AGB 2022.12 - Verisk Analytics (VRSK)

Refocusing on the Core Insurance Vertical

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Verisk Analytics

Verisk reminds me of Constellation Brands in that there is a prized asset that the company has owned since inception, which generates a lot of excess cash flow. For Verisk, it’s the core insurance business built on the consortium data model. For Constellation Brands, it’s the perpetual import rights for the Grupo Modelo beer brands into the U.S.

However, the management teams have a questionable track record for capital allocation. Excess cash flow has been used for making acquisitions that are lower in quality. For Verisk, the list consists of the mortgage, healthcare, financial services and energy acquisitions. For Constellation Brands, it’s the wine, craft beer acquisitions and the Canopy Growth investments. Even with this drag, these companies have grown their intrinsic values over the years because the prized assets generate such high returns.

The difference going forward is that Verisk has decided…