Key insights
- The author discusses Verisk Analytics, a data and analytics provider for the insurance industry, highlighting its potential to benefit from AI. The bull case centers on AI enhancing Verisk's existing moat, while the bear case involves AI enabling insurers to replicate Verisk's models. The author notes positive financial metrics, including strong margins and FCF growth, and suggests a buy price under $180.
Hard to navigate with all the noise around AI. I try to look at businesses that do not really rely on the making of the AI-boom, but that could hugely benefit from it while still being independent enough without it, like Wolters Kluwer NV or Sectra AB (missed the train on Sectra, although I called it and even posted about them pre earnings - but will find other opportunities).
After looking at the business, Verisk seem to fit the bill. In short, they gather an enormous amount of data and models to help insurers with their claims, assessments, and pricing.
I think that AI can be a great tailwind - helping them be even more precise, faster in fraud detection. It could basically enhance what Verisk is already doing. That could help efficiency and retention. Finally, the more insurers use its data and tools, the better those tools become, and the harder they are to replicate elsewhere.
Now, that is a bull case, where the already existing MOAT gets a push from AI (base case would simply be what they are doing as of today). A bear case, as with many companies that look disrupted by AI, could be made that their models get closer and closer replicated, and/or insurers get entitled to create their own models with their own internal data - putting pressure on Verisk's margins.
Some interesting metrics to take into account (latest quarter report):
>55.8% to 56.5% margins for 2026 (good number, growth seems limited, but quite decent when you consider they heavily invest which normally tends to cut into profitability) >+30% in FCF for 2025 (+10.7% in 2024) >70% Gross margin >29.5 Opearing margin >+5% projected revenue growth 2026 >High recent share buybacks >Slight dividend increase
Price: 200$ (fairly valued): P/FCF 23 and FCF yield of 4.3% for strong MOAT and balancesheet company that programmed heavy buybacks is ok. I sent an alert for under 180$ (getting closer to the 5% yield-mark and under 30 PE ratio). 10% looks like a lot, but it traded that level 5 weeks ago, the market and these companies are volatile.
What are your opinion on Verisk ?