Fitch: Verisk's Ratings Unaffected by Announced EagleView Acquisition

Fitch Ratings' 'A-' Issuer Default Rating for Verisk Analytics, Inc. (Verisk) and Insurance Services Office, Inc. (ISO), a wholly owned subsidiary of Verisk, remain unchanged after Verisk's announcement to acquire EagleView Technology Corp. (EVT). A complete list of ratings is provided at the end of this release.

The transaction is valued at $650 million ($637 million after warrants held by Verisk) and is expected to close by July 15, 2014. EVT will be integrated with Xactware and will be reported as part of the Insurance category in the Decision Analytics segment. The acquisition is consistent with Verisk's strategic plan to grow the company's data and products offerings organically and through acquisitions.

Verisk plans to fund the acquisition using a combination of borrowings under its credit facility ($585 million) and cash on hand (approximately $50 million). Fitch calculates Sept. 30, 2013 pro forma unadjusted gross leverage of approximately 2.3 times (x). While this exceeds the ratings and Verisk's 2.0x leverage target, Fitch expects leverage to decline and return to targeted levels within 12 to 15 months through absolute debt reduction and EBITDA growth. The ratings can tolerate leverage in excess of targeted levels for an acquisition, with the expectation that leverage would be reduced within a 12-to-18-month timeframe. Verisk demonstrated this commitment after it acquired Argus in the third quarter of 2012. After the Argus acquisition, gross unadjusted leverage increased to 2.4x, and was reduced to 2.0x by Dec. 31, 2012.

As of Sept. 30, 2013, the company had solid liquidity consisting of $180 million in cash, and full availability under its $975 million revolving credit facility due 2018. Fitch calculates $407 million in free cash flow (FCF) for the last 12 months ending September 2013. Fitch believes pro forma liquidity of $130 million in cash and $390 million in revolver availability is adequate.

Fitch expects the company to have sufficient liquidity to handle all of its maturities. Verisk and ISO's maturity schedule consists of approximately:

--$170 million due in 2015;
--$50 million in 2016;
--The $975 million credit facility due in 2018 (pro forma for the acquisition $585 million in borrowings);
--$250 million in 2019;
--$450 million in 2021; and
--$350 million in 2022.

As of Sept. 30, 2013, Fitch calculates gross unadjusted leverage at 1.7x and interest coverage of 10x.

KEY RATING DRIVERS

The ratings reflect Verisk's dominant market position within its Property and Casualty (P&C) insurance related businesses. Any competition for its industry standard programs and specific property information primarily comes from internal P&C insurance company departments.

The company has delivered consistent organic revenue growth. Verisk's core products are largely non-discretionary purchases for most, if not all, of its clients. Fitch believes that the company has the ability to organically grow revenues in the low single digits during an economic downturn.

While not highly likely, potential disruptions to Verisk's future access to its core insurance related data and the potential for increased data cost is a concern for Fitch. This risk is mitigated by the rationale points discussed above and by the company's track record and long relationship with insurance companies and regulators. This relationship dates back to 1971 and is extended further back when including the history with the insurance bureaus.

The company continues to grow its non-P&C businesses organically and through acquisitions. Fitch recognizes that by growing its other businesses, EBITDA margins may decline over time. However, Verisk's margin is high relative to its peers and Fitch expects margins to remain in the mid-40% range over the next few years. Fitch calculates Verisk's EBITDA margin at 46% as of Sept. 30, 2013 (prior to the acquisition of EVT).

Verisk's credit profile and ratings are consistent relative to Fitch's ratings on other Professional Publishers (Thomson Reuters; Dun & Bradstreet; McGraw-Hill; and Reed Elsevier).

RATING SENSITIVITIES:

The ratings could be upgraded if the company were to target a more conservative unadjusted leverage metrics with a rationale for such a target.

Ratings may be pressured if the company's performance does not materially meet Fitch's expectations and leverage is unable to return to 2x target level within 18 months. While not expected, material share buyback activity or additional debt funded acquisitions that delayed the company's planned reduction in leverage may also pressure the ratings.

Fitch currently rates Verisk and ISO as follows:

Verisk
--Long-term IDR at 'A-';
--Short-term IDR at 'F2';
--Senior unsecured notes at 'A-'.

ISO
--Long-term IDR at 'A-';
--Short-term IDR at 'F2';
--Revolving credit facility at 'A-';
--Unsecured private placement notes at 'A-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:
--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

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Fitch Ratings
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