standalone license fees for new agentic AI platforms. AI is still at an early stage of adoption, so current contribution cannot be quantified, but management expects it to be additive to organic growth over time. (483 characters)

• Q: If carriers develop their own industry LLMs in-house, does that create risk for Verisk, or is it a net positive opportunity? /

  A: Client development of in-house LLMs is a net positive opportunity for Verisk, as these clients still require access to Verisk's unique, cleansed, standardized industry data sets to power their models. Verisk's retrieval augmented generation (RAG) and semantic layer capabilities add significant value regardless of whether the base model is developed in-house or by a third party. Historically, more technologically sophisticated clients tend to consume more Verisk data and build broader, deeper relationships with the firm. (401 characters)

• Q: What supports management's confidence in second half organic growth acceleration, despite ongoing transactional headwinds? /

  A: The large, recurring subscription revenue segment (83% of total revenue) is already delivering strong, stable 8% OCC growth, giving management high visibility into base performance. The work stoppage on a federal government contract that pressured H1 results has been lifted, with work resuming in Q3 2026 in line with prior guidance assumptions. Strong ILS revenue in Q2 will not repeat, so management expects more steady growth in Q3 and faster acceleration in Q4 2026, still within the full-year guidance range. (367 characters)