UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation		26-2994223 (I.R.S. Employer
or organization)		Identification No.)
545 Washington Boulevard
Jersey City, NJ		07310-1686
(Address of principal executive offices)		(Zip Code)

(201) 469-2000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 2, 2010 there was the following number of shares outstanding of each of the issuer’s classes of common stock:

Class		Shares Outstanding
Class A common stock $.001 par value		144,618,477
Class B (Series 1) common stock $.001 par value		12,554,605
Class B (Series 2) common stock $.001 par value		15,100,465

 

 

Verisk Analytics, Inc.
Index to Form 10-Q
Table of Contents

		Page Number
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Changes in Stockholders’ Equity/(Deficit)			5
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			37
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			38
Item 4. (Removed and Reserved)			38
Item 5. Other Information			38
Item 6. Exhibits			38
SIGNATURES			39
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2010 and December 31, 2009

		2010
		unaudited				2009
		(In thousands, except for share and per share data)
ASSETS
Current assets:
Cash and cash equivalents		$	107,255			$	71,527
Available-for-sale securities			5,350				5,445
Accounts receivable, net of allowance for doubtful accounts of $4,070 and $3,844 (including amounts from related parties of $3,892 and $1,353) in 2010 and 2009, respectively (1)			130,360				89,436
Prepaid expenses			18,040				16,155
Deferred income taxes, net			4,405				4,405
Federal and foreign income taxes receivable			12,796				16,721
Other current assets			7,566				21,656
Total current assets			285,772				225,345
Noncurrent assets:
Fixed assets, net			83,571				89,165
Intangible assets, net			94,113				108,526
Goodwill			503,240				490,829
Deferred income taxes, net			66,054				66,257
State income taxes receivable			4,933				6,536
Other assets			11,728				10,295
Total assets		$	1,049,411			$	996,953
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities		$	99,285			$	101,401
Acquisition related liabilities			2,000				—
Short-term debt and current portion of long-term debt			128,325				66,660
Pension and postretirement benefits, current			5,284				5,284
Fees received in advance (including amounts from related parties of $1,372 and $439) (1)			155,867				125,520
State and local income taxes payable			2,217				1,414
Total current liabilities			392,978				300,279
Noncurrent liabilities:
Long-term debt			401,879				527,509
Pension benefits			90,670				102,046
Postretirement benefits			23,072				25,108
Other liabilities			78,668				76,960
Total liabilities			987,267				1,031,902
Commitments and contingencies
Stockholders’ equity/(deficit):
Verisk Class A common stock, $.001 par value; 1,200,000,000 shares authorized; 128,048,460 and 125,815,600 shares issued and 123,404,054 and 125,815,600 outstanding as of September 30, 2010 and December 31, 2009, respectively			32				30
Verisk Class B (Series 1) common stock, $.001 par value; 400,000,000 shares authorized; 205,637,925 shares issued and 27,118,975 outstanding as of September 30, 2010 and December 31, 2009			50				50
Verisk Class B (Series 2) common stock, $.001 par value; 400,000,000 shares authorized; 205,637,925 shares issued and 27,118,975 outstanding as of September 30, 2010 and December 31, 2009			50				50
Unearned KSOP contributions			(1,104	)			(1,305	)
Additional paid-in capital			705,698				652,573
Treasury stock, at cost, 361,682,306 and 357,037,900 shares as of September 30, 2010 and December 31, 2009			(819,564	)			(683,994	)
Retained earnings			227,934				51,275
Accumulated other comprehensive loss			(50,952	)			(53,628	)
Total stockholders’ equity/(deficit)			62,144				(34,949	)
Total liabilities and stockholders’ equity/(deficit)		$	1,049,411			$	996,953

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three- and Nine-Month Periods Ended September 30, 2010 and 2009

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
		(In thousands, except for share and per share data)
Revenues (including amounts from related parties of $14,789 and $25,120 for the three months ended September 30, 2010 and 2009 and $45,202 and $73,263 for the nine months ended September 30, 2010 and 2009, respectively) (1)		$	287,354			$	258,311			$	845,185			$	761,978
Expenses:
Cost of revenues (exclusive of items shown separately below)			117,005				117,383				346,998				337,884
Selling, general and administrative			40,982				38,500				121,134				110,725
Depreciation and amortization of fixed assets			10,035				9,621				29,908				28,534
Amortization of intangible assets			6,158				8,012				20,482				24,986
Acquisition related liabilities adjustment			(544	)			—				(544	)			—
Total expenses			173,636				173,516				517,978				502,129
Operating income			113,718				84,795				327,207				259,849
Other income/(expense):
Investment income			59				29				183				121
Realized gains/(losses) on securities, net			9				24				70				(341	)
Interest expense			(8,484	)			(9,449	)			(25,395	)			(26,126	)
Total other expense, net			(8,416	)			(9,396	)			(25,142	)			(26,346	)
Income before income taxes			105,302				75,399				302,065				233,503
Provision for income taxes			(42,422	)			(33,194	)			(125,406	)			(100,444	)
Net income		$	62,880			$	42,205			$	176,659			$	133,059
Basic net income per share of Class A and Class B (2):		$	0.35			$	0.24			$	0.98			$	0.77
Diluted net income per share of Class A and Class B (2):		$	0.34			$	0.23			$	0.94			$	0.74
Weighted average shares outstanding:
Basic (2)			178,687,236				172,796,400				179,744,297				173,216,650
Diluted (2)			187,188,667				179,850,850				188,728,438				180,117,150

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)
(UNAUDITED) For The Year Ended December 31, 2009 and The Nine Months Ended September 30, 2010

																																		(Accumulated				Accumulated				Total
		Common Stock Issued																				Unearned				Additional								Deficit)/				Other				Stockholders’
										Verisk				Verisk								KSOP				Paid-in				Treasury				Retained				Comprehensive				(Deficit)/
		Verisk Class A				ISO Class B				Class B (Series 1)				Class B (Series 2)				Par Value				Contributions				Capital				Stock				Earnings				Loss				Equity
		(In thousands, except for share data)
Balance, January 1, 2009			—				500,225,000				—				—			$	100			$	—			$	—			$	(683,994	)		$	(243,495	)		$	(82,434	)		$	(1,009,823	)
Comprehensive income:
Net income			—				—				—				—				—				—				—				—				126,614				—				126,614
Other comprehensive income			—				—				—				—				—				—				—				—				—				28,806				28,806
Comprehensive income			—				—				—				—				—				—				—				—				—				—				155,420
Increase in redemption value of ISO Class A common stock			—				—				—				—				—				—				—				—				(272,428	)			—				(272,428	)
Conversion of ISO Class B common stock upon corporate reorganization (Note 10)			88,949,150				(500,225,000	)			205,637,925				205,637,925				—				—				—				—				—				—				—
Conversion of ISO Class A redeemable common stock upon corporate reorganization (Note 9)			34,768,750				—				—				—				30				(1,305	)			624,282				—				440,584				—				1,063,591
KSOP shares earned			—				—				—				—				—				—				725				—				—				—				725
Stock options exercised (including tax benefit of $18,253)			2,097,700				—				—				—				—				—				23,348				—				—				—				23,348
Stock-based compensation			—				—				—				—				—				—				4,218				—				—				—				4,218
Balance, December 31, 2009			125,815,600				—				205,637,925				205,637,925			$	130			$	(1,305	)		$	652,573			$	(683,994	)		$	51,275			$	(53,628	)		$	(34,949	)
Comprehensive income:
Net income			—				—				—				—				—				—				—				—				176,659				—				176,659
Other comprehensive income			—				—				—				—				—				—				—				—				—				2,676				2,676
Comprehensive income			—				—				—				—				—				—				—				—				—				—				179,335
Treasury stock acquired — Class A (4,644,406 shares)			—				—				—				—				—				—				—				(135,570	)			—				—				(135,570	)
KSOP shares earned			—				—				—				—				—				201				8,450				—				—				—				8,651
Stock options exercised (including tax benefit of $23,442)			2,731,349				—				—				—				2				—				43,598				—				—				—				43,600
Net share settlement of taxes upon exercise of stock options			(503,043	)			—				—				—				—				—				(15,051	)			—				—				—				(15,051	)
Stock-based compensation			—				—				—				—				—				—				15,990				—				—				—				15,990
Other stock issuances			4,554				—				—				—				—				—				138				—				—				—				138
Balance, September 30, 2010			128,048,460				—				205,637,925				205,637,925			$	132			$	(1,104	)		$	705,698			$	(819,564	)		$	227,934			$	(50,952	)		$	62,144

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Nine Months Ended September 30, 2010 and 2009

		2010				2009
		(In thousands)
Cash flows from operating activities:
Net income		$	176,659			$	133,059
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets			29,908				28,534
Amortization of intangible assets			20,482				24,986
Amortization of debt issuance costs			1,156				—
Allowance for doubtful accounts			562				692
KSOP compensation expense			8,651				17,620
Stock-based compensation			15,990				8,526
Non-cash charges associated with performance based appreciation awards			515				2,649
Acquisition related liabilities adjustment			(544	)			—
Realized (gains)/losses on securities, net			(70	)			341
Deferred income taxes			(1,893	)			4,990
Other operating			183				207
Loss on disposal of assets			81				342
Non-cash charges associated with lease termination			—				196
Excess tax benefits from exercised stock options			(15,083	)			(1,723	)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable			(40,654	)			(16,946	)
Prepaid expenses and other assets			(1,331	)			(2,241	)
Federal and foreign income taxes			27,005				10,460
State and local income taxes			2,768				(2,082	)
Accounts payable and accrued liabilities			(3,255	)			1,359
Acquisition related liabilities			—				(300	)
Fees received in advance			29,551				38,414
Other liabilities			(8,874	)			6,493
Net cash provided by operating activities			241,807				255,576
Cash flows from investing activities:
Acquisitions, net of cash acquired of $1,556 and $9,477			(6,386	)			(58,831	)
Earnout payments			—				(78,100	)
Proceeds from release of acquisition related escrows			283				24
Escrow funding associated with acquisitions			(1,500	)			(7,400	)
Purchases of available-for-sale securities			(324	)			(450	)
Proceeds from sales and maturities of available-for-sale securities			645				772
Purchases of fixed assets			(22,206	)			(24,319	)
Net cash used in investing activities			(29,488	)			(168,304	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			—				80,000
Proceeds from issuance of short-term debt, net			—				6,808
Redemption of ISO Class A common stock			—				(46,740	)
Repurchase of Verisk Class A common stock			(129,762	)			—
Net share settlement of taxes upon exercise of stock options			(15,051	)			—
Repayment of current portion of long-term debt			—				(100,000	)
Repayment of short-term debt			(65,230	)			—
Payment of debt issuance cost			(1,781	)			(4,510	)
Excess tax benefits from exercised stock options			15,083				1,723
Proceeds from stock options exercised			20,161				2,612
Net cash used in financing activities			(176,580	)			(60,107	)
Effect of exchange rate changes			(11	)			210
Increase in cash and cash equivalents			35,728				27,375
Cash and cash equivalents, beginning of period			71,527				33,185
Cash and cash equivalents, end of period		$	107,255			$	60,560
Supplemental disclosures:
Taxes paid		$	96,745			$	90,917
Interest paid		$	24,351			$	25,824
Non-cash investing and financing activities:
Repurchase of Verisk Class A common stock included in accounts payable and accrued liabilities		$	5,808			$	—
Redemption of ISO Class A common stock used to fund the exercise of stock options		$	—			$	2,326
Deferred tax liability established on date of acquisition		$	(349	)		$	(8,907	)
Capital lease obligations		$	1,265			$	2,860
Capital expenditures included in accounts payable and accrued liabilities		$	743			$	4,165
Decrease in goodwill due to finalization of acquisition related liabilities		$	—			$	(4,300	)
Increase in goodwill due to acquisition related escrow distributions		$	6,996			$	—
Accrual of acquisition related liabilities		$	2,000			$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except for share and per share data, unless otherwise stated)

1. Organization:

Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) enable risk-bearing businesses to better understand and manage their risks. The Company provides its customers proprietary data that, combined with analytic methods, create embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) insurance risks in the United States of America (“U.S.”). The Company offers solutions for detecting fraud in the U.S. P&C insurance, mortgage and healthcare industries and sophisticated methods to predict and quantify loss in diverse contexts ranging from natural catastrophes to health insurance. The Company provides solutions, including data, statistical models or tailored analytics, all designed to allow clients to make more logical decisions.

Verisk was established on May 23, 2008 to serve as the parent holding company of Insurance Services Office, Inc. (“ISO”) upon completion of the initial public offering (“IPO”). ISO was formed in 1971 as an advisory and rating organization for the P&C insurance industry to provide statistical and actuarial services, to develop insurance programs and to assist insurance companies in meeting state regulatory requirements. Over the past decade, the Company has broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. On October 6, 2009, ISO effected a corporate reorganization whereby the Class A and Class B common stock of ISO were exchanged by the current stockholders for the common stock of Verisk on a one-for-one basis. Verisk immediately thereafter effected a fifty-for-one stock split of its Class A and Class B common stock and equally sub-divided the Class B common stock into two new series of stock, Verisk Class B (Series 1) (“Class B-1”) and Verisk Class B (Series 2) (“Class B-2”). All share and per share information in the condensed consolidated financial statements gives effect to the fifty-for-one stock split that occurred immediately after the reorganization.

On October 9, 2009, the Company completed its IPO. Upon completion of the IPO, the selling stockholders sold 97,995,750 shares of Class A common stock of Verisk, which included the 12,745,750 over-allotment option, at the IPO price of $22.00 per share. The Company did not receive any proceeds from the sales of common stock in the offering. Verisk trades under the ticker symbol “VRSK” on the NASDAQ Global Select Market.

On October 1, 2010, the Company completed a follow-on public offering. Upon completion of this offering, the selling stockholders sold 2,602,212 and 19,282,880 shares of Class A and Class B common stock of Verisk, respectively, which included the underwriters’ over-allotment option of 2,854,577 shares, at the public offering price of $27.25 per share. Class B common stock sold into this offering was automatically converted into Class A common stock. The Company did not receive any proceeds from the sale of common stock in the offering. Concurrently with the closing of this offering, the Company also repurchased 7,300,000 shares of Class B common stock at $26.3644 per share, which represents the net proceeds per share the selling stockholders received in the public offering. The Company funded a portion of this repurchase with proceeds from borrowings of $160,000 under its syndicated revolving credit facility. Upon consummation of the offering and the repurchase, the Company’s Class B-1 and Class B-2 common stock outstanding was 12,554,605 and 15,100,465 shares, respectively. Class B-1 and Class B-2 shares will automatically convert to Class A common stock on April 6, 2011 and October 6, 2011, respectively.

2. Basis of Presentation and Summary of Significant Accounting Policies:

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. (“U.S. GAAP”). The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill, the realization of deferred tax assets, acquisition related liabilities, fair value of stock-based compensation, liabilities for pension and postretirement benefits, and the estimate for the allowance for doubtful accounts. Actual results may ultimately differ from those estimates.

The condensed consolidated financial statements as of September 30, 2010 and for the three- and nine-month periods ended September 30, 2010 and 2009, in the opinion of management, include all adjustments, consisting of normal recurring accruals, to present fairly the Company’s financial position, results of operations and cash flows. The operating results for the three- and nine-month periods ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements and related notes for the three- and nine-month periods ended September 30, 2010 have been prepared on the same basis as and should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2009. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The Company believes the disclosures made are adequate to keep the information presented from being misleading.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (“ASU No. 2010-06”). ASU No. 2010-06 provides guidance on improving disclosures on fair value measurements, such as the transfers between Level 1, Level 2 and Level 3 inputs and the disaggregated activity in the rollforward for Level 3 fair value measurements. ASU No. 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about the disaggregated activity in the rollforward for Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal periods. The adoption of the portion of ASU No. 2010-06 that discusses the transfers between Level 1, Level 2 and Level 3 inputs, effective January 1, 2010, did not have a material impact on the Company’s consolidated financial statements. The Company is currently evaluating the impact of the portion of ASU No. 2010-06 that discusses the disclosures about the disaggregated activity in the rollforward for Level 3 fair value measurements on its consolidated financial statements.

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU No. 2009-13”). ASU No. 2009-13 establishes the accounting and reporting guidance for arrangements under which the vendor will perform multiple revenue-generating activities. Specifically, ASU No. 2009-13 addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company has elected not to early adopt and is currently evaluating the impact of ASU No. 2009-13 on its consolidated financial statements.

3. Investments:

The following is a summary of available-for-sale securities:

						Gross				Gross
		Adjusted				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
September 30, 2010
Registered investment companies		$	4,279			$	1,064			$	—			$	5,343
Equity securities			14				—				(7	)			7
Total available-for-sale securities		$	4,293			$	1,064			$	(7	)		$	5,350
December 31, 2009
Registered investment companies		$	4,530			$	905			$	—			$	5,435
Equity securities			14				—				(4	)			10
Total available-for-sale securities		$	4,544			$	905			$	(4	)		$	5,445

In addition to the available-for-sale securities above, the Company has investments in private equity securities in which the Company acquired non-controlling interests and for which no readily determinable market value exists. These securities were accounted for under the cost method in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock (“ASC 323-10-25”). At September 30, 2010 and December 31, 2009, the carrying value of such securities was $3,841 for each period and has been included in “Other assets” in the accompanying condensed consolidated balance sheets.

4. Fair Value Measurements:

Certain assets and liabilities of the Company are reported at fair value in the accompanying condensed consolidated balance sheets. Such assets and liabilities include amounts for both financial and non-financial instruments. To increase consistency and comparability of assets and liabilities recorded at fair value, ASC 820-10, Fair Value Measurements (“ASC 820-10”) establishes a three-level fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. ASC 820-10 requires disclosures detailing the extent to which companies measure assets and liabilities at fair value, the methods and assumptions used to measure fair value and the effect of fair value measurements on earnings. In accordance with ASC 820-10, the Company applied the following fair value hierarchy:

Level 1 —		Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments.
Level 2 —		Assets and liabilities valued based on observable market data for similar instruments.
Level 3 —		Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a market participant would require.

The following tables provide information for such assets and liabilities as of September 30, 2010 and December 31, 2009. The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, acquisitions related liabilities prior to the adoption of ASC 805, Business Combinations (“ASC 805”), and short-term debt approximate their carrying amounts because of the short-term maturity of these instruments. The fair value of the Company’s long-term debt was estimated at $587,565 and $578,804 as of September 30, 2010 and December 31, 2009, respectively, and is based on an estimate of interest rates available to the Company for debt with similar features, the Company’s current credit rating and spreads applicable to the Company. These assets and liabilities are not presented in the following table.

						Quoted Prices
						in Active Markets				Significant Other				Significant
						for Identical				Observable				Unobservable
		Total				Assets (Level 1)				Inputs (Level 2)				Inputs (Level 3)
September 30, 2010
Registered investment companies (1)		$	5,343			$	5,343			$	—			$	—
Equity securities (1)		$	7			$	7			$	—			$	—
Contingent consideration under ASC 805 (2)		$	(3,323	)		$	—			$	—			$	(3,323	)
December 31, 2009
Registered investment companies (1)		$	5,435			$	5,435			$	—			$	—
Equity securities (1)		$	10			$	10			$	—			$	—
Cost-based investment recorded at fair value on a non-recurring basis (3)		$	1,809			$	—			$	—			$	1,809
Contingent consideration under ASC 805 (2)		$	(3,344	)		$	—			$	—			$	(3,344	)

The tables below include a rollforward of the Company’s contingent consideration liability under ASC 805 for the three- and nine-month periods ended September 30:

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
Beginning balance		$	3,853			$	2,800			$	3,344			$	—
Acquisitions (1)			—				544				491				3,344
Acquisition related liabilities adjustment (1)			(544	)			—				(544	)			—
Accretion on acquisition related liabilities			14				—				32				—
Ending balance		$	3,323			$	3,344			$	3,323			$	3,344

5. Goodwill and Intangible Assets:

The following is a summary of the change in goodwill from December 31, 2009 through September 30, 2010, both in total and as allocated to the Company’s operating segments:

		Risk				Decision
		Assessment				Analytics				Total
Goodwill at December 31, 2009 (1)		$	27,908			$	462,921			$	490,829
Current year acquisitions			—				3,466				3,466
Accrual of acquisition related liabilities			—				2,000				2,000
Purchase accounting reclassifications			—				(51	)			(51	)
Finalization of acquisition related escrows			—				6,996				6,996
Goodwill at September 30, 2010 (1)		$	27,908			$	475,332			$	503,240

The Company finalized the purchase accounting for the acquisition of D2 Hawkeye, Inc. (“D2”) in the first quarter of 2010, and there have been no adjustments since December 31, 2009. The Company finalized the purchase accounting for the acquisitions of TierMed Systems, LLC (“TierMed”) and Enabl-u Technology Corporation as of September 30, 2010, which resulted in a decrease in goodwill of $51, an increase in current liabilities of $1,047 and an increase in intangible assets of $1,098. The Company also revised the purchase accounting for the acquisition of Strategic Analytics, Inc. (“Strategic Analytics”) as it relates to intangible assets, current assets and current liabilities, thereby increasing goodwill by $342. The impact of these adjustments on the condensed consolidated statement of operations is immaterial.

Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of June 30, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The Company completed the required annual impairment test as of June 30, 2010, which resulted in no impairment of goodwill. Based on the results of the impairment assessment as of June 30, 2010, the Company confirmed that the fair value of its reporting units exceeded their respective carrying value and that there were no reporting units that were at risk for impairment. This testing compares the carrying value of each reporting unit to its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets, including goodwill assigned to that reporting unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then the Company will determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss is recorded for the difference between the carrying amount and the implied fair value of goodwill. There were no goodwill impairment indicators after the date of the last annual impairment test.

The Company’s intangible assets and related accumulated amortization consisted of the following:

		Weighted
		Average								Accumulated
		Useful Life				Cost				Amortization				Net
September 30, 2010
Technology-based		6 years				$	177,182			$	(131,913	)		$	45,269
Marketing-related		4 years					36,314				(27,997	)			8,317
Contract-based		6 years					6,555				(6,238	)			317
Customer-related		12 years					70,133				(29,923	)			40,210
Total intangible assets						$	290,184			$	(196,071	)		$	94,113

		Weighted
		Average								Accumulated
		Useful Life				Cost				Amortization				Net
December 31, 2009
Technology-based		6 years				$	174,973			$	(117,986	)		$	56,987
Marketing-related		4 years					35,104				(24,690	)			10,414
Contract-based		6 years					6,555				(6,092	)			463
Customer-related		12 years					67,534				(26,872	)			40,662
Total intangible assets						$	284,166			$	(175,640	)		$	108,526

Consolidated amortization expense related to intangible assets for the three months ended September 30, 2010 and 2009, was $6,158 and $8,012, respectively. Consolidated amortization expense related to intangible assets for the nine months ended September 30, 2010 and 2009, was $20,482 and $24,986, respectively. Estimated amortization expense in future periods through 2014 and thereafter for intangible assets subject to amortization is as follows:

Year		Amount
2010		$	6,503
2011		$	21,352
2012		$	18,002
2013		$	12,488
2014		$	5,362
Thereafter		$	30,406

6. Acquisitions:

On February 26, 2010, the Company acquired 100% of the stock of Strategic Analytics, a privately owned provider of credit risk and capital management solutions to consumer and mortgage lenders, for a net cash purchase price of approximately $6,386 and the Company funded $1,500 of indemnity escrows. Within the Decision Analytics segment, the Company believes Strategic Analytics’ solutions and application set will allow customers to take advantage of state-of-the-art loss forecasting, stress testing, and economic capital requirement tools to better understand and forecast the risk associated within their credit portfolios.

The preliminary allocation of purchase price resulted in the following:

		Purchase Price
		Allocation
Accounts receivable		$	832
Current assets			55
Fixed assets			159
Intangible assets			4,993
Goodwill			3,466
Total assets acquired			9,505
Deferred income taxes			349
Current liabilities			779
Other liabilities			1,991
Total liabilities assumed			3,119
Net assets acquired		$	6,386

Other liabilities consist of a $1,500 payment due to the sellers of Strategic Analytics, assuming no pre-acquisition indemnity claims arise subsequent to the acquisition date through December 31, 2012, which was funded into escrow at close. The remaining balance is contingent consideration of $491, which was estimated as of the acquisition date by averaging the probability of achieving each of the specific predetermined EBITDA and revenue targets of the acquired entity, which could result in a payment ranging from $0 to $18,000 for the fiscal year ending December 31, 2011. The terms of the contingent consideration include a range that allows the sellers to benefit from the potential growth of Strategic Analytics; however, the amount recorded as of the purchase allocation date represents management’s best estimate based on the prior financial results as well as management’s current best estimate of the future growth of revenue and EBITDA. Subsequent changes in the fair value of contingent consideration are recorded in other income in the statement of operations.

The amounts assigned to intangible assets by type for current year acquisitions are summarized in the table below:

		Weighted Average
		Useful Life				Total
Technology-based		7 years				$	2,143
Marketing-related		9 years					678
Customer-related		10 years					2,172
Total intangible assets		9 years				$	4,993

The goodwill for the acquisition of Strategic Analytics is not deductible for tax purposes. Included within the condensed consolidated statements of operations for the three- and nine-month periods ended September 30, 2010 are revenues of $921 and $1,811 and an operating loss of $272 and $1,250, associated with this acquisition.

Acquisition Escrows

Pursuant to the related acquisition agreements, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition date, as well as a portion of the contingent payments. At September 30, 2010 and December 31, 2009, the current portion of the escrows amounted to $6,167 and $20,142, respectively, and has been included in “Other current assets” in the accompanying condensed consolidated balance sheets. During the nine months ended September 30, 2010, the Company released $13,931 of escrows to sellers primarily related to the D2 and Xactware, Inc. acquisitions. In accordance with ASC 805, the escrows related to the D2 acquisition were recorded within goodwill at the time of acquisition, as those escrows were expected to be released to the sellers. The release of $6,935 related to D2 was recorded as a reduction of other current assets and a corresponding reduction in accounts payable and accrued liabilities. At September 30, 2010 and December 31, 2009, the noncurrent portion of the escrow amounted to $1,502 and $236, respectively.

Acquisition Related Liabilities

Based on the results of operations of Atmospheric and Environmental Research, Inc. (“AER”), which was acquired in 2008, the Company recorded an increase of $2,000 to acquisition related liabilities and goodwill. AER was acquired in 2008 and therefore, accounted for under the transition provision under ASC 805. As such, any adjustments to contingent consideration are recorded to goodwill until the final resolution has occurred.

As of September 30, 2010, the Company reevaluated the probability of TierMed achieving the specific predetermined EBITDA and revenue earnout targets for fiscal year 2010 that would result in a contingent consideration payment to the sellers and reversed a liability for the payment of contingent consideration related to this acquisition. This reversal resulted in a reduction of $544 to contingent consideration and a decrease of $544 to “Acquisition related liabilities adjustment” in the accompanying condensed consolidated statements of operations during the three- and nine-month periods ended September 30, 2010.

7. Income Taxes:

The Company’s effective tax rate for the nine months ended September 30, 2010 was 41.5% compared to the effective tax rate for the nine months ended September 30, 2009 of 43.0%. The effective rate for the nine months ended September 30, 2010 was lower due to a decrease in nondeductible expenses in 2010 versus 2009 related to the ISO 401(k) Savings and Employee Stock Ownership Plan (“KSOP”). In addition, the 2010 effective tax rate for the nine month period was lower than the comparable 2009 period due to a revision of estimated state tax liabilities in 2009 resulting from the impact of legislative changes. These benefits were partially offset by a non-cash charge of $2,362 resulting from reduced tax benefits of Medicare subsidies associated with legislative changes in the first quarter of 2010. Excluding this charge, the effective rate for the nine months ended September 30, 2010 would have been 40.7%. The difference between statutory tax rates and the Company’s effective tax rate is primarily attributable to state taxes and nondeductible share appreciation from the KSOP.

The Company’s effective tax rate for the three months ended September 30, 2010 was 40.3% compared to the effective tax rate for the three months ended September 30, 2009 of 44.0%. The effective rate for the three months ended September 30, 2010 was lower due to a decrease in nondeductible expenses in 2010 versus 2009 related to the KSOP. In addition, the 2010 effective tax rate for the three month period was lower than the comparable 2009 period due to a revision of estimated state tax liabilities in 2009 resulting from the impact of legislative changes.

8. Debt:

The following table presents short-term and long-term debt by issuance:

		Issuance		Maturity		September 30,				December 31,
		Date		Date		2010				2009
Short-term debt and current portion of long-term debt:
Syndicated revolving credit facility		12/16/2009		1/19/2010		$	—			$	10,000
Syndicated revolving credit facility		12/23/2009		1/25/2010			—				50,000
Prudential senior notes:
4.60% Series E senior notes		6/14/2005		6/13/2011			50,000				—
6.00% Series F senior notes		8/8/2006		8/8/2011			25,000				—
Principal senior notes:
6.03% Series A senior notes		8/8/2006		8/8/2011			50,000				—
Capital lease obligations		Various		Various			3,039				5,488
Other		Various		Various			286				1,172
Short-term debt and current portion of long-term debt						$	128,325			$	66,660
Long-term debt:
Prudential senior notes:
4.60% Series E senior notes		6/14/2005		6/13/2011		$	—			$	50,000
6.00% Series F senior notes		8/8/2006		8/8/2011			—				25,000
6.13% Series G senior notes		8/8/2006		8/8/2013			75,000				75,000
5.84% Series H senior notes		10/26/2007		10/26/2013			17,500				17,500
5.84% Series H senior notes		10/26/2007		10/26/2015			17,500				17,500
6.28% Series I senior notes		4/29/2008		4/29/2013			15,000				15,000
6.28% Series I senior notes		4/29/2008		4/29/2015			85,000				85,000
6.85% Series J senior notes		6/15/2009		6/15/2016			50,000				50,000
Principal senior notes:
6.03% Series A senior notes		8/8/2006		8/8/2011			—				50,000
6.16% Series B senior notes		8/8/2006		8/8/2013			25,000				25,000
New York Life senior notes:
5.87% Series A senior notes		10/26/2007		10/26/2013			17,500				17,500
5.87% Series A senior notes		10/26/2007		10/26/2015			17,500				17,500
6.35% Series B senior notes		4/29/2008		4/29/2015			50,000				50,000
Aviva Investors North America:
6.46% Series A senior notes		4/27/2009		4/27/2013			30,000				30,000
Other obligations:
Capital lease obligations		Various		Various			1,686				2,094
Other		Various		Various			193				415
Long-term debt						$	401,879			$	527,509

On January 19, 2010 and January 25, 2010, the Company repaid $10,000 and $50,000, respectively, related to outstanding borrowings from its syndicated revolving credit facility as of December 31, 2009.

On March 16, 2010, the Company amended the New York Life Master Shelf Agreement to increase the authorization of additional senior promissory notes by $15,000, from $100,000 to $115,000, and to extend the maturity of the agreement through March 16, 2013. As of September 30, 2010 and December 31, 2009, the Company had long-term debt outstanding of $85,000 under this agreement.

On August 30, 2010, the Company amended the Prudential Master Shelf Agreement to extend the maturity of the agreement through August 30, 2013. As of September 30, 2010 and December 31, 2009, the Company had long-term debt outstanding of $335,000 under this agreement.

On September 10, 2010, the Company amended its syndicated revolving credit facility to increase the capacity by $155,000 to $575,000, to extend the maturity of the syndicated revolving credit facility to September 10, 2014 and to modify certain restrictions. The Company paid a one-time fee of $1,781, which will be amortized over a four-year period, consistent with the remaining life of the credit facility, reduced the ongoing unused facility fees from 0.375% to 0.200% and reduced the borrowing rate from LIBOR plus 2.50% to LIBOR plus 1.75%. The Company had no borrowings from its syndicated revolving credit facility outstanding as of September 30, 2010 and $60,000 outstanding as of December 31, 2009. As disclosed in Note 1, upon completion of the follow-on offering on October 1, 2010, the Company borrowed $160,000 under the syndicated revolving credit facility.

9. Redeemable Common Stock:

Prior to the corporate reorganization on October 6, 2009, the Company followed ASC 480-10-S99-1, Presentation in Financial Statements of Preferred Redeemable Stock (“ASC 480-10-S99-1”). ASC 480-10-S99-1 required the Company to record ISO Class A common stock and vested stock options at full redemption value at each balance sheet date as the redemption of these securities was not solely within the control of the Company. Effective with the corporate reorganization, the Company is no longer obligated to redeem shares of ISO Class A common stock and is therefore no longer required to record the ISO Class A common stock and vested stock options at redemption value under ASC 480-10-S99-1. The reversal of the redeemable common stock of $1,064,896 on October 6, 2009 resulted in the elimination of accumulated deficit of $440,584, an increase of $30 to Class A common stock at par value, an increase of $624,282 to additional paid-in capital, and a reclassification of the ISO Class A unearned common stock KSOP shares balance of $1,305 to unearned KSOP contributions.

During the nine months ended September 30, 2009, 3,032,850 shares of ISO Class A common stock were redeemed by the Company at a weighted average price of $16.18 per share.

10. Stockholders’ Equity/(Deficit):

On November 18, 1996, the Company authorized 335,000,000 shares of ISO Class A redeemable common stock. Effective with the corporate reorganization on October 6, 2009, the ISO Class A redeemable common stock and all Verisk Class B shares sold into the IPO were converted to Verisk Class A common stock on a one-for-one basis. In addition, the Verisk Class A common stock authorized was increased to 1,200,000,000 shares. The Verisk Class A common shares have rights to any dividend declared by the board of directors, subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect nine of the twelve members of the board of directors.

On November 18, 1996, the Company authorized 1,000,000,000 ISO Class B shares and issued 500,225,000 shares. On October 6, 2009, the Company completed a corporate reorganization whereby the ISO Class B common stock and ISO Class B treasury stock were converted to Verisk Class B common stock and Verisk Class B treasury stock on a one-for-one basis. All Verisk Class B shares sold into the IPO were converted to Verisk Class A common stock on a one-for-one basis. In addition, the Verisk Class B common stock authorized was reduced to 800,000,000 shares, sub-divided into 400,000,000 shares of Class B (Series 1) (“Class B-1”) and 400,000,000 shares of Class B (Series 2) (“Class B-2”). Each share of Class B-1 common stock shall convert automatically, without any action by the stockholder, into one share of Verisk Class A common stock on April 6, 2011. Each share of Class B-2 common stock shall convert automatically, without any action by the stockholder, into one share of Verisk Class A common stock on October 6, 2011. The Class B shares have the same rights as Verisk Class A shares with respect to dividends and economic ownership, but have voting rights to elect three of the twelve directors. The Company did not repurchase any Class B shares during the nine months ended September 30, 2010 and 2009.

On October 6, 2009, the Company authorized 80,000,000 shares of preferred stock, par value $0.001 per share, in connection with the reorganization. The preferred shares have preferential rights over the Verisk Class A and Class B common shares with respect to dividends and net distribution upon liquidation. The Company did not issue any preferred shares from the reorganization date through September 30, 2010.

Share Repurchase Program

On April 29, 2010, the Company’s board of directors authorized a $150,000 share repurchase program of the Company’s common stock (the “Repurchase Program”). Under the Repurchase Program, the Company may repurchase stock in the open market or as otherwise determined by the Company. The Company has no obligation to repurchase stock under this program and intends to use this authorization as a means of offsetting dilution from the issuance of shares under the KSOP, the Verisk Analytics, Inc. 2009 Equity Incentive Plan (the “Incentive Plan”) and the Insurance Services Office, Inc. 1996 Incentive Plan (the “Option Plan”). This authorization has no expiration date and may be suspended or terminated at any time. Repurchased shares will be recorded as treasury stock and will be available for future issuance as part of the Repurchase Program. During the nine months ended September 30, 2010, 4,644,406 shares of Verisk Class A common stock were repurchased by the Company as part of this program at a weighted average price of $29.19 per share. As treasury stock purchases are recorded based on trade date, the Company has included $5,808 in “Accounts payable and accrued liabilities” in the accompanying condensed consolidated balance sheets for those purchases that have not settled as of September 30, 2010. The Company had $14,430 available to repurchase shares under the Repurchase Program as of September 30, 2010. On October 19, 2010, the Company’s board of directors authorized up to an additional $150,000 of share repurchases under the Repurchase Program. As of October 19, 2010, there was $152,753 available to repurchase shares under the Repurchase Program.

On October 1, 2010, concurrent with the closing of the Company’s follow-on public offering, the Company repurchased 7,300,000 shares of Class B common stock at $26.3644 per share. This repurchase was separately authorized and did not affect the remaining availability under the Repurchase Program.

Treasury Stock

As of September 30, 2010, the Company’s treasury stock consisted of 4,644,406 Class A common stock, 178,518,950 Class B-1 common stock and 178,518,950 Class B-2 common stock. The Class B-1 common stock will convert to Class A common stock on April 6, 2011 and the Class B-2 common stock will convert to Class A common stock on October 6, 2011. No later than October 6, 2011, there will be no issued or outstanding shares of Class B common stock.

Earnings Per Share (“EPS”)

As disclosed in “Note 1 — Organization,” on October 6, 2009 Verisk became the new parent holding company of ISO. In connection with the IPO, the stock of ISO was exchanged for the stock of Verisk on a one-for-one basis and Verisk effected a fifty-for-one stock split of its Verisk Class A and Class B common stock. As a result of the stock split on October 6, 2009, all share and per share data throughout this report has been adjusted to reflect the fifty-for-one stock split.

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Prior to the IPO, the Company had common stock within the Employee Stock Ownership Plan (“ESOP”) that had been committed to be released and those shares were subtracted from the weighted average number of common shares outstanding to arrive at the denominator used in calculating EPS for the three and nine months ended September 30, 2009. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding, using the treasury stock method, if the dilutive potential common shares, such as stock awards and stock options, had been issued.

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the three-and nine-month periods ended September 30, 2010 and 2009:

		For the Three Months Ended								For the Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2010				2009				2010				2009
Numerator used in basic and diluted EPS:
Net income		$	62,880			$	42,205			$	176,659			$	133,059
Denominator:
Weighted average number of common shares used in basic EPS			178,687,236				172,796,400				179,744,297				173,216,650
Effect of dilutive shares:
Potential Class A redeemable common stock issuable upon the exercise of stock options			8,501,431				7,054,450				8,984,141				6,900,500
Weighted average number of common shares and dilutive potential common shares used in diluted EPS			187,188,667				179,850,850				188,728,438				180,117,150
Basic EPS of Class A and Class B		$	0.35			$	0.24			$	0.98			$	0.77
Diluted EPS of Class A and Class B		$	0.34			$	0.23			$	0.94			$	0.74

The potential shares of common stock that were excluded from diluted EPS were 2,151,646 and 8,255,550 for the nine months ended September 30, 2010 and 2009, respectively, because the effect of including these potential shares was anti-dilutive.

Accumulated Other Comprehensive Loss

The following is a summary of accumulated other comprehensive loss:

		September 30,				December 31,
		2010				2009
Unrealized gains on investments		$	617			$	526
Unrealized foreign currency losses			(694	)			(683	)
Pension and postretirement unfunded liability adjustment			(50,875	)			(53,471	)
Accumulated other comprehensive loss		$	(50,952	)		$	(53,628	)

The before tax and after tax amounts of other comprehensive income for the nine months ended September 30, 2010 and 2009 are summarized below:

						Tax Benefit/
		Before Tax				(Expense)				After Tax
For the Nine Months Ended September 30, 2010
Unrealized holding gains on investments arising during the year		$	156			$	(65	)		$	91
Unrealized foreign currency losses			(11	)			—				(11	)
Pension and postretirement unfunded liability adjustment			4,278				(1,682	)			2,596
Total other comprehensive income		$	4,423			$	(1,747	)		$	2,676
For the Nine Months Ended September 30, 2009
Unrealized holding gains on investments arising during the year		$	501			$	(208	)		$	293
Reclassification adjustment for amounts included in net income			386				(160	)			226
Unrealized foreign currency gains			210				—				210
Pension and postretirement unfunded liability adjustment			7,621				(1,477	)			6,144
Total other comprehensive income		$	8,718			$	(1,845	)		$	6,873

11. Stock Option Plan:

All of the Company’s outstanding stock options are covered under the Incentive Plan or the Option Plan. Awards under the Incentive Plan may include one or more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share-based awards, and (vii) cash. To date, only nonqualified stock options and share-based awards have been issued under the plan. Employees, directors and consultants are eligible for awards under the Incentive Plan. Cash received from stock option exercises for the nine months ended September 30, 2010 and 2009 was $20,161 and $2,612, respectively. On April 1, 2010 and June 1, 2010, the Company granted 2,011,390 and 5,000, respectively, of nonqualified stock options to key employees with an exercise price equal to the closing price of the Company’s Class A common stock on March 31, 2010 and May 28, 2010, with a ten-year contractual term and a service vesting period of four years. On July 1, 2010, the Company granted 31,906 nonqualified stock options that were immediately vested, 138,120 nonqualified stock options with a one-year service vesting period and 4,554 shares of Class A common stock, to the directors of the Company. The stock options have an exercise price equal to the closing price of the Company’s Class A commons stock on the grant date and a ten year contractual term. As of September 30, 2010, there are 8,683,159 shares of Class A common stock reserved and available for future issuance.

The fair value of the stock options granted during the nine months ended September 30, 2010 and 2009 was estimated using a Black-Scholes valuation model that uses assumptions noted in the following table:

		September 30, 2010				September 30, 2009
Option pricing model		Black-Scholes				Black-Scholes
Expected volatility			31.08	%			31.10	%
Risk-free interest rate			2.39	%			2.01	%
Expected term in years			4.8				5.7
Dividend yield			0.00	%			0.93	%
Weighted average grant date fair value per stock option			$8.73				$4.77