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VRSK-2014.03.31.10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________



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

For the quarterly period ended March 31, 2014



¨	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		26-2994223
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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 ý No ¨

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 ý No ¨

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.

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

As of April 25, 2014, 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		166,392,110

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Verisk Analytics, Inc.

Index to Form 10-Q

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	Page Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Operations	2

Condensed Consolidated Statements of Comprehensive Income	3

Condensed Consolidated Statements of Changes in Stockholders’ Equity	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3. Quantitative and Qualitative Disclosures About Market Risk	38

Item 4. Controls and Procedures	38

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	39

Item 1A. Risk Factors	39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3. Defaults Upon Senior Securities	39

Item 4. Mine Safety Disclosures	39

Item 5. Other Information	39

Item 6. Exhibits	39

SIGNATURES	40

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

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Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2014 and December 31, 2013



	2014			2013
	(unaudited)			2013
	(In thousands, except for share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	427,376		$	165,801
Available-for-sale securities		3,918			3,911
Accounts receivable, net of allowance for doubtful accounts of $4,326 and $4,415, respectively		173,451			158,547
Prepaid expenses		26,407			25,657
Deferred income taxes, net		5,075			5,077
Income taxes receivable		7,499			67,346
Other current assets		35,478			34,681
Current assets held-for-sale		—			13,825
Total current assets		679,204			474,845
Noncurrent assets:
Fixed assets, net		251,731			233,373
Intangible assets, net		434,968			447,618
Goodwill		1,184,374			1,181,681
Pension assets		64,801			60,955
Other assets		24,926			20,034
Noncurrent assets held-for-sale		—			85,945
Total assets	$	2,640,004		$	2,504,451

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	156,893		$	188,264
Short-term debt and current portion of long-term debt		4,317			4,448
Pension and postretirement benefits, current		2,437			2,437
Fees received in advance		343,827			226,581
Federal and foreign taxes payable		8,166			—
Current liabilities held-for-sale		—			9,449
Total current liabilities		515,640			431,179
Noncurrent liabilities:
Long-term debt		1,270,992			1,271,439
Pension benefits		12,957			13,007
Postretirement benefits		2,159			2,061
Deferred income taxes, net		194,305			198,604
Other liabilities		44,425			36,043
Noncurrent liabilities held-for-sale		—			4,529
Total liabilities		2,040,478			1,956,862
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $.001 par value; 1,200,000,000 shares authorized; 544,003,038 shares issued and 166,531,114 and 167,457,927 outstanding, respectively		137			137
Unearned KSOP contributions		(270	)		(306	)
Additional paid-in capital		1,224,122			1,202,106
Treasury stock, at cost, 377,471,924 and 376,545,111 shares, respectively		(1,951,306	)		(1,864,967	)
Retained earnings		1,369,665			1,254,107
Accumulated other comprehensive losses		(42,822	)		(43,488	)
Total stockholders’ equity		599,526			547,589
Total liabilities and stockholders’ equity	$	2,640,004		$	2,504,451

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For The Three Months Ended March 31, 2014 and 2013



	2014			2013
	(In thousands, except for share and per share data)
Revenues	$	409,643		$	376,697
Expenses:
Cost of revenues (exclusive of items shown separately below)		169,673			143,632
Selling, general and administrative		57,134			56,322
Depreciation and amortization of fixed assets		19,781			14,163
Amortization of intangible assets		14,212			17,052
Total expenses		260,800			231,169
Operating income		148,843			145,528
Other income (expense):
Investment income		20			44
Realized loss on available-for-sale securities, net		(11	)		(193	)
Interest expense		(17,439	)		(20,090	)
Total other expense, net		(17,430	)		(20,239	)
Income before income taxes		131,413			125,289
Provision for income taxes		(46,972	)		(45,844	)
Income from continuing operations		84,441			79,445
Income from discontinued operations, net of tax of $23,365 and $835, respectively (Note 6)		31,117			1,066
Net income	$	115,558		$	80,511
Basic net income per share:
Income from continuing operations	$	0.50		$	0.47
Income from discontinued operations		0.19			0.01
Basic net income per share	$	0.69		$	0.48
Diluted net income per share:
Income from continuing operations	$	0.50		$	0.46
Income from discontinued operations		0.18			0.01
Diluted net income per share	$	0.68		$	0.47
Weighted average shares outstanding:
Basic		166,981,982			168,078,589
Diluted		170,421,489			172,760,641

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

For The Three Months Ended March 31, 2014 and 2013



	2014		2013
	(In thousands)
Net income	$	115,558	$	80,511
Other comprehensive income, net of tax:
Foreign currency translation adjustment		507		(406	)
Unrealized holding gain (loss) on available-for-sale securities		16		(230	)
Pension and postretirement unfunded liability adjustment		143		869
Total other comprehensive income		666		233
Comprehensive income	$	116,224	$	80,744

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(UNAUDITED)

For The Year Ended December 31, 2013 and The Three Months Ended March 31, 2014



	Class A Common Stock Issued	Par Value		Unearned KSOP Contributions			Additional Paid-in Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Losses			Total Stockholders’ Equity
	(In thousands, except for share data)
Balance, December 31, 2012	544,003,038	$	137	$	(483	)	$	1,044,746		$	(1,605,376	)	$	905,727	$	(89,160	)	$	255,591
Net income	—		—		—			—			—			348,380		—			348,380
Other comprehensive income	—		—		—			—			—			—		45,672			45,672
Treasury stock acquired (4,532,552 shares)	—		—		—			—			(278,938	)		—		—			(278,938	)
KSOP shares earned	—		—		177			14,753			—			—		—			14,930
Stock options exercised, including tax benefit of $57,065 (4,076,750 shares reissued from treasury stock)	—		—		—			119,236			18,523			—		—			137,759
Restricted stock lapsed, including tax benefit of $991 (150,668 shares reissued from treasury stock)	—		—		—			333			658			—		—			991
Employee stock purchase plan (27,879 shares reissued from treasury stock)	—		—		—			1,533			129			—		—			1,662
Stock based compensation	—		—		—			21,087			—			—		—			21,087
Other stock issuances (8,109 shares reissued from treasury stock)	—		—		—			418			37			—		—			455
Balance, December 31, 2013	544,003,038		137		(306	)		1,202,106			(1,864,967	)		1,254,107		(43,488	)		547,589
Net income	—		—		—			—			—			115,558		—			115,558
Other comprehensive income	—		—		—			—			—			—		666			666
Treasury stock acquired (1,399,349 shares)	—		—		—			—			(88,728	)		—		—			(88,728	)
KSOP shares earned	—		—		36			3,865			—			—		—			3,901
Stock options exercised, including tax benefit of $6,945 (445,911 shares reissued from treasury stock)	—		—		—			12,749			2,253			—		—			15,002
Restricted stock lapsed, including tax benefit of $61 (17,955 shares reissued from treasury stock)	—		—		—			(30	)		91			—		—			61
Employee stock purchase plan (8,670 shares reissued from treasury stock)	—		—		—			449			45			—		—			494
Stock based compensation	—		—		—			4,983			—			—		—			4,983
Balance, March 31, 2014	544,003,038	$	137	$	(270	)	$	1,224,122		$	(1,951,306	)	$	1,369,665	$	(42,822	)	$	599,526

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For The Three Months Ended March 31, 2014 and 2013



	2014			2013
	(In thousands)
Cash flows from operating activities:
Net income	$	115,558		$	80,511
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets		20,776			15,214
Amortization of intangible assets		14,323			17,207
Amortization of debt issuance costs and original issue discount		661			688
Allowance for doubtful accounts		(227	)		298
KSOP compensation expense		3,901			3,570
Stock based compensation		4,983			4,571
Gain on sale of discontinued operations		(65,410	)		—
Realized loss on available-for-sale securities, net		11			193
Deferred income taxes		(3,640	)		622
Loss on disposal of fixed assets		683			426
Excess tax benefits from exercised stock options		—			(36,128	)
Other operating activities, net		—			(7	)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable		(7,078	)		(12,785	)
Prepaid expenses and other assets		(2,632	)		(2,624	)
Income taxes		71,276			47,600
Accounts payable and accrued liabilities		(32,886	)		(36,206	)
Fees received in advance		116,318			113,743
Pension and postretirement benefits		(3,509	)		(1,930	)
Other liabilities		(280	)		(3,706	)
Net cash provided by operating activities		232,828			191,257
Cash flows from investing activities:
Acquisitions		(4,001	)		—
Purchase of non-controlling interest in non-public companies		(5,000	)		—
Proceeds from sale of discontinued operations		155,000			—
Purchases of fixed assets		(36,144	)		(28,065	)
Purchases of available-for-sale securities		(6	)		(3,747	)
Proceeds from sales and maturities of available-for-sale securities		16			3,765
Other investing activities, net		—			439
Net cash provided by (used in) investing activities		109,865			(27,608	)
Cash flows from financing activities:
Repayment of short-term debt, net		—			(10,000	)
Excess tax benefits from exercised stock options		—			36,128
Repurchases of Class A common stock		(88,161	)		(22,130	)
Proceeds from stock options exercised		7,804			12,455
Other financing activities, net		(1,268	)		(2,157	)
Net cash (used in) provided by financing activities		(81,625	)		14,296
Effect of exchange rate changes		507			(406	)
Increase in cash and cash equivalents		261,575			177,539
Cash and cash equivalents, beginning of period		165,801			89,819
Cash and cash equivalents, end of period	$	427,376		$	267,358
Supplemental disclosures:
Taxes paid	$	2,592		$	189
Interest paid	$	16,957		$	19,619
Noncash investing and financing activities:
Repurchases of common stock included in accounts payable and accrued liabilities	$	3,605		$	915
Deferred tax asset established on date of acquisition	$	—		$	343
Tenant improvement included in other liabilities	$	8,799		$	—
Capital lease obligations	$	510		$	998
Capital expenditures included in accounts payable and accrued liabilities	$	622		$	4,410

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

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VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(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, financial and healthcare industries and sophisticated methods to predict and quantify loss in diverse contexts ranging from natural catastrophes to supply chain 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 to serve as the parent holding company of Insurance Services Office, Inc. (“ISO”) upon completion of the initial public offering ("IPO"), which occurred on October 9, 2009. 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. For over the past decade, the Company has broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. Verisk trades under the ticker symbol “VRSK” on the NASDAQ Global Select Market.

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, fair value of stock based compensation, assets and liabilities for pension and postretirement benefits, and the estimate for the allowance for doubtful accounts. Actual results may ultimately differ from those estimates. The results of operations for the Company's mortgage services business are reported as a discontinued operation for the periods presented herein (See Note 6).

The condensed consolidated financial statements as of March 31, 2014 and for the three months ended March 31, 2014 and 2013, 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 months ended March 31, 2014 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 months ended March 31, 2014 have been prepared on the same basis as and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2013. 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 March 2013, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU No. 2013-05”). Under ASU No. 2013-05, an entity is required to release any related cumulative translation adjustment into net income upon cessation to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. ASU 2013-05 is effective prospectively for reporting periods beginning after December 15, 2013. ASU No. 2013-05 was adopted by the Company on January 1, 2014. The adoption of ASU No. 2013-05 did not have a material impact on the Company’s condensed consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU No. 2013-11”). Under ASU No. 2013-11, an unrecognized tax benefit should be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with the exception that these unrecognized tax benefits are not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position or the tax law. An additional exception applies when the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability and should not be combined with deferred

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tax assets. ASU No. 2013-11 is effective for reporting periods beginning after December 15, 2013. The Company adopted the standard on January 1, 2014. The adoption of ASU No. 2013-11 did not have a material impact on the Company’s condensed consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU No. 2014-08”). Under ASU No. 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The amendments in this ASU further require additional disclosures on discontinued operations in the financial statements. ASU No. 2014-08 is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held-for-sale) that have not been reported in the financial statements previously issued. The Company has elected not to early adopt and will assess the impact of this standard when applicable circumstances are required to be reported in discontinued operations under the existing guidance and this ASU.

3. Investments:

Available-for-sale securities consisted of the following:



	Adjusted Cost		Gross Unrealized Loss			Fair Value
March 31, 2014
Registered investment companies	$	4,077	$	(159	)	$	3,918
December 31, 2013
Registered investment companies	$	4,098	$	(187	)	$	3,911

In addition to the available-for-sale securities above, the Company has equity investments in non-public companies 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 Accounting Standards Codification (“ASC”) 323-10-25, The Equity Method of Accounting for Investments in Common Stock. At March 31, 2014 and December 31, 2013, the carrying value of such securities was $8,487 and $3,602, respectively, and has been included in “Other assets” in the accompanying condensed consolidated balance sheets.

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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”), established 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 are internally-developed, and considers risk premiums that market participants would require.

The fair values of cash and cash equivalents (other than money-market funds, which are recorded on a reported net asset value basis disclosed below), accounts receivable, accounts payable and accrued liabilities, and short-term debt expected to be refinanced approximate their carrying amounts because of the short-term nature of these instruments.

The following table summarizes fair value measurements by level for cash equivalents and registered investment companies that were measured at fair value on a recurring basis:



	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
March 31, 2014
Cash equivalents - money-market funds	$	2,115	$	—	$	2,115
Registered investment companies (1)	$	3,918	$	3,918	$	—
December 31, 2013
Cash equivalents - money-market funds	$	889	$	—	$	889
Registered investment companies (1)	$	3,911	$	3,911	$	—

______________________


(1)	Registered investment companies are classified as available-for-sale securities and are valued using quoted prices in active markets multiplied by the number of shares owned.

The Company has not elected to carry its long-term debt at fair value. The carrying value of the long-term debt represents amortized cost. The Company assesses the fair value of its long-term debt based on quoted market prices if available, and if not, 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. The fair value of the long-term debt would be a Level 2 liability if the long-term debt was measured at fair value on the condensed consolidated balance sheets. The following table summarizes the carrying value and estimated fair value of the long-term debt as of March 31, 2014 and December 31, 2013, respectively:



	2014				2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial instrument not carried at fair value:
Long-term debt excluding capitalized leases	$	1,265,309	$	1,358,532	$	1,265,129	$	1,335,844

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5. Acquisitions:

In the first quarter of 2014, the Company acquired the net assets of Inovatus, LLC for approximately $4,000. The assets primarily consisted of software and are embedded in our existing models focusing on reducing fraud and premium leakage for personal auto insurance carriers. The technology is included in the Company's Decision Analytics segment as part of its solutions to leverage data and analytics to help insurance companies improve results.

2014 Pending Acquisition

In January 2014, the Company entered into an agreement to acquire 100 percent of the stock of Eagleview Technology Corporation (“EVT”), the parent company of Pictometry International Corp. and Eagle View Technologies, Inc., for a net cash purchase price of $650,000, which will be funded by the Company's operating cash and borrowings from the senior unsecured Syndicated Revolving Credit Facility (the "Credit Facility"). EVT is a provider of geo-referenced aerial image capture and visual-centric data analytics and solutions to insurers, contractors, government, and commercial customers in the United States. This acquisition is expected to advance the Company's position in the imagery analytics market, adding new municipal and commercial customers. The transaction is expected to support the aerial imagery solution development in the Company's Decision Analytics segment. The purchase price to be paid will be adjusted subsequent to close to reflect final balances of certain working capital accounts and other closing adjustments. The closing of the transaction is subject to the completion of customary closing conditions, including receipt of regulatory and shareholder approvals. On March 28, 2014, the Company received a request for additional information (the “Second Request”) from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Company is responding to the Second Request and presently expects the transaction to close during the third quarter of 2014.

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 dates, as well as a portion of the contingent payments. At March 31, 2014 and December 31, 2013, the current portion of the escrows amounted to $27,504 and $27,967, respectively, and there was no noncurrent portion amount of the escrow in either period. The current portion of the escrows has been included in “Other current assets” in the accompanying condensed consolidated balance sheets.

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6. Discontinued Operations:

On March 11, 2014, the Company sold 100 percent of the stock of the Company’s mortgage services business, Interthinx, which was a guarantor subsidiary, in exchange for a purchase price of $155,000. The cash received will be adjusted subsequent to close to reflect final balances of certain working capital accounts and other closing adjustments. The Company recognized a gain, net of tax, of $31,117 for this sale. Results of operations for the mortgage services business are reported as a discontinued operation for the three months ended March 31, 2014 and for all prior periods presented.

The mortgage services business meets the criteria for being reported as a discontinued operation and has been segregated from continuing operations. The following table summarizes the results from the discontinued operation for the three months ended March 31:



	2014			2013
Revenues from discontinued operations	$	11,512		$	26,626
Income from discontinued operations before income taxes (including gain on sale of $65,410 in 2014)	$	54,482		$	1,901
Provision for income taxes (including tax on sale of $27,067 in 2014)		(23,365	)		(835	)
Income from discontinued operations, net of tax	$	31,117		$	1,066

7. Goodwill and Intangible Assets:

The following is a summary of the change in goodwill from December 31, 2013 through March 31, 2014, both in total and as allocated to the Company’s operating segments:



	Risk Assessment		Decision Analytics			Total
Goodwill at December 31, 2013 (1)	$	55,555	$	1,126,126		$	1,181,681
Current year acquisitions		—		2,995			2,995
Sale of discontinued operations		—		(302	)		(302	)
Goodwill at March 31, 2014 (1)	$	55,555	$	1,128,819		$	1,184,374

______________________


(1)	These balances are net of accumulated impairment charges of $3,244 that occurred prior to December 31, 2011.

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. Goodwill impairment 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 completed the required annual impairment test as of June 30, 2013, which resulted in no impairment of goodwill. There were no goodwill impairment indicators after the date of the last annual impairment test.

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



	Weighted Average Useful Life	Cost		Accumulated Amortization			Net
March 31, 2014
Technology-based	8 years	$	296,502	$	(184,350	)	$	112,152
Marketing-related	5 years		71,047		(46,914	)		24,133
Contract-based	6 years		6,555		(6,555	)		—
Customer-related	13 years		388,505		(89,822	)		298,683
Total intangible assets		$	762,609	$	(327,641	)	$	434,968
December 31, 2013
Technology-based	8 years	$	294,940	$	(180,581	)	$	114,359
Marketing-related	5 years		71,047		(44,274	)		26,773
Contract-based	6 years		6,555		(6,555	)		—
Customer-related	13 years		388,505		(82,019	)		306,486
Total intangible assets		$	761,047	$	(313,429	)	$	447,618

Amortization expense related to intangible assets for the three months ended March 31, 2014 and 2013 was $14,212 and $17,052, respectively. Estimated amortization expense in future periods through 2019 and thereafter for intangible assets subject to amortization is as follows:



Year	Amount
2014	$	42,562
2015		50,870
2016		49,040
2017		48,136
2018		47,390
2019 and thereafter		196,970
	$	434,968

8. Income Taxes:

The Company’s effective tax rate for the three months ended March 31, 2014 was 35.7%, compared to the effective tax rate for the three months ended March 31, 2013 of 36.6%. The effective tax rate for the three months ended March 31, 2014 is lower than the March 31, 2013 effective tax rate primarily due to favorable state legislative changes. 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 ISO 401(k) Savings and Employee Stock Ownership Plan (“KSOP”).

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9. Debt:

The following table presents short-term and long-term debt by issuance as of March 31, 2014 and December 31, 2013:



	Issuance Date	Maturity Date	2014		2013
Short-term debt:
Capital lease obligations	Various	Various	$	4,317	$	4,448
Short-term debt				4,317		4,448
Long-term debt:
Senior notes:
4.125% senior notes, less unamortized discount of $2,345 and $2,415, respectively	9/12/2012	9/12/2022		347,655		347,585
4.875% senior notes, less unamortized discount of $1,614 and $1,699, respectively	12/8/2011	1/15/2019		248,386		248,301
5.800% senior notes, less unamortized discount of $732 and $757, respectively	4/6/2011	5/1/2021		449,268		449,243
Prudential shelf notes:
5.84% Series H shelf notes	10/26/2007	10/26/2015		17,500		17,500
6.28% Series I shelf notes	4/29/2008	4/29/2015		85,000		85,000
6.85% Series J shelf notes	6/15/2009	6/15/2016		50,000		50,000
New York Life shelf notes:
5.87% Series A shelf notes	10/26/2007	10/26/2015		17,500		17,500
6.35% Series B shelf notes	4/29/2008	4/29/2015		50,000		50,000
Capital lease obligations	Various	Various		5,683		6,310
Long-term debt				1,270,992		1,271,439
Total debt			$	1,275,309	$	1,275,887

As of March 31, 2014, the Company had a $975,000 committed Credit Facility with Bank of America N.A., JPMorgan Chase Bank N.A., and a syndicate of banks. Borrowings may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program (the “Repurchase Program”). As of March 31, 2014 and December 31, 2013, the Company had no outstanding borrowings under the Credit Facility.

10. Stockholders’ Equity:

The Company has 1,200,000,000 shares of authorized Class A common stock. The 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 all twelve members of the board of directors.

Share Repurchase Program

The Company has authorized repurchases of up to $1,200,000 of its common stock through its Repurchase Program. Since the introduction of share repurchase as a feature of the Company's capital management strategies in 2010, the Company has repurchased shares with an aggregate value of $1,123,475. As of March 31, 2014, the Company had $76,525 available to repurchase shares. 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 2013 Equity Incentive Plan (the “2013 Incentive Plan”), the Verisk 2009 Equity Incentive Plan (the “2009 Incentive Plan”), and the ISO 1996 Incentive Plan (the “1996 Incentive Plan”), while providing flexibility to repurchase additional shares if warranted. This authorization has no expiration date and may be increased, reduced, 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 three months ended March 31, 2014, the Company repurchased 1,399,349 shares of common stock as part of the Repurchase Program at a weighted average price of $63.41 per share. The Company utilized cash from operations and the proceeds from its senior notes to fund these repurchases. As treasury stock purchases are recorded based on trade date, the Company has included $3,605 in “Accounts payable and accrued liabilities” in the accompanying condensed consolidated balance sheets for those purchases that have not settled as of March 31, 2014.

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Treasury Stock

As of March 31, 2014, the Company’s treasury stock consisted of 377,471,924 shares of Class A common stock. During the three months ended March 31, 2014, the Company reissued 472,536 shares of Class A common stock from the treasury shares at a weighted average price of $5.06 per share.

Earnings Per Share (“EPS”)

Basic EPS is computed by dividing income from continuing operations, income from discontinued operations and net income available to common stockholders, respectively, by the weighted average number of common shares outstanding during the period. 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, including stock options, nonvested restricted stock, and nonvested restricted stock units, had been issued.

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the three months ended March 31, 2014 and 2013:



	Three Months Ended March 31,
	2014		2013
Numerator used in basic and diluted EPS:
Income from continuing operations	$	84,441	$	79,445
Income from discontinued operations, net of tax of $23,365 and $835, respectively (Note 6)		31,117		1,066
Net income	$	115,558	$	80,511
Denominator:
Weighted average number of common shares used in basic EPS		166,981,982		168,078,589
Effect of dilutive shares:
Potential common shares issuable from stock options and stock awards		3,439,507		4,682,052
Weighted average number of common shares and dilutive potential common shares used in diluted EPS		170,421,489		172,760,641
Basic net income per share:
Income from continuing operations	$	0.50	$	0.47
Income from discontinued operations		0.19		0.01
Basic net income per share	$	0.69	$	0.48
Diluted net income per share:
Income from continuing operations	$	0.50	$	0.46
Income from discontinued operations		0.18		0.01
Diluted net income per share	$	0.68	$	0.47

The potential shares of common stock that were excluded from diluted EPS were 761,848 and 34,062 for the three months ended March 31, 2014 and 2013, respectively, because the effect of including these potential shares was anti-dilutive.

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Accumulated Other Comprehensive Losses

The following is a summary of accumulated other comprehensive losses as of March 31, 2014 and December 31, 2013:



	2014			2013
Foreign currency translation adjustment	$	(1,293	)	$	(1,800	)
Unrealized holding losses on available-for-sale securities, net of tax		(59	)		(75	)
Pension and postretirement adjustment, net of tax		(41,470	)		(41,613	)
Accumulated other comprehensive losses	$	(42,822	)	$	(43,488	)

The before tax and after tax amounts of other comprehensive income for the three months ended March 31, 2014 and 2013 are summarized below:



	Before Tax			Tax Benefit (Expense)			After Tax
March 31, 2014
Foreign currency translation adjustment	$	507		$	—		$	507
Unrealized holding gain on available-for-sale securities before reclassifications		39			(16	)		23
Amount reclassified from accumulated other comprehensive losses (1)		(11	)		4			(7	)
Unrealized holding gain on available-for-sale securities		28			(12	)		16
Pension and postretirement adjustment before reclassifications		584			(261	)		323
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (2)		(292	)		112			(180	)
Pension and postretirement adjustment		292			(149	)		143
Total other comprehensive income	$	827		$	(161	)	$	666
March 31, 2013
Foreign currency translation adjustment	$	(406	)	$	—		$	(406	)
Unrealized holding loss on available-for-sale securities before reclassifications		(1,018	)		379			(639	)
Amount reclassified from accumulated other comprehensive losses (1)		647			(238	)		409
Unrealized holding loss on available-for-sale securities		(371	)		141			(230	)
Pension and postretirement adjustment before reclassifications		2,802			(1,046	)		1,756
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (2)		(1,401	)		514			(887	)
Pension and postretirement adjustment		1,401			(532	)		869
Total other comprehensive income	$	624		$	(391	)	$	233

______________________


(1)	This accumulated other comprehensive loss component, before tax, is included under “Realized loss on available-for-sale securities, net” in the accompanying condensed consolidated statements of operations.


(2)	These accumulated other comprehensive loss components, before tax, are included under “Cost of revenues” and “Selling, general and administrative” in the accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note. 12 Pension and Postretirement Benefits for additional details).

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11. Equity Compensation Plans:

All of the Company’s outstanding stock options and restricted stock are covered under the 2013 Incentive Plan, 2009 Incentive Plan or the 1996 Incentive Plan. Awards under the 2013 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 2013 Incentive Plan. The Company issued common stock under these plans from the Company’s treasury shares. On May 15, 2013, the Company’s shareholders approved the 2013 Incentive Plan. There are 15,700,000 shares of common stock available for issuance under the 2013 Incentive Plan. Shares subject to awards granted subsequent to March 15, 2013, whether under the 2013 Incentive Plan or the 2009 Incentive Plan, with certain exceptions, will reduce the number of shares available for issuance under the 2013 Incentive Plan. As of March 31, 2014, there were 14,372,174 shares of common stock reserved and available for future issuance under the 2013 Incentive Plan. Cash received from stock option exercises for the three months ended March 31, 2014 and 2013 was $7,804 and $12,455, respectively.

On April 1, 2014, the Company granted 1,144,934 nonqualified stock options and 227,794 shares of restricted stock to key employees. The nonqualified stock options have an exercise price equal to the closing price of the Company’s common stock on the grant date, with a ten-year contractual term and a service vesting period of four years. The fair value of the restricted stock is determined using the closing price of the Company’s common stock on the grant date and has a service vesting period of four years. The Company recognizes the expense of the restricted stock ratably over the vesting period. The restricted stock is not assignable or transferable until it becomes vested.

The expected term for the stock options granted was estimated based on studies of historical experience and projected exercise behavior. 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 for stock options granted prior to 2014 was based on the average volatility of the Company’s peers, calculated using historical daily closing prices over the most recent period that is commensurate 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.

A summary of the stock options outstanding as of December 31, 2013 and March 31, 2014 and changes during the interim period are presented below:



	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2013	9,235,320		$	26.67	$	360,611
Exercised	(445,911	)	$	18.07	$	20,158
Cancelled or expired	(4,458	)	$	44.06
Outstanding at March 31, 2014	8,784,951		$	27.10	$	288,664
Stock options exercisable at March 31, 2014	6,793,102		$	21.42	$	261,837
Stock options exercisable at December 31, 2013	7,169,089		$	20.98	$	320,766

Intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the quoted price of Verisk common stock as of the reporting date. In accordance with ASC 718, Stock Compensation, excess tax benefit from exercised stock options and restricted stock lapsed is recorded as an increase to additional paid-in capital and a corresponding reduction in income taxes payable. This tax benefit is calculated as the excess of the intrinsic value of options exercised and restricted stock lapsed in excess of compensation recognized for financial reporting purposes. The amount of the tax benefit that has been realized, as a result of those excess tax benefits, is presented as a financing cash inflow within the accompanying condensed consolidated statements of cash flows. For the three months ended March 31, 2014 and 2013, the Company recorded excess tax benefits of $7,006 and $16,706, respectively. The Company realized $0 and $36,128 of tax benefit within the Company’s quarterly tax payments through March 31, 2014 and 2013, respectively.

The Company estimates expected forfeitures of equity awards at the date of grant and recognizes compensation expense only for those awards that the Company expects to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized over the requisite service period and may impact the timing of expense recognized over the requisite service period.

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A summary of the status of the restricted stock awarded under the 2013 Incentive Plan as of December 31, 2013 and March 31, 2014 and changes during the interim period is presented below:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2013	396,749		$	52.82
Vested	(17,955	)	$	36.96
Forfeited	(769	)	$	51.74
Outstanding at March 31, 2014	378,025		$	52.75

As of March 31, 2014, there was $33,410 of total unrecognized compensation costs, exclusive of the impact of vesting upon retirement eligibility, related to nonvested share-based compensation arrangements granted under the 2009 and 2013 Incentive Plans. That cost is expected to be recognized over a weighted average period of 2.38 years. As of March 31, 2014, there were 1,991,849 and 378,025 nonvested stock options and restricted stock, respectively, of which 1,524,383 and 273,084 are expected to vest. The total grant date fair value of options vested during the three months ended March 31, 2014 and 2013 was $3,415 and $4,530, respectively. The total grant date fair value of restricted stock vested during the three months ended March 31, 2014 and 2013 was $2,167 and $961, respectively.

The Company’s employee stock purchase plan (“ESPP”) commenced on October 1, 2012 and offers eligible employees the opportunity to authorize payroll deductions of up to 20.0% of their regular base salary and up to 50.0% of their short-term incentive compensation, both of which in total may not exceed $25 in any calendar year, to purchase shares of the Company’s common stock at a 5.0% discount of its fair market value at the time of purchase. In accordance with ASC 718, the ESPP is noncompensatory as the purchase discount is 5.0% or less from the fair market value, substantially all employees that meet limited employment qualifications may participate, and it incorporates no option features. During the three months ended March 31, 2014, the Company issued 8,670 shares of common stock at a weighted discounted price of $56.96.

12. Pension and Postretirement Benefits:

The Company maintained a frozen qualified defined benefit pension plan for certain of its employees through membership in the Pension Plan for Insurance Organizations (the “Pension Plan”), a multiple-employer trust. The Company has applied a cash balance formula to determine future benefits. Under the cash balance formula, each participant has an account, which is credited annually based on salary rates determined by years of service, as well as the interest earned on the previous year-end cash balance. The Company also has a frozen non-qualified supplemental cash balance plan (“SERP”) for certain employees. The SERP is funded from the general assets of the Company.

The Company also provides certain healthcare and life insurance benefits to certain qualifying active and retired employees. The Postretirement Health and Life Insurance Plan (the “Postretirement Plan”), which has been frozen, is contributory, requiring participants to pay a stated percentage of the premium for coverage.

The components of net periodic (benefit) cost for the three months ended March 31, are summarized below:



	Pension Plan and SERP						Postretirement Plan
	Three Months Ended March 31,
	2014			2013			2014			2013
Interest cost	$	4,813		$	4,427		$	163		$	150
Expected return on plan assets		(8,513	)		(7,597	)		(200	)		(212	)
Amortization of prior service credit		—			—			(36	)		(38	)
Amortization of net actuarial loss		152			1,289			176			150
Net periodic (benefit) cost	$	(3,548	)	$	(1,881	)	$	103		$	50
Employer contributions	$	195		$	100		$	—		$	—

The expected contributions to the Pension Plan, SERP and Postretirement Plan for the year ending December 31, 2014 are consistent with the amounts previously disclosed as of December 31, 2013.

13. Segment Reporting:

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ASC 280-10, Disclosures About Segments of an Enterprise and Related Information (“ASC 280-10”), establishes standards for reporting information about operating segments. ASC 280-10 requires that a public business enterprise report financial and descriptive information about its reportable operating segments.

Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s President and Chief Executive Officer is identified as the CODM as defined by ASC 280-10. To align with the internal management of the Company’s business operations based on service offerings, the Company is organized into the following two operating segments, which are also the Company’s reportable segments:

Decision Analytics: The Company develops solutions that its customers use to analyze the three key processes in managing risk: ‘prediction of loss’, ‘detection and prevention of fraud’ and ‘quantification of loss’. The Company’s combination of algorithms and analytic methods incorporates its proprietary data to generate solutions. In most cases, the Company’s customers integrate the solutions into their models, formulas or underwriting criteria in order to predict potential loss events, ranging from hurricanes and earthquakes to unanticipated healthcare claims. The Company develops catastrophe and extreme event models and offers solutions covering natural and man-made risks, including acts of terrorism. The Company also develops solutions that allow customers to quantify costs after loss events occur. Fraud solutions include data on claim histories, analysis of claims to find emerging patterns of fraud, and identification of suspicious claims in the insurance and healthcare sectors. The Company discloses revenue within this segment based on the industry vertical groupings of insurance, financial services, healthcare and specialized markets.

Risk Assessment: The Company is the leading provider of statistical, actuarial and underwriting data for the U.S. P&C insurance industry. The Company’s databases include cleansed and standardized records describing premiums and losses in insurance transactions, casualty and property risk attributes for commercial buildings and their occupants and fire suppression capabilities of municipalities. The Company uses this data to create policy language and proprietary risk classifications that are industry standards and to generate prospective loss cost estimates used to price insurance policies.

Discontinued Operations: On March 11, 2014, the Company sold its mortgage services business, Interthinx, which was included in the Decision Analytics segment. Results of operations for the mortgage services business are reported as a discontinued operation for the three months ended March 31, 2014, and for all prior periods presented. Refer to Note 6 for more information.

The two aforementioned operating segments represent the segments for which separate discrete financial information is available and upon which operating results are regularly evaluated by the CODM in order to assess performance and allocate resources. The Company uses EBITDA as the profitability measure for making decisions regarding ongoing operations. EBITDA is net income before interest expense, provision for income taxes, depreciation and amortization of fixed and intangible assets. EBITDA is the measure of operating results used to assess corporate performance and optimal utilization of debt and acquisitions. Operating expenses consist of direct and indirect costs principally related to personnel, facilities, software license fees, consulting, travel, and third-party information services. Indirect costs are generally allocated to the segments using fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. The Company does not allocate interest expense and provision for income taxes, since these items are not considered in evaluating the segment’s overall operating performance. The CODM does not evaluate the financial performance of each segment based on assets. On a geographic basis, no individual country outside of the U.S. accounted for 1.0% or more of the Company’s consolidated revenues for the three months ended March 31, 2014 or 2013. No individual country outside of the U.S. accounted for 1.0% or more of total consolidated long-term assets as of March 31, 2014 or December 31, 2013.

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The following table provides the Company’s revenue and operating income by reportable segment for the three months ended March 31, 2014 and 2013, in the accompanying condensed consolidated statements of operations:



	Three Months Ended									Three Months Ended
	March 31, 2014									March 31, 2013
	Decision Analytics			Risk Assessment			Total			Decision Analytics			Risk Assessment			Total
Revenues	$	247,330		$	162,313		$	409,643		$	224,084		$	152,613		$	376,697
Expenses:
Cost of revenues (exclusive of items shown separately below)		(119,759	)		(49,914	)		(169,673	)		(96,816	)		(46,816	)		(143,632	)
Selling, general and administrative		(38,051	)		(19,083	)		(57,134	)		(36,749	)		(19,573	)		(56,322	)
Investment income and realized gain (loss) on available-for-sale securities, net		—			9			9			—			(149	)		(149	)
EBITDA from discontinued operations (including the gain on sale in 2014)		55,588			—			55,588			3,107			—			3,107
EBITDA		145,108			93,325			238,433			93,626			86,075			179,701
Depreciation and amortization of fixed assets		(16,031	)		(3,750	)		(19,781	)		(10,826	)		(3,337	)		(14,163	)
Amortization of intangible assets		(14,124	)		(88	)		(14,212	)		(16,964	)		(88	)		(17,052	)
Less: Investment income and realized gain (loss) on available-for-sale securities, net		—			(9	)		(9	)		—			149			149
EBITDA from discontinued operations (including the gain on sale in 2014)		(55,588	)		—			(55,588	)		(3,107	)		—			(3,107	)
Operating income	$	59,365		$	89,478		$	148,843		$	62,729		$	82,799		$	145,528

Operating segment revenue by type of service is provided below:



	Three Months Ended March 31,
	2014		2013
Decision Analytics:
Insurance	$	141,430	$	126,549
Financial services		21,016		17,282
Healthcare		63,896		59,049
Specialized markets		20,988		21,204
Total Decision Analytics		247,330		224,084
Risk Assessment:
Industry-standard insurance programs		123,817		116,450
Property-specific rating and underwriting information		38,496		36,163
Total Risk Assessment		162,313		152,613
Total revenues	$	409,643	$	376,697

14. Related Parties:

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The Company considers its Class A stockholders that own more than 5.0% of the outstanding common stock to be related parties as defined within ASC 850, Related Party Disclosures. As of March 31, 2014 and December 31, 2013, the Company had no related parties owning more than 5.0% of its common stock.

15. Commitments and Contingencies:

The Company is a party to legal proceedings with respect to a variety of matters in the ordinary course of business, including the matters described below. With respect to ongoing matters, the Company is unable, at the present time, to determine the ultimate resolution of or provide a reasonable estimate of the range of possible loss attributable to these matters or the impact they may have on the Company’s results of operations, financial position or cash flows. This is primarily because the matters are generally in early stages and discovery has either not commenced or been completed. Although the Company believes it has strong defenses and intends to vigorously defend these matters, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations, financial position or cash flows.

Intellicorp Records, Inc. Litigation and iiX Litigation

On April 20, 2012, the Company was served with a class action complaint filed in Alameda County Superior Court in California naming the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp”) titled Jane Roe v. Intellicorp Records, Inc. The complaint alleged violations of the Fair Credit Reporting Act (“FCRA”) and claimed that Intellicorp failed to implement reasonable procedures to assure maximum possible accuracy of the adverse information contained in the background reports, failed to maintain strict procedures to ensure that criminal record information provided to employers is complete and up to date, and failed to notify class members contemporaneously of the fact that criminal record information was being provided to their employers and prospective employers. Intellicorp removed the case to the United States District Court of the Northern District of California. The California Court later granted Intellicorp’s motion to transfer the case, which is now pending in the United States District Court for the Northern District of Ohio. On October 24, 2012 plaintiffs served their First Amended Complaint (the “Roe Complaint”) alleging a nationwide putative class action on behalf of all persons who were the subject of a Criminal SuperSearch or other “instant” consumer background report furnished to a third party by Intellicorp for employment purposes, and whose report contained any negative public record of criminal arrest, charge, or conviction without also disclosing the final disposition of the charges during the 5 years preceding the filing of this action through the date class certification is granted. The Roe Complaint seeks statutory damages for the class in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, costs and attorneys’ fees. On February 4, 2013, the Court granted plaintiffs’ motion to amend the Roe Complaint to eliminate the named plaintiff’s individual claim for compensatory damages. This amendment did not change the breadth or scope of the request for relief sought on behalf of the proposed class. Plaintiffs later amended their class definition in their motion for class certification to include only those consumers whose (1) Criminal SuperSearch returned results, but Single County search returned no result; (2) Criminal SuperSearch returned one or more criminal charges without a disposition, but the Single County search returned a disposition other than “conviction” or “guilty” and (3) Criminal SuperSearch returned a higher level of offense (felony or misdemeanor) for one or more criminal charges than the Single County search (misdemeanor or infraction.) This amendment reduces the size of the potential class, but does not alter the time period for which the plaintiffs seek to certify a class or the scope of the request for relief sought on behalf of the proposed class. Plaintiffs’ motion for class certification was fully submitted on March 18, 2013 and oral argument was heard by Judge Gwin on June 27, 2013.

On November 1, 2012, the Company was served with a complaint filed in the United States District Court for the Northern District of Ohio naming the Company’s subsidiary Intellicorp Records, Inc. titled Michael R. Thomas v. Intellicorp Records, Inc. On January 7, 2013 plaintiff served its First Amended Complaint (the “Thomas Complaint”) to add Mark A. Johnson (the plaintiff in the Johnson v. iiX matter described below) as a named plaintiff. The Thomas Complaint alleges a nationwide putative class action for violations of FCRA on behalf of “[a]ll natural persons residing in the United States (a) who were the subject of a report sold by Intellicorp to a third party, (b) that was furnished for an employment purpose, (c) that contained at least one public record of a criminal conviction or arrest, civil lien, bankruptcy or civil judgment, (d) within five years next preceding the filing of this action and during its pendency, and (e) to whom Intellicorp did not place in the United States mail postage-prepaid, on the day it furnished any part of the report, a written notice that it was furnishing the subject report and containing the name of the person that was to receive the report.” The Thomas Complaint proposes an alternative subclass as follows: “[a]ll natural persons residing in Ohio or Tennessee (a) who were the subject of a report sold by Intellicorp to a third party, (b) that was furnished for an employment purpose, (c) that contained at least one public record of a criminal conviction or arrest, civil lien, bankruptcy or civil judgment, (d) within five years next preceding the filing of this action and during its pendency, (e) when a mutual review of the record would reveal that the identity associated with the public record does not match the identity of the class member about whom the report was furnished, and (f) to whom Intellicorp did not place in the United States mail postage pre-paid, on the day it furnished any part of the report, a written notice that it was furnishing the subject report and containing the name of the person that was to receive the report.” Similar to the Roe action, the Thomas Complaint alleges that Intellicorp violated the FCRA, asserting that Intellicorp violated section 1681k(a)(1) of the FCRA because it failed to provide notice to the plaintiffs “at the time” the adverse public record

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information was reported. The named plaintiffs also allege individual claims under section 1681e(b) claiming that Intellicorp failed to follow reasonable procedures to assure maximum possible accuracy in the preparation of the consumer report it furnished pertaining to plaintiffs. The Thomas Complaint seeks statutory damages for the class in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, costs and attorneys’ fees, as well as compensatory and punitive damages on behalf of the named plaintiffs.

On January 3, 2013, the Company received service of a complaint filed in the United States District Court for the Southern District of Ohio naming the Company’s subsidiary Insurance Information Exchange (“iiX”) titled Mark A. Johnson v. Insurance Information Exchange, LLC (the “Johnson Complaint”). The Johnson Complaint alleges a nationwide putative class action on behalf of “[a]ll natural persons residing in the United States who were the subject of a consumer report prepared by iiX for employment purposes within five (5) years prior to the filing of this Complaint and to whom iiX did not provide notice of the fact that public record information which is likely to have an adverse effect upon the consumer’s ability to obtain employment, is being reported by iiX, together with the name and address of the person to whom such information is being reported at the time such public record information is reported to the user of such consumer report.” Similar to the Thomas matter, the Johnson Complaint alleges violations of section 1681k(a) of the FCRA claiming that iiX failed to notify customers contemporaneously that criminal record information was provided to a prospective employer and failed to maintain strict procedures to ensure that the information reported is complete and up to date. The Johnson Complaint seeks statutory damages for the class in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, costs and attorneys’ fees.

On October 18, 2013, the parties filed a Stipulation of Settlement resolving the Roe, Thomas and Johnson matters which Judge Gwin approved on October 29, 2013 subject to a hearing on Final Approval. The Stipulation of Settlement provides for a payment of $18,600 all of which is to be provided by insurance. Accordingly, if the Stipulation of Settlement is approved at the hearing on Final Approval, the settlement of these matters is not expected to have a material adverse effect on the Company.

Interthinx, Inc. Litigation

On May 13, 2013, the Company was served with a putative class action titled Celeste Shaw v. Interthinx, Inc., Verisk Analytics, Inc. and Jeffrey Moyer. The plaintiff is a current employee of the Company’s former subsidiary Interthinx, Inc. based in Colorado, who filed the class action in the United States District Court for the District of Colorado on behalf of all fraud detection employees who have worked for Interthinx for the last three years nationwide and who were classified as exempt employees. The class complaint claims that the fraud detection employees were misclassified as exempt employees and, as a result, were denied certain wages and benefits that would have been received if they were properly classified as non-exempt employees. It pleads three causes of action against defendants: (1) Collective Action under section 216(b) of the Fair Labor Standards Act for unpaid overtime (nationwide class); (2) A Fed. R. Civ. P. 23 class action under the Colorado Wage Act and Wage Order for unpaid overtime and (3) A Fed. R. Civ. P. 23 class action under Colorado Wage Act for unpaid commissions/nondiscretionary bonuses (Colorado class). The complaint seeks compensatory damages, penalties that are associated with the various statutes, declaratory and injunctive relief interest, costs and attorneys’ fees.

On July 2, 2013, the Company was served with a putative class action titled Shabnam Shelia Dehdashtian v. Interthinx, Inc. and Verisk Analytics, Inc. in the United States District Court for the Central District of California. The plaintiff, Shabnam Shelia Dehdashtian, a former mortgage auditor at the Company’s former subsidiary Interthinx, Inc. in California, filed the class action on behalf of all persons who have been employed by Interthinx as auditors, mortgage compliance underwriters and mortgage auditors nationwide at any time (i) within 3 years prior to the filing of this action until trial for the Fair Labor Standards Act (FLSA) class and (ii) within 4 years prior to the filing of the initial complaint until trial for the California collective action. The class complaint claims that the defendants failed to pay overtime compensation, to provide rest and meal periods, waiting time penalties and to provide accurate wage statements to the plaintiffs as required by federal and California law. It pleads seven causes of action against defendants: (1) Failure to pay overtime compensation in violation of the FLSA for unpaid overtime (nationwide class); (2) Failure to pay overtime compensation in violation of Cal. Lab. Code sections 510, 1194 and 1198 and IWC Wage Order No. 4; (3) Failure to pay waiting time penalties in violation of Cal. Lab. Code sections 201-203; (4) Failure to provide itemized wage statements in violation of Cal. Lab. Code section 226 and IWC Order No. 4; (5) Failure to provide and or authorize meal and rest periods in violation of Cal. Lab. Code section 226.7 and IWC Order No. 4; (6) Violation of California Business and Professions Code sections 17200 et seq; and (7) a Labor Code Private Attorney General Act (PAGA) Public enforcement claim, Cal. Lab. Code section 2699 (California class). The complaint seeks compensatory damages, penalties that are associated with the various statutes, equitable and injunctive relief, interest, costs and attorneys’ fees.

On October 14, 2013, the Company received notice of a claim titled Dejan Nagl v. Interthinx Services, Inc. filed in the California Labor and Workforce Development Agency. The claimant, Dejan Nagl, a former mortgage auditor at the Company’s former subsidiary Interthinx, Inc. in California, filed the claim on behalf of himself and all current and former individuals employed in California as auditors by Interthinx, Inc. for violations of the California Labor Code and Wage Order. The claimant alleges on

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behalf of himself and other auditors the following causes of action: (1) Failure to provide rest breaks and meal periods in violation of Lab. Code sections 226.7, 514 and 1198; (2) Failure to pay overtime wages in violation of Lab. Code sections 510 and 1194; (3) Failure to provide accurate wage statements in violation of Lab. Code section 226; (4) Failure to timely pay wages in violation of Lab. Code section 204 and (5) Failures to timely pay wages for violations of Lab. Code sections 201- 203. The claim seeks compensatory damages and penalties that are associated with the various statutes, costs and attorneys’ fees.

On March 11, 2014, the Company sold 100 percent of the stock of Interthinx (see Note 6. Discontinued Operations for additional details). Pursuant to the terms of the sale agreement, the Company is responsible for the resolution of these matters.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to these matters.

Mariah Re Litigation

On July 8, 2013, the Company was served with summons and complaint filed in the United States District Court for the Southern District of New York in an action titled Mariah Re LTD. v. American Family Mutual Insurance Company, ISO Services, Inc. and AIR Worldwide Corporation, which was amended by the plaintiff on October 18, 2013 (the “Amended Complaint”). Plaintiff Mariah is a special purpose vehicle established to provide reinsurance to defendant American Family Insurance. Mariah entered into contracts with the Company’s ISO Services, Inc. and AIR Worldwide Corporation subsidiaries, pursuant to which, among other things, Mariah (i) licensed the right to utilize information published in Catastrophe Bulletins issued by the Property Claims Services division of ISO Services, Inc. and (ii) engaged AIR Worldwide Corporation as Calculation Agent to compute certain reinsured losses. The Amended Complaint alleges the following causes of action: (1) breach of contract against ISO Services, Inc. and AIR Worldwide Corporation; (2) unjust enrichment against American Family; (3) conversion against American Family; (4) tortious interference with contract against American Family; (5) declaratory judgment against all defendants and (6) specific performance against all defendants. The Amended Complaint seeks declaratory relief, specific performance, restitution, monetary damages and attorneys’ fees.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

MediConnect Global, Inc. Litigation

On October 11, 2013, the Company was served with a summons and complaint in an action titled Naveen Trehan v. MediConnect Global, Inc., Amy Anderson and Verisk Health, Inc. filed on October 9, 2013 in the United States District Court for the District of Utah. The complaint, brought by a former minority shareholder of the Company’s subsidiary, MediConnect Global, Inc., alleges four causes of action: (1) breach of fiduciary duty against MediConnect and Amy Anderson for failure to disclose the Company's interest in acquiring, merging with or investing in MediConnect prior to the buyout of his shares; (2) fraud against Amy Anderson and MediConnect for intentionally providing false information to plaintiff with the purpose of inducing him to agree to sell his shares at an artificially low price; (3) negligent misrepresentation against Amy Anderson and MediConnect for their negligent failure to discover and disclose the Company's interest in acquiring MediConnect prior to the buyout of plaintiff’s shares and (4) a violation of SEC Rule 10b-5 against Amy Anderson and MediConnect for defrauding plaintiff and failing to disclose material information in connection with the sale of securities. The complaint seeks joint and several recovery from Amy Anderson and MediConnect for compensatory damages, punitive damages, and disgorgement of all profits earned through the investment of plaintiff’s funds, attorneys’ fees, interest and an order from the court that plaintiff’s funds be held in a constructive trust.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

Insurance Services Office, Inc Litigation

In October 2013, the Company was served with a summons and complaint filed in the United States District Court for the Southern District of New York in an action titled Laurence J. Skelly and Ellen Burke v. Insurance Services Office, Inc. and the Pension Plan for Insurance Organizations. The plaintiffs, former employees of our subsidiary Insurance Services Office, Inc., or ISO, bring the action on their own behalf as participants in the Pension Plan for Insurance Organizations and on the behalf of similarly situated participants of the pension plan and ask the court to declare that a certain amendment to the pension plan as of December 31, 2001, which terminated their right to calculate and define the value of their retirement benefit under the pension plan based on their compensation levels as of immediately prior to their “retirement” (the “Unlawful Amendment”), violated the anti-cutback provisions and equitable principles of ERISA. The First Amended Class Action Complaint (the “Amended Complaint”) alleges that (1) the Unlawful Amendment of the pension plan violated Section 502(a)(1)(B) of ERISA as well as the anti-cutback rules of ERISA Section 204(g) and Section 411(d)(6) of the Internal Revenue Code; (2) ISO’s failure to provide an ERISA 204(h) notice in a manner calculated to be understood by the average pension plan participant was a violation of Sections 204(h) and 102(a) of ERISA and (3) the Living Pension Right was a contract right under ERISA common law and that by terminating

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that right through the Unlawful Amendment ISO violated plaintiffs’ common law contract rights under ERISA. The Amended Complaint seeks declaratory, equitable and injunctive relief enjoining the enforcement of the Unlawful Amendment and ordering the pension plan and ISO retroactive to the date of the Unlawful Amendment to recalculate the accrued benefits of all class members, indemnification from ISO to the pension plan for costs and contribution requirements related to voiding the Unlawful Amendment, bonuses to the class representatives, costs and attorney’s fees.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter.

On April 9, 2013, the Company's subsidiary ISO was served with a First Amended Petition and Request for Disclosure filed in the District Court of Dallas County, Texas in an action titled Sidah Garner v. Nationwide Mutual Insurance Company, Carfax, Inc., General and Import Motors, Porschea Nicole Kendall, Daniel Scott Hayward and Insurance Services Office, Inc. Thereafter, on June 5, 2013 and August 16, 2013 plaintiff served its Second Amended Petition and Third Amended Petition (“the Amended Petition”) on defendants. This action arises from a car accident on June 6, 2011 in which the plaintiff was critically injured. At the time of the accident the plaintiff was in the passenger seat of a 2004 Mazda, which the plaintiff alleges was previously involved in a total loss rollover collision on April 25, 2006. The Amended Petition alleges that at the time of the April 2006 accident the Mazda was insured by Nationwide which failed to issue a Texas Salvage Title and that ISO was to provide the crash information to vehicle reporting services, including the defendant Carfax. It further alleges that the Mazda was rebuilt and auctioned through a multi-state salvage reseller and sold to defendant Kendall (the driver) and that prior to purchase Kendall consulted Carfax’s Vehicle History Report which guaranteed no problem with the Mazda’s title and that it was not “junk,” neither “salvage nor rebuilt.” As a result, the Amended Petition alleges that Carfax’s report was in error and it sets forth a claim for negligence, negligent misrepresentation, gross negligence, strict liability, breach of contract and fraud against defendants Nationwide Insurance, Carfax and ISO in addition to the negligence claims against defendants General and Import Motors and Kendall and Hayward. It seeks actual damages, pain and suffering, loss of past and future earnings, past and future impairment and disfigurement, costs and interest from all defendants and exemplary damages from Nationwide, ISO and Carfax. The court denied the summary judgment motions of ISO and Nationwide on December 19, 2013 and January 6, 2014, respectively and granted the summary judgment motion of Carfax on January 27, 2014. Trial is scheduled to commence on May 13, 2014.

At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter.

16. Condensed Consolidated Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

Verisk Analytics, Inc. (the “Parent Company”) registered senior notes with full and unconditional and joint and several guarantees by certain of its 100 percent owned subsidiaries and issued certain other unregistered debt securities with full and unconditional and joint and several guarantees by certain 100 percent owned subsidiaries. Accordingly, presented below is the condensed consolidating financial information for (i) the Parent Company, (ii) the guarantor subsidiaries of the Parent Company on a combined basis and (iii) all other non-guarantor subsidiaries of the Parent Company on a combined basis, as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013. The condensed consolidating financial information has been presented using the equity method of accounting, to show the nature of assets held, results of operations, comprehensive income and cash flows of the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries assuming all guarantor subsidiaries provide both full and unconditional, and joint and several guarantees to the Parent Company at the beginning of the periods presented. Effective as of December 31, 2013, Verisk Health, Inc. and Verisk Health Solutions, Inc., guarantors of the senior notes, merged with and into Bloodhound Technologies, Inc. ("Bloodhound"), a non-guarantor of the senior notes, pursuant to which Bloodhound (renamed Verisk Health, Inc.) was the surviving corporation. By virtue of the merger, the surviving corporation of Verisk Health, Inc. expressly assumed all of the obligations of the former Verisk Health, Inc. and Verisk Health Solutions, Inc., including the guarantee by them of the senior notes. As a result, the condensed consolidating statements of operations, statements of comprehensive income and statements of cash flows of the former Bloodhound subsidiary for the three months ended March 31, 2014 were included in the financial information of the guarantor subsidiaries.

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CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)

As of March 31, 2014



	Verisk Analytics, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	20,235	$	309,825	$	97,316	$	—		$	427,376
Available-for-sale securities		—		3,918		—		—			3,918
Accounts receivable, net		—		119,455		53,996		—			173,451
Prepaid expenses		—		23,504		2,903		—			26,407
Intercompany receivables		677,598		639,861		196,227		(1,513,686	)		—
Deferred income taxes, net		—		3,404		1,671		—			5,075
Income taxes receivable		5,005		17,756		—		(15,262	)		7,499
Other current assets		5,145		28,151		2,182		—			35,478
Total current assets		707,983		1,145,874		354,295