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 June 30, 2010

OR

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

For the transition period from                      to                     

Commission File Number: 001-34480

VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		26-2994223 (I.R.S. Employer Identification No.)
545 Washington Boulevard
Jersey City, NJ (Address of principal executive offices)		07310-1686 (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 August 3, 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		124,731,552
Class B (Series 1) common stock $.001 par value		27,118,975
Class B (Series 2) common stock $.001 par value		27,118,975

 

 

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			36
Item 4. Controls and Procedures			36
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults Upon Senior Securities			37
Item 4. (Removed and Reserved)			37
Item 5. Other Information			37
Item 6. Exhibits			37
SIGNATURES			38
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 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		$	106,827			$	71,527
Available-for-sale securities			5,067				5,445
Accounts receivable, net of allowance for doubtful accounts of $3,946 and $3,844 (including amounts from related parties of $925 and $1,353) in 2010 and 2009, respectively (1)			118,470				89,436
Prepaid expenses			21,684				16,155
Deferred income taxes, net			4,405				4,405
Federal and foreign income taxes receivable			19,206				16,721
State and local income taxes receivable			1,869				—
Other current assets			7,962				21,656
Total current assets			285,490				225,345
Noncurrent assets:
Fixed assets, net			86,253				89,165
Intangible assets, net			100,228				108,526
Goodwill			501,996				490,829
Deferred income taxes, net			63,920				66,257
State income taxes receivable			4,933				6,536
Other assets			10,448				10,295
Total assets		$	1,053,268			$	996,953
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities		$	81,571			$	101,401
Acquisition related liabilities			544				—
Short-term debt and current portion of long-term debt			53,935				66,660
Pension and postretirement benefits, current			5,284				5,284
Fees received in advance (including amounts from related parties of $3,116 and $439) (1)			182,275				125,520
State and local income taxes payable			—				1,414
Total current liabilities			323,609				300,279
Noncurrent liabilities:
Long-term debt			476,767				527,509
Pension benefits			94,900				102,046
Postretirement benefits			23,586				25,108
Other liabilities			80,831				76,960
Total liabilities			999,693				1,031,902
Commitments and contingencies
Stockholders’ equity/(deficit):
Verisk Class A common stock, $.001 par value; 1,200,000,000 shares authorized; 127,658,986 and 125,815,600 shares issued and 125,485,880 and 125,815,600 outstanding as of June 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 June 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 June 30, 2010 and December 31, 2009			50				50
Unearned KSOP contributions			(1,167	)			(1,305	)
Additional paid-in capital			690,635				652,573
Treasury stock, at cost, 359,211,006 and 357,037,900 shares as of June 30, 2010 and December 31, 2009			(748,895	)			(683,994	)
Retained earnings			165,054				51,275
Accumulated other comprehensive loss			(52,184	)			(53,628	)
Total stockholders’ equity/(deficit)			53,575				(34,949	)
Total liabilities and stockholders’ equity/(deficit)		$	1,053,268			$	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 Six Month Periods Ended June 30, 2010 and 2009

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
		(In thousands, except for share and per share data)
Revenues (include revenues from related parties of $15,280 and $24,056 for the three months ended June 30, 2010 and 2009 and $30,413 and $48,143 for the six months ended June 30, 2010 and 2009, respectively) (1)		$	281,677			$	257,916			$	557,831			$	503,667
Expenses:
Cost of revenues (exclusive of items shown separately below)			115,000				112,978				229,993				220,501
Selling, general and administrative			42,638				38,905				80,152				72,225
Depreciation and amortization of fixed assets			9,944				9,718				19,873				18,913
Amortization of intangible assets			7,020				8,464				14,324				16,974
Total expenses			174,602				170,065				344,342				328,613
Operating income			107,075				87,851				213,489				175,054
Other income/(expense):
Investment income			92				49				124				92
Realized gains/(losses) on securities, net			29				33				61				(365	)
Interest expense			(8,445	)			(8,523	)			(16,911	)			(16,677	)
Total other expense, net			(8,324	)			(8,441	)			(16,726	)			(16,950	)
Income before income taxes			98,751				79,410				196,763				158,104
Provision for income taxes			(40,347	)			(33,471	)			(82,984	)			(67,250	)
Net income		$	58,404			$	45,939			$	113,779			$	90,854
Basic net income per share of Class A and Class B (2):		$	0.32			$	0.27			$	0.63			$	0.52
Diluted net income per share of Class A and Class B (2):		$	0.31			$	0.26			$	0.60			$	0.50
Weighted average shares outstanding:
Basic (2)			180,492,106				172,887,331				180,272,828				173,409,800
Diluted (2)			189,541,893				179,824,479				189,498,324				180,204,300

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 Six Months Ended June 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			—				—				—				—				—				—				—				—				113,779				—				113,779
Other comprehensive income			—				—				—				—				—				—				—				—				—				1,444				1,444
Comprehensive income			—				—				—				—				—				—				—				—				—				—				115,223
Treasury stock acquired — Class A (2,173,106 shares)			—				—				—				—				—				—				—				(64,901	)			—				—				(64,901	)
KSOP shares earned			—				—				—				—				—				138				5,591				—				—				—				5,729
Stock options exercised (including tax benefit of $20,507)			2,346,429				—				—				—				2				—				37,238				—				—				—				37,240
Net share settlement of taxes upon exercise of stock options			(503,043	)			—				—				—				—				—				(15,051	)			—				—				—				(15,051	)
Stock based compensation			—				—				—				—				—				—				10,284				—				—				—				10,284
Balance, June 30, 2010			127,658,986				—				205,637,925				205,637,925			$	132			$	(1,167	)		$	690,635			$	(748,895	)		$	165,054			$	(52,184	)		$	53,575

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 Six Months Ended June 30, 2010 and 2009

		2010				2009
		(In thousands)
Cash flows from operating activities:
Net income		$	113,779			$	90,854
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets			19,873				18,913
Amortization of intangible assets			14,324				16,974
Amortization of debt issuance costs			789				—
Allowance for doubtful accounts			526				509
KSOP compensation expense			5,729				10,738
Stock-based compensation			10,284				5,515
Non-cash charges associated with performance based appreciation awards			792				1,385
Realized (gains)/losses on securities, net			(61	)			365
Deferred income taxes			507				(199	)
Other operating			30				30
Loss on disposal of assets			38				308
Non-cash charges associated with lease termination			—				196
Excess tax benefits from exercised stock options			(10,036	)			(658	)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable			(28,694	)			(20,256	)
Prepaid expenses and other assets			(5,504	)			(3,964	)
Federal and foreign income taxes			17,929				9,538
State and local income taxes			(1,387	)			(3,901	)
Accounts payable and accrued liabilities			(18,327	)			(11,196	)
Acquisition related liabilities			—				(300	)
Fees received in advance			55,959				60,452
Other liabilities			(3,316	)			9,226
Net cash provided by operating activities			173,034				184,529
Cash flows from investing activities:
Acquisitions, net of cash acquired of $1,556 and $9,477			(6,386	)			(51,618	)
Earnout payments			—				(78,100	)
Proceeds from release of acquisition related escrows			283				—
Escrow funding associated with acquisitions			(1,500	)			(7,000	)
Purchases of available-for-sale securities			(262	)			(398	)
Proceeds from sales and maturities of available-for-sale securities			511				628
Purchases of fixed assets			(15,570	)			(16,195	)
Net cash used in investing activities			(22,924	)			(152,683	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			—				80,000
Proceeds from issuance of short-term debt, net			—				40,000
Redemption of ISO Class A common stock			—				(38,282	)
Repurchase of Verisk Class A common stock			(62,266	)			—
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, net			(64,069	)			(2,659	)
Excess tax benefits from exercised stock options			10,036				658
Proceeds from stock options exercised			16,733				1,126
Net cash used in financing activities			(114,617	)			(19,157	)
Effect of exchange rate changes			(193	)			88
Increase in cash and cash equivalents			35,300				12,777
Cash and cash equivalents, beginning of period			71,527				33,185
Cash and cash equivalents, end of period		$	106,827			$	45,962
Supplemental disclosures:
Taxes paid		$	63,545			$	60,464
Interest paid		$	16,299			$	16,527
Non-cash investing and financing activities:
Repurchase of Verisk Class A common stock included in accounts payable and accrued liabilities		$	2,635			$	—
Redemption of ISO Class A common stock used to fund the exercise of stock options		$	—			$	456
Deferred tax liability established on date of acquisition		$	(732	)		$	(8,744	)
Capital lease obligations		$	602			$	1,972
Capital expenditures included in accounts payable and accrued liabilities		$	668			$	619
Decrease in goodwill due to finalization of acquisition related liabilities		$	—			$	(4,300	)
Increase in goodwill due to acquisition related escrow distributions		$	6,996			$	—

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, creates embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) or 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) and Verisk Class B (Series 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 on the NASDAQ Global Select Market under the ticker symbol “VRSK.”

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 June 30, 2010 and for the three and six month periods ended June 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 six month periods ended June 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 six month periods ended June 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
June 30, 2010
Registered investment companies		$	4,342			$	716			$	—			$	5,058
Equity securities			14				—				(5	)			9
Total available-for-sale securities		$	4,356			$	716			$	(5	)		$	5,067
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 two 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 June 30, 2010 and December 31, 2009, the carrying value of such securities was $3,841 for each period and have 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 June 30, 2010 and December 31, 2009. The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, acquisitions related liabilities, 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 $579,162 and $578,804 as of June 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)
June 30, 2010
Registered investment companies (1)		$	5,058			$	5,058			$	—			$	—
Equity securities (1)		$	9			$	9			$	—			$	—
Contingent consideration under ASC 805 (2)		$	(3,853	)		$	—			$	—			$	(3,853	)
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 under ASC 805 for the three and six month periods ended June 30:

		For the Three Months Ended								For the Six Months Ended
		June 30, 2010				June 30, 2009				June 30, 2010				June 30, 2009
Beginning balance		$	3,840			$	2,800			$	3,344			$	—
Acquisitions (1)			—				—				491				2,800
Accretion on acquisition related liabilities			13				—				18				—
Ending balance		$	3,853			$	2,800			$	3,853			$	2,800

5. Goodwill and Intangible Assets:

The following is a summary of the change in goodwill from December 31, 2009 through June 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			—				3,124				3,124
Purchase accounting reclassifications			—				1,047				1,047
Finalization of acquisition related escrows			—				6,996				6,996
Goodwill at June 30, 2010 (1)		$	27,908			$	474,088			$	501,996

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 values. 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.

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

		Weighted
		Average						Accumulated
		Useful Life		Cost				Amortization				Net
June 30, 2010
Technology-based		6 years		$	177,234			$	(127,384	)		$	49,850
Marketing-related		4 years			36,124				(26,725	)			9,399
Contract-based		6 years			6,555				(6,190	)			365
Customer-related		12 years			70,279				(29,665	)			40,614
Total intangible assets				$	290,192			$	(189,964	)		$	100,228

		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 June 30, 2010 and 2009, was $7,020 and $8,464, respectively. Consolidated amortization expense related to intangible assets for the six months ended June 30, 2010 and 2009, was $14,324 and $16,974, respectively. Estimated amortization expense in future periods through 2014 and thereafter for intangible assets subject to amortization is as follows:

Year		Amount
2010		$	13,827
2011		$	22,234
2012		$	18,250
2013		$	12,087
2014		$	5,036
Thereafter		$	28,794

6. Acquisitions:

2010 Acquisitions

On February 26, 2010, the Company acquired 100% of the stock of Strategic Analytics, Inc. (“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		$	866
Current assets			56
Fixed assets			159
Intangible assets			6,026
Goodwill			3,124
Total assets acquired			10,231
Deferred income taxes			732
Current liabilities			1,122
Other liabilities			1,991
Total liabilities assumed			3,845
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 of the acquired entity, and revenue targets, 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 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		$	2,261
Marketing-related		5 years			1,020
Customer-related		10 years			2,745
Total intangible assets		8 years		$	6,026

2009 Acquisitions

On October 30, 2009, the Company acquired the net assets of Enabl-u Technology Corporation, Inc. (“Enabl-u”), a privately owned provider of data management, training and communication solutions to companies with regional, national or global work forces, for a net cash purchase price of $2,502 and the Company funded $136 of indemnity escrows and $100 of contingency escrows. The Company believes this acquisition will enhance the Company’s ability to provide solutions for customers to measure loss prevention and improve asset management through the use of software and software services.

On July 24, 2009, the Company acquired the net assets of TierMed Systems LLC (“TierMed”), a privately owned provider of Healthcare Effectiveness Data and Information Set (“HEDIS”) solutions to healthcare organizations that have HEDIS or quality-reporting needs, for a net cash purchase price of $7,230 and the Company funded $400 of indemnity escrows. The Company believes this acquisition will enhance the Company’s ability to provide solutions for customers to measure and improve healthcare quality and financial performance through the use of software and software services.

On January 14, 2009, the Company acquired 100% of the stock of D2 Hawkeye (“D2”), a privately-owned provider of data mining, decision support, clinical quality analysis, and risk analysis tools for the healthcare industry, for a net cash purchase price of $51,618 and the Company funded $7,000 of indemnity escrows. The Company believes this acquisition will enhance the Company’s position in the healthcare analytics and predictive modeling market by providing new market, cross-sell, and diversification opportunities for the Company’s expanding healthcare solutions.

The total net cash purchase price of these three acquisitions was $61,350 and the Company funded $7,636 of escrows, of which $7,000 and $236 was recorded in “Other current assets” and “Other assets,” respectively, in the accompanying condensed consolidated balance sheets. The preliminary allocation of purchase price, including working capital adjustments, resulted in accounts receivable of $4,435, current assets of $573, fixed assets of $2,387, finite lived intangible assets with no residual value of $25,265, goodwill of $49,776, current liabilities of $4,879, other liabilities of $10,479, and deferred tax liabilities of $5,728. Other liabilities consisted of $7,236 payment due to the sellers of D2 and Enabl-u at the conclusion of the escrows funded at close, assuming no pre-acquisition indemnity claims arise subsequent to the acquisition date, and $3,344 of contingent consideration, which was estimated as of the acquisition date by averaging the probability of achieving each of the specific predetermined EBITDA and revenue targets, which could result in a payment ranging from $0 to $65,700 for the fiscal year ending December 31, 2011 for D2 and a payment ranging from $0 to $6,000 for the fiscal year ending December 31, 2010 for TierMed. Under ASC 805, contingent consideration is recognized at fair value at the end of each reporting period. Subsequent changes in the fair value of contingent consideration is recorded in the statement of operations.

The amounts assigned to intangible assets by type for acquisitions during the year ended December 31, 2009 are summarized in the table below:

		Weighted Average
		Useful Life				Total
Technology-based		12 years				$	9,282
Marketing-related		5 years					4,698
Customer-related		8 years					11,285
Total intangible assets		9 years				$	25,265

The preliminary allocation of the purchase price for the 2010 and 2009 acquisitions to intangible assets, goodwill, accrued liabilities, and the determination of an ASC 740-10-25, Accounting for Uncertainty in Income Taxes (“ASC 740-10-25”), liability is subject to revisions, which may have a material impact on the Company’s consolidated financial statements. As the values of such assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. In accordance with ASC 805, the allocation of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date. The value of goodwill associated with these acquisitions is currently included within the Decision Analytics segment. The goodwill for the Enabl-u and TierMed acquisitions are expected to be deductible for tax purposes over fifteen years. The goodwill for the D2 and Strategic Analytics acquisitions are not deductible for tax purposes. Included within the condensed consolidated statements of operations for the three and six month periods ended June 30, 2010 are revenues of $796 and $890 and an operating loss of $506 and $978, associated with the Strategic Analytics acquisition. Excluding the final resolution of contingent consideration, the Company finalized the purchase accounting for the acquisition of D2 in the first quarter of 2010, and there have been no adjustments since December 31, 2009. Excluding the final resolution of indemnity escrows and contingent consideration, the Company finalized the purchase accounting for the acquisition of TierMed in the second quarter of 2010, which resulted in an increase in goodwill of $746 and current liabilities of $746.

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 June 30, 2010 and December 31, 2009, the current portion of the escrows amounted to $6,116 and $20,142, respectively, and has been included in “Other current assets” in the accompanying condensed consolidated balance sheets. During the second quarter of 2010, the Company released $13,931 of escrows to sellers primarily related to the D2 and Xactware 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. In the current period, 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 June 30, 2010 and December 31, 2009, the noncurrent portion of the escrow amounted to $1,501 and $236, respectively.

7. Income Taxes:

The Company’s effective tax rate for the six months ended June 30, 2010 was 42.2% compared to the effective tax rate for the six months ended June 30, 2009 of 42.5%. The effective rate for the six months ended June 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”). This benefit was 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 six months ended June 30, 2010 would have been 41.0%. 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 June 30, 2010 was 40.9% compared to the effective tax rate for the three months ended June 30, 2009 of 42.2%. The effective rate for the three months ended June 30, 2010 was lower than the prior period due to lower nondeductible expenses in 2010 related to the KSOP.

8. Debt:

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

		Issuance		Maturity		June 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				—
Capital lease obligations		Various		Various			3,650				5,488
Other		Various		Various			285				1,172
Short-term debt and current portion of long-term debt						$	53,935			$	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				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				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			1,580				2,094
Other		Various		Various			187				415
Long-term debt						$	476,767			$	527,509

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

In March 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 2013. As of June 30, 2010 and December 31, 2009, the Company had long-term debt outstanding of $85,000 under this agreement.

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 six months ended June 30, 2009, 2,452,350 shares of ISO Class A common stock were redeemed by the Company at a weighted average price of $15.80 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 treasury stock were converted to Verisk Class B common 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 six months ended June 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 June 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 Class A common stock. Under this 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. During the six months ended June 30, 2010, 2,173,106 shares of Verisk Class A common stock were repurchased by the Company as part of this program at a weighted average price of $29.87 per share. As treasury stock purchases are recorded based on trade date, the Company has included $2,635 in “Accounts payable and accrued liabilities” in the accompanying condensed consolidated balance sheets for those purchases that have not settled as of June 30, 2010.

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 six months ended June 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 six month periods ended June 30, 2010 and 2009:

		For the Three Months Ended								For the Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Numerator used in basic and diluted EPS:
Net income		$	58,404			$	45,939			$	113,779			$	90,854
Denominator:
Weighted average number of common shares used in basic EPS			180,492,106				172,887,331				180,272,828				173,409,800
Effect of dilutive shares:
Potential Class A redeemable common stock issuable upon the exercise of stock options			9,049,787				6,937,148				9,225,496				6,794,500
Weighted average number of common shares and dilutive potential common shares used in diluted EPS			189,541,893				179,824,479				189,498,324				180,204,300
Basic EPS of Class A and Class B		$	0.32			$	0.27			$	0.63			$	0.52
Diluted EPS of Class A and Class B		$	0.31			$	0.26			$	0.60			$	0.50

The potential shares of common stock that were excluded from diluted EPS were 2,004,390 and 5,301,650 for the six months ended June 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:

		June 30,				December 31,
		2010				2009
Unrealized gains on investments		$	416			$	526
Unrealized foreign currency losses			(876	)			(683	)
Pension and postretirement unfunded liability adjustment			(51,724	)			(53,471	)
Accumulated other comprehensive loss		$	(52,184	)		$	(53,628	)

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

						Tax Benefit/
		Before Tax				(Expense)				After Tax
For the Six Months Ended June 30, 2010
Unrealized holding losses on investments arising during the year		$	(190	)		$	80			$	(110	)
Unrealized foreign currency losses			(193	)			—				(193	)
Pension and postretirement unfunded liability adjustment			2,926				(1,179	)			1,747
Total other comprehensive income		$	2,543			$	(1,099	)		$	1,444
For the Six Months Ended June 30, 2009
Unrealized holding gains on investments arising during the year		$	104			$	(41	)		$	63
Reclassification adjustment for amounts included in net income			386				(156	)			230
Unrealized foreign currency gains			88				—				88
Pension and postretirement unfunded liability adjustment			4,900				(1,977	)			2,923
Total other comprehensive income		$	5,478			$	(2,174	)		$	3,304

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. Employees, directors and consultants are eligible for awards under the Incentive Plan. Cash received from stock option exercises for the six months ended June 30, 2010 and 2009 was $16,733 and $1,126, 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. As of June 30, 2010, there are 8,857,739 shares of Class A common stock reserved and available for future issuance. On July 1, 2010, the Company granted 31,906 nonqualified stock options that were immediately vested and 138,120 nonqualified stock options with a one year service vesting period, to the directors of the Company. These 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.

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

		June 30, 2010				June 30, 2009
Option pricing model		Black-Scholes				Black-Scholes
Expected volatility			30.99	%			30.95	%
Risk-free interest rate			2.47	%			1.98	%
Expected term in years			4.8				5.7
Dividend yield			0.00	%			1.00	%
Weighted average grant date fair value per stock option		$	8.70			$	4.69

The expected term for a majority of the awards granted was estimated based on studies of historical experience and projected exercise behavior. However, for certain awards granted, for which no historical exercise pattern exist, the expected term was estimated using the simplified method. The risk-free interest rate is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the expected term of the equity award. The volatility factor was based on the average volatility of the Company’s peers, calculated using historical daily closing prices over the most recent period that commensurates with the expected term of the stock option award. The expected dividend yield was based on the Company’s expected annual dividend rate on the date of grant.

Exercise prices for options outstanding and exercisable at June 30, 2010 ranged from $1.84 to $30.25 as outlined in the following table:

		Options Outstanding												Options Exercisable
														Weighted-
		Weighted-												Average								Weighted-
		Average				Stock				Weighted-				Remaining				Stock				Average
Range of		Remaining				Options				Average				Contractual				Options				Exercise
Exercise Prices		Contractual Life				Outstanding				Exercise Price				Life				Exercisable				Price
$1.84 to $2.20			1.0				515,270			$	2.04				1.0				515,270			$	2.04
$2.21 to $2.96			2.7				1,996,600			$	2.84				2.7				1,996,600			$	2.84
$2.97 to $4.62			2.8				5,439,750			$	3.56				2.8				5,439,750			$	3.56
$4.63 to $8.90			4.8				4,154,400			$	8.31				4.8				4,154,400			$	8.31
$8.91 to $13.62			5.7				1,653,600			$	11.84				5.6				1,603,600			$	11.79
$13.63 to $15.10			6.6				1,617,875			$	15.10				6.6				1,122,875			$	15.10
$15.11 to $17.78			8.3				5,824,801			$	16.65				8.0				1,921,486			$	16.81
$17.79 to $30.25			9.4				5,082,011			$	24.26				8.0				208,250			$	17.84
							26,284,307												16,962,231