Two U.K.-based companies and one U.S.-based company that compete with part of Verisk’s insurance vertical reported results during the last 24 hours, so we wanted to provide our view on what these results mean for Verisk. The most notable news from these competitors was probably that Daily Mail and General Trust (DMGT $8.17) further delayed the launch of its new RMS (one) platform, which we believe is a small positive for Verisk’s catastrophe modeling business. While we do not yet know Verisk’s second-quarter results, these results also reinforce our view that Verisk is nicely outpacing its competition in the insurance analytics sector.
In the remainder of this note we provide a closer look at the key developments reported by competitors for Verisk’s Insurance vertical. The Daily Mail’s RMS segment competes directly with Verisk’s catastrophe modeling business; in fact, RMS has the bigger market share. The exhibit on the following page shows the year-over-year underlying (adjusted for acquisitions and currency) revenue growth in Daily Mail and General Trust’s RMS segment and Reed Elsevier’s (ENL $44.86) risk solutions segment. RMS’s growth, after accelerating during much of the last two years, slipped to 4% in the second quarter. Management said on its conference call that this was mainly due to timing, and it continues to expect 5%-6% underlying growth for RMS this year.
The bigger announcement Thursday was probably a further delay in the expected launch of the RMS (one) platform. The Daily Mail Group has been heavily touting the potential benefits of this new technology platform, which it believes can more than double the addressable market for its solutions and will allow it to significantly increase revenue per customer through additional modules and expanding the usage base within clients. While there are some differences in the approaches, we view the RMS (one) platform as similar to the new Touchstone platform that Verisk’s catastrophe modeling business rolled out about two years ago (we believe that more than 50% of the company’s catastrophe modeling customers have already upgraded to the Touchstone platform).
The full-scale launch of the RMS (one) platform was originally expected in April 2014, but the company previously delayed the expected launch to sometime in late 2014 because of some complications clients found in the beta version of the product. On Thursday, the company further delayed the expected launch to sometime in 2015; management refused to give a specific date, but said it hoped to be more specific when it hosts an investor day in mid-September. A majority of the questions on the conference call focused on this delay. Management was adamant that the delay was not because of negative feedback from clients about the product or negative feedback about the usagebased pricing (instead of subscription pricing) that the company is switching to. Regardless of the reason, the delay in the release of this new platform at Verisk’s largest competitor in the catastrophe modeling sector is probably an incremental positive for the company, in our view.