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Baron Funds Comments on Verisk Analytics

August 24, 2012 | About:
Holly LaFon

Holly LaFon

262 followers
From Baron Funds' second quarter commentary:

Shares of insurance analytics company Verisk Analytics, Inc. (VRSK) rose 4.9% in the second quarter versus a 2.8% drop for the S&P 500 Index. Verisk's primary mission is providing proprietary data, forms and analytics to the property and casualty insurance industry.This part of the business is about 40% of revenues and is high margin (approximately 55%). One of the primary reasons the stock outperformed in the second quarter was the changing view of insurance participants that rates and the exposure levels in the space that are improving after three years of negative growth. Verisk's core insurance business fluctuates directly with premium volume and when sentiment improves around overall insurance exposure and pricing, the multiple tends to expand and the stock outperforms.What is interesting is that Verisk prices its insurance product on a two year lag, so that improvements today could benefit the company for many years ahead. Additionally, the stock outperformed because Verisk's emerging health care business continues to make great strides helping medical providers and payers with quality of outcome data and fraud risk. Organic growth in this segment has been in the 30% range and recent results showed sequential improvement. If Verisk can apply its expertise around understanding and managing risk to the health care space then we think the earnings potential of the company is significant. Total health care spend is approximately four times the size of P&C insurance. As part of this health care strength, in the second quarter Verisk acquired Medi-Connect, a company with a unique database of clinical files which provides Verisk with yet another great data set from which to derive proprietary analytics. (Rob Susman)

Rating: 2.7/5 (3 votes)

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