Verisk Analytics, Inc. 545 Washington Boulevard Jersey City, NJ 07310-1686 201-469-3000 www.verisk.com V e r i s k A n a y t i c s l 2 0 1 5 A n n u a l R e p o r t Distinctives Verisk Analytics 2015 Annual Report 94562 Cover va16024 VeriskAnnual-2015.indd 1-3 3/15/16 9:13 PM Company Profile Verisk Analytics (Nasdaq:VRSK) is a leading data analytics provider serving customers in insurance, natural resources, healthcare, financial services, government, and risk manage- ment. Headquartered in Jersey City, New Jersey, the com- pany operates in 23 countries and is a member of Standard & Poor’s (S&P) 500® Index. Verisk Analytics is also part of the NASDAQ-100 Index, which includes the 100 largest nonfinancial securities listed on the NASDAQ stock market. Its common stock is traded on NASDAQ under the symbol VRSK. In 2015, the company was ranked 18th on the Forbes World’s 100 Most Innovative Companies list. Using advanced technologies to collect and analyze billions of records, Verisk Analytics draws on unique data assets and deep domain expertise to provide first-to-market innova- tions that are integrated into customer workflows. The company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. To meet the needs of diverse clients, Verisk Analytics employs an experienced staff of business and technical specialists, analysts, and certified professionals. In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, please visit www.verisk.com. Financial Highlights Revenues $ Millions 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 C A G R = 1 4 . 8 % 2011 2012 2013 2014 2015 2015 Revenue Types Transactional: 25% Subscriptions and Long-Term Contracts: 75% Adjusted EBITDA from Continuing Operations 2015 Revenues by Vertical End Market $ Millions 1000 900 800 700 600 500 400 300 200 100 0 C A G R = 1 5 . 7 % 2011 2012 2013 2014 2015 Decision Analytics: 67% Insurance: 31% Financial Services: 6% Risk Assessment: 33% Healthcare: 15% Energy and Specialized Markets: 15% Corporate Headquarters 545 Washington Boulevard Jersey City, NJ 07310-1686 201-469-3000 www.verisk.com Investor Relations E-mail: ir@verisk.com 201-469-2142 http://investor.verisk.com Stock Transfer Agent Wells Fargo Shareowner Services P.O. Box 64874 St. Paul, MN 55164 1-800-468-9716 Outside Legal Counsel Davis Polk & Wardwell LLP Independent Registered Public Accounting Firm Deloitte & Touche LLP The following is a reconciliation of net income to adjusted net income: Net income Amortization of intangibles Income tax effect on amortization of intangibles Discontinued operations, net of tax Nonrecurring items related to the Wood Mackenzie acquisition Income tax effect on one-time items related to the Wood Mackenzie acquisition Adjusted net income 2015 2014 2013 $ 507,577 $ 400,042 $ 348,380 94,864 (26,363 ) — (45,234 ) (10,690 ) 56,870 (21,611 ) (29,177 ) — — 63,741 (24,222 ) (6,066 ) — — $ 520,154 $ 406,124 $ 381,833 The following is a reconciliation of net income to Adjusted EBITDA from continuing operations: Net income Depreciation and amortization Interest expense Provision for income taxes Discontinued operations, net of tax $ 507,577 215,484 121,316 209,859 — Nonrecurring items related to the Wood Mackenzie acquisition (58,569 ) $ 400,042 142,376 69,984 219,755 (29,177 ) — $ 348,380 129,931 76,136 196,426 (6,066 ) — Adjusted EBITDA from continuing operations $ 995,667 $ 802,980 $ 744,807 Note regarding the use of non-GAAP financial measures The company has provided certain non-GAAP financial information as supplemental information regarding its operating results. These measures are not in accordance with—or an alternative for—GAAP and may be different from non-GAAP measures reported by other companies. The company believes that its presentation of non-GAAP measures—such as adjusted net income, EBITDA, and Adjusted EBITDA—provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. In addition, the company’s management uses these measures for reviewing the financial results of the company and for budgeting and planning purposes. This annual report is printed on paper certified by the Forest Stewardship Council® (FSC®). The FSC promotes environmentally sound, socially beneficial, and economically prosperous forest management. Annual Report cover concept winners: Anne Benkovitz and Robert Lester, Verisk Analytics © 2016 Verisk Analytics, Inc. Verisk Analytics, the Verisk Analytics logo, ISO, ISO ClaimSearch, ISO Risk Analyzer, and ProMetrix are registered trademarks and Verisk, Verisk Maplecroft, GarageConfirm, ISO ClaimSearch DNA, ISO RiskElements, OdometerConfirm, Safety Scoring, 360InspectHub, and Verisk Telematics Data Exchange are trade- marks of Insurance Services Office, Inc. Claims Outcome Advisor is a registered trademark of ISO Claims Services, Inc. Property Claim Services and PCS are registered trade- marks of ISO Services, Inc. AER is a trademark of Atmospheric and Environmental Research, Inc. AIR Worldwide and Touchstone are registered trademarks of AIR Worldwide Corporation. Argus is a trademark of Argus Information and Advisory Services, LLC. Ariel, MSDgen, 3E Online, and 3ESC are registered trademarks of 3E Company. Verisk Health and DxCG are registered trademarks of Verisk Health, Inc. Xactimate and Xactware are registered trademarks and ClaimXperience and Property InSight are trademarks of Xactware Solutions, Inc. All other product or corporate names are trademarks or registered trademarks of their respective companies. 94562 Cover va16024 VeriskAnnual-2015.indd 4-6 3/15/16 9:13 PM dis·tinc·tives \di-'stin(k)-tivz\ noun 1. characteristics that set someone or something apart from others 2. Verisk sustainable competitive advantages 94562 VeriskAnnual-Fly Sheet.indd 1 3/15/16 9:29 PM Selected Financial Data Statement of operations Revenues: Decision Analytics revenues Risk Assessment revenues Revenues Total expenses Operating income Income from continuing operations, net of tax Income from discontinued operations, net of tax Net income Adjusted net income from continuing operations Adjusted earnings per share from continuing operations: Basic Diluted Adjusted EBITDA from continuing operations: Decision Analytics Risk Assessment Years Ended December 31, 2015 2014 2013 (in thousands, except for per share data) $ 1,379,819 $ 1,096,074 $ 977,427 688,191 $ 2,068,010 $ 1,331,448 $ $ $ $ $ $ $ 736,562 507,577 — 507,577 520,154 3.15 3.09 650,652 $ 1,746,726 $ 1,086,280 $ $ $ $ $ $ $ 660,446 370,865 29,177 400,042 406,124 2.45 2.40 618,276 $ 1,595,703 $ $ $ $ $ $ $ $ 981,436 614,267 342,314 6,066 348,380 381,833 2.27 2.21 $ 589,169 $ 434,210 $ 397,876 406,498 368,770 346,931 Total Adjusted EBITDA from continuing operations $ 995,667 $ 802,980 $ 744,807 Adjusted EBITDA margin from continuing operations 48.1 % 46.0 % 46.7 % Balance sheet data Cash and cash equivalents Total assets Total debt Stockholders’ equity Other data Cash from operations Capital expenditures $ 138,348 $ 5,615,927 $ 3,167,990 $ 1,372,011 $ 39,359 $ 2,345,330 $ 1,436,932 $ 211,043 $ 165,801 $ 2,504,451 $ 1,275,887 $ 547,589 $ $ 623,687 166,138 $ $ 489,452 146,818 $ $ 506,920 145,976 The company defines “Adjusted EBITDA” as net income from continuing operations before interest expense, income taxes, deprecia- tion, and amortization of fixed and intangible assets and excluding second-quarter nonrecurring items related to the Wood Mackenzie acquisition. The company defines “adjusted net income” as income from continuing operations before amortization of intangibles and second- quarter nonrecurring items related to the Wood Mackenzie acquisition, net of tax. The company calculates “diluted adjusted earnings per share” as adjusted net income divided by diluted shares. Adjusted net income, Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures. See inside back cover for the reconciliations to net income. The company defines “capital expenditures” as purchases of fixed assets. Distinctives | 1 94562 va16024 VeriskAnnual Text.indd 1 3/15/16 10:42 PM To our shareholders, customers, and employees At Verisk Analytics, our vision is to be the world’s most effective and responsible data analytics company in pursuit of our customers’ most strategic opportunities. 2015 Review We achieved significant milestones in 2015 that demonstrate our commitment to innovation, customer value, financial performance, and shareholder returns. Forbes magazine ranked Verisk eighteenth on its list of the World’s 100 Most Innovative Companies. We were also named to the S&P 500 Index, joining other distinguished companies chosen for market size, liquidity, and standing in their industries. I was pleased that our customers’ loyalty improved materially over the prior year—as measured by our Net Promoter Scores. Overall, 2015 was a year of good performance as we con- tinue to build a strong foundation for future performance. We again achieved peer-leading levels of organic revenue growth—averaging about 8 percent over the past ten years —and high levels of profitability. We maintained our disci- plined capital management strategy and invested in growing our business while also returning capital to shareholders. Our 2015 consolidated revenues increased 18.4 percent over 2014, to $2.1 billion. In our Decision Analytics business segment, revenues from continuing operations grew 25.9 percent, to $1.4 billion. In our Risk Assessment segment, revenues grew 5.8 percent, to $688.2 million. From 2011 to 2015, revenues from continuing operations increased at a compound annual growth rate (CAGR) of 14.8 percent; Decision Analytics revenues from continuing operations increased at a CAGR of 21.2 percent; and Risk Assessment revenues increased at a CAGR of 5.7 percent. The company achieved $995.7 million of consolidated Adjusted EBITDA from continuing operations, up 24.0 per- cent from 2014. The Adjusted EBITDA margin from con- tinuing operations was 48.1 percent. The company recorded $507.6 million of net income from continuing operations, up 36.9 percent from 2014, and $520.2 million of adjusted net income from continuing operations, up 28.1 percent from 2014. Diluted adjusted earnings per share from continuing operations increased 28.8 percent, to $3.09. 2 | Verisk Analytics 2015 Annual Report Verisk continued to diversify in 2015. Approximately 44.4 percent of revenues from continuing operations came from primary insurers in the property/casualty insurance industry; and 55.6 percent came from other markets, including natural resources, healthcare, financial services, and other specialized markets. The contribution from those newer markets is up from about 20 percent in 2004. We continue to pursue a program of strategic open-market share repurchases. In 2015, we repurchased approximately 279 thousand shares for a total cost of $20.5 million at a weighted average price of $73.20, bringing the total to $1.6 billion deployed over the past five years. The $2.8 bil- lion acquisition of Wood Mackenzie brought capital deployed from acquisitions to $3.8 billion over the past five years, net of foreign currency hedges. We entered into an agreement with General Motors as our inaugural partner for the newly introduced Verisk Telematics Data Exchange. We also enhanced our predictive analytics capabilities, launched advanced catastrophe models and fraud mitigation tools, introduced key insurance coverages, and released imagery-based solutions. We rolled out new programs in the healthcare and financial services sectors. And we grew our supply chain offerings in compliance and supply chain risk, with an emphasis on responsible sourcing, human rights, political risks, and organization resilience. Verisk expanded its corporate social responsibility program with initiatives that benefited customers, employees, share- holders, and the communities in which we operate. Read about our accomplishments a little later in this report. Verisk acquisitions, combined with our focus on innovation powering our businesses, are essential to our strategy for growth. We made several acquisitions to augment our offer- ings in global risk analytics, enter new vertical markets, and expand internationally. Most significantly, we acquired Wood Mackenzie—a global leader in data analytics and com- mercial intelligence for the energy, chemicals, and metals and mining industries—establishing Verisk as a trusted data analytics provider in the international natural resources market. The acquisition advanced our position in markets central to the world economy in the twenty-first century. 94562 va16024 VeriskAnnual Text.indd 2 3/15/16 10:42 PM Long-Term Value Creation We produce solutions that combine data, analytic methods for finding meaning in the data, and software for delivering data and analysis into customers’ workflows. Customers use our solutions to make better decisions about risk, invest- ments, and operations with greater precision, efficiency, and discipline. And we help customers across the globe protect and grow the value of people, property, and financial assets. Much of what we do frequently demonstrates two qualities: • Our solutions often become the standard for all participants in a vertical market to perform their data/analytic work. • Most of our solutions are “ready to use” and don’t require significant servicing or installation support. As a result, our business is often characterized by high incremental and net margins and relatively low capital intensity. Moreover, we usually enjoy relationships with most, if not all, of the participants in the vertical markets we serve. Given those qualities, the key to long-term value creation for Verisk is organic revenue growth, leading to scaling margins and better returns on invested capital. In turn, organic growth depends on: • deepening the reach and quality of our analytics, so that our existing solutions yield more insight and value for customers • creating a steady stream of new solutions that meet customers’ emerging needs The company’s ability to deepen our analytics and create new solutions in ways that differentiate us from our competition is contingent on Verisk being distinctive along four dimensions: • having unique data assets • exhibiting deep expertise in our customers’ domains • providing a steady stream of first-to-market innovations • being deeply integrated into customer workflows Much of our thinking and work goes into protecting and extending those four distinctives. The distinctives tend to reside in specific verticals—supporting Verisk’s organization around the core markets of property/casualty insurance, retail banking, healthcare, and natural resources. To amplify the distinctives that come with being the leading provider of data and analytics to specific vertical markets, we’re investing in our people and infrastructure to become increasingly accomplished in four core capabilities: Large-scale data integration: Advanced capabilities to manage and integrate structured and unstructured data sets from all relevant sources Multitier, multispectral data capture: Advanced technolo- gies to capture and interpret imagery, telemetry data, sensory data, and other emergent data sets in real time and at scale Visualization of data and analytics: Superior methods to use data, visualize it, and make it meaningful, with a focus on geolocation Predictive analytics: Methods leading to prediction in com- plex environments, such as natural phenomena, insurance outcomes, supply chains, and consumer behavior In sum, our approach to long-term value creation centers on deeply committing to specific vertical markets to provide scalable data and analytic solutions, enhancing the four dis- tinctives leading to differentiation, and investing in our core capabilities. We’ve added one more theme to this approach —the globalization of our business. We’ve traditionally con- ducted business in the United States, yet our methods are applicable worldwide. We’re thoughtfully and steadily put- ting people and operations into overseas markets to create local data sets and leverage our preexisting analytic methods. Because of the scalability of our solutions, we’re highly cash-generative. Our strategy for value creation also includes reinvestment in our business, both for building new solutions ourselves as well as acquiring solution sets meaningful to our customers that help accelerate us to market. Acquired businesses usually benefit from access to Verisk’s data assets and infrastructure. In the fourth quarter of 2015, we held extended discussions with our Board of Directors to revisit the strategies of our company and a view of our current environment. As we enter 2016, we find the structure of the markets we serve and their regulatory environments to be fairly unchanging. We don’t see any major external factors that would materially reduce our long-term opportunities, though we do note this is a year in which, at the outset, the price of hydrocarbon com- modities is unusually low, putting pressure on our energy customers. Our response is to intensify our interaction with customers to help them find even more value in our solu- tions, positioning us for greater growth into the future as market conditions ease. In general, we feel our future is in our own hands and rests upon our creativity and initiative. Sincerely, Scott G. Stephenson Chairman, President, and Chief Executive Officer Distinctives | 3 94562 va16024 VeriskAnnual Text.indd 3 3/15/16 10:42 PM Verisk Distinctives At Verisk Analytics, we follow a set of distinctives—sustainable competitive advantages—that guide our company. Our distinctives provide a unique framework to produce actionable, mission-critical solutions to meet the needs of our customers and the markets we serve in all corners of the world. They help us create exceptional value for our stakeholders and ultimately achieve greater profitability. In 2015, our distinctives—a key component of The Verisk Way principles to serve, add value, and innovate—propelled us forward as we continued to serve our customers’ needs, innovate, and find new revenue streams. Our 7,700 employees foster our distinctives with a workforce that includes experts in diverse fields, such as predictive analytics, statistical modeling, chemistry, engineering, economics, information technology, and data management. Many hold doctorates, other advanced degrees, and profes- sional certifications and designations. Our employees’ technical talent and qualifications continue to increase every year. Our distinctives lay the foundation to build on our past successes and forge new ones—and allow our customers, employees, shareholders, and communities to prosper. 4 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 4 3/15/16 10:42 PM Unique Data Assets Data is at the core of what we do. We use our proprietary data assets to develop predictive analytics and transformative models for our cus- tomers. We discover insightful ways to use data, visualize it, and make it meaningful. We create innovative solutions by applying scientific methods to massive volumes of data—information about properties and communities, fraud, claims, catastrophes and weather, consumer behavior, insurance premiums and losses, societal and environmental risks, and natural resources. Deep Domain Expertise We have specialized and in-depth knowledge in a number of defined vertical markets, including insurance, natural resources, healthcare, financial services, government, and risk management. We understand that different verticals require different approaches. And our deep domain expertise adds value to our analytics in the markets we serve. Steady Stream of First-to-Market Innovations Innovation is vital to growth and achieving success. We’re on a continu- ous quest to be the first to market with new innovations. We achieve that by forming strong relationships with our customers as development partners. Innovation takes concerted effort and great motivation. It takes talent, forward thinking, and passion. But the rewards are great—for our company, customers, and shareholders. Deep Integration into Customer Workflows By integrating our products and services into customer workflows, we help them better understand and manage risk and make smarter decisions. Through ongoing col laboration, we combine our data, analytics, and deci- sion support platforms into comprehensive, industry-leading solutions. In this Annual Report, learn about how we integrate our distinctives into our work every day. 94562 va16024 VeriskAnnual Text.indd 5 3/15/16 10:42 PM Distinctives | 5 for loss control measures and improve risk selection. With nearly 3.7 million site-verified commercial properties and more than 6 million businesses in its database, ProMetrix continues to add value for insurers through improved risk management and enhanced rating insights. We launched new analytic reports in ProMetrix to help insurers better understand risks and align them with underwriting decisions. The Peril and Incident Report helps underwriters accurately determine the likelihood of fire incidents and a broad spectrum of nonmodeled weather events; it also provides exact fire hydrant locations from our geo-mapped database of 8 million hydrants and water sources. The Workers Compensation Advantage Report validates business and property information up front, helping with risk differen- tiation and selection. And the General Liability Underwriting Report supplies business-specific exposure details at point of sale, providing general liability writers with actionable insight into specific risk factors. Verisk’s ISO business launched ISO RiskElements™, a service that provides access to ISO’s high- quality, model-ready insurance data along with leading market and demographic research data— validated and ready to create predictive analytics. ISO RiskElements can help insurers obtain the modeling data they need to generate new insights, refine their business strategies, and create better predictive models. We also supported the analytic ambitions of insurers looking for modeling expertise, as demonstrated by the nearly 40 per- cent increase in the number of customers licens- ing ISO Risk Analyzer®, a suite of predictive models that help classify, segment, and price insurance risk. The innovative Roof Age accurately determines the age of a roof, a predictor of the likelihood and extent of future roof loss. Predictive Analytics Verisk is a leader in predictive analytics and modeling. In 2015, we released tools and reports that give insurers new risk insights, analytics, and modeling capabilities. For commercial lines insurers, Verisk launched two new tools as part of its next-generation ProMetrix® suite—with data and analytics on construction, building and occupancy, relative hazard comparisons, property details, fire protec- tion and sprinkler grading, and exposure details. The Risk Engineering Utility—the first such tool of its kind in the commercial property market- place—allows underwriters to recalculate the filed loss cost for a building by instantly model- ing the impact of risk reduction. The dynamic web portal allows insurers to see in real time the effects on loss costs resulting from remediating property hazards. The second tool, the Relative Hazard Percentile analytic, compares a property with peer properties stratified at the state and national level, helping insurers identify the need 6 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 6 3/15/16 10:42 PM Property/Casualty Insurance Jocelyn Augustino/FEMA We also launched Roof Age to give insurers a powerful model that accurately accounts for roof age in coverage and premium decisions. Using the BuildFax roof permit data- base covering more than 10 million homes, along with our unique data assets on weather, claims, property, and occu- pant characteristics, the model validates roof age and allows insurers to better manage risk for homes with older and even newer roofs. Catastrophe Modeling The effects of catastrophes on people, the economy, and the insurance industry can be severe. Our catastrophe models use sophisticated simulation methods that capture how natural and man-made catastrophes behave and affect buildings and infrastructure. Customers use our catastrophe models in pricing, risk selec- tion and underwriting, loss mitigation, reinsurance decision making, and portfolio management. Model output provides information about the potential for large losses before they occur, so our customers can prepare for the financial conse- quences. Today, we offer models for natural catastrophe risk and terrorism in 100 countries around the world, covering more than 85 percent of global catastrophe losses. In 2015, Verisk continued to leverage its unique data assets across the organization—including using noncatastrophe data in our catastrophe models—to enhance and develop products and services. Verisk business AIR Worldwide released Touchstone® 3.0, a complete catastrophe modeling and risk analysis platform with advanced analytics to help primary personal and com- mercial lines insurers, the excess and surplus market, rein- surers, and reinsurance and insurance brokers manage risk. Incorporating unique data assets from across the company, the new release provides additional tools to test, compare, and modify model output to help companies develop their own view of risk. Significant enhancements include new comparative loss analytics to help customers compare and understand differences in data sets, detailed hazard data for simulated events, the ability to integrate non-AIR models, and dynamic algorithms for identifying exposure accumu- lations. We deeply integrated Touchstone into customer workflows, completing the migration of almost all of AIR’s customer base to the platform. Property/Casualty Insurance | 7 94562 va16024 VeriskAnnual Text.indd 7 3/15/16 10:42 PM This year also saw the continued global adoption of Touchstone across the insurance and reinsurance industries, including specialty markets and the Lloyd’s market. The new customer base underwrites risk in Europe, the Middle East, Asia, and South America. plain. And we expanded our atmospheric model suite for Canada, including new models for winter storm and hurri- cane and comprehensive updates to our severe thunderstorm model. Together, these models provide a complete view of atmospheric peril risk and account for insurance policy conditions specific to Canada. AIR also launched new and updated models that represent the culmination of major research and development efforts. We released an updated hurricane model for the United States that includes a new storm surge module with state- of-the-art modeling techniques and unique data assets to help insurers better understand risk from hurricane wind and storm surge—supporting improved risk selection, port- folio management, and risk transfer decisions. The updated earthquake models for South America include tsunami modeling and support for the analysis of industrial facili- ties, builder’s risk, and public infrastructure. Customers can use the models to satisfy regulatory requirements that base capital reserves on probabilistic loss estimates. We also released new inland flood models for Austria, the Czech Republic, and Switzerland, helping insurers determine the likelihood of losses from floods both on and off the flood- In 2015, AIR completed several notable projects for a variety of nongovernmental organizations, with the aim of assessing the catastrophe risk and increasing the resilience of communities to natural disasters. Many aspects of those projects contributed to Verisk’s stated corporate social responsibility objectives. Catastrophe Planning and Weather Risk Management Working with Verisk business Atmospheric and Environmental Research (AER), we created a data-driven estimate of severe weather hazard for insurers in the United States and Canada using a trillion observations covering two decades. The results provide actionable data that insur- ers can use to gain additional insights on severe weather and help them manage weather risks and related costs. 8 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 8 3/15/16 10:42 PM Verisk launched the PCS® Benchmarking Service, providing industry best practices data and information for catastrophe claims operations. One of the service’s reports provides insight on catastrophe response compensation procedure and policy decisions. Another report on personal lines catastrophe claims planning and response highlights the importance of insurers using an established catastrophe plan to respond immediately when catastrophes strike. Fraud Mitigation and Claims Management Verisk helps insurers detect and prevent fraud at every step of the claims life cycle, including reporting, processing, analysis, and investigation. ISO ClaimSearch® is the indus- try’s first and only comprehensive system for improving claims processing and fighting fraud. In 2015, Verisk launched the ISO ClaimSearch mobile application, giving adjusters and investigators real-time access to a database of more than 1 billion claims. App users can see instant search results and conduct inquiries anywhere they have a con- nected mobile device to help them investigate and adjust claims more efficiently and facilitate faster claims handling. Through an ISO ClaimSearch alliance with a core systems solution provider, we developed a new inte gration model for claims system vendors to provide customers with an unprecedented interactive view of industry claims data with- out exiting the claims system. ISO ClaimSearch analytics provide real-time claims data using a new single sign-on. We also released ISO ClaimSearch DNA™, an analytical tool with patent-pending technology that applies advanced network analytics to the ISO ClaimSearch database to pro- actively detect networks of organized claims activity most likely to affect organizations. With estimates of property/ casualty insurance fraud at more than $30 billion per year, the new tool provides insurers with the capability to visual- ize patterns of potential fraud in increasingly large data sets. Verisk’s ISO Claims Partners business implemented a new automated Medicare conditional payment analytic solution that helps insurers and third-party administrators challenge and reduce liens—Medicare’s demands for reimbursement of conditional payment claims. Also in 2015, Verisk launched two new services for personal lines underwriters. GarageConfirm™ helps auto insurers verify garaging addresses at point of sale and renewal. The service uses license plate recognition technology provided by DRN (Digital Recognition Network), with a location database of more than 4 billion license plate scans, the larg- est of its kind. An estimated $2 billion in auto premium is lost annually to garaging misrepresentation. GarageConfirm data can spot red flags that need investigation, potentially recovering lost premium. The Verisk Device Reputation Service is a tool to help insurers prevent fraud at all stages of the policy cycle by exposing the reputation of Internet- enabled devices. Using proprietary technology from iovation and tapping into a database of more than 2.5 billion devices, the service helps identify devices related to previous fraudulent activity. The resultant score can help insurers determine policy pricing and applicant integrity. Verisk’s Xactware business released ClaimXperience™— tools that allow policyholders to connect and collaborate directly with their insurance companies during a claim. The Contents Collaboration capability lets policyholders build an inventory of their personal property losses and exchange information with claims representatives, and it offers video collaboration for policyholders to stream videos of their losses and interact with claims representatives in real time. The service also provides policyholder contractor selection based on certified credentials. ClaimXperience can help improve policyholder satisfaction and reduce claims- handling costs for insurers. Xactware also released major improvements to its on-site claims estimating tool, Xactimate® mobile. Enhancements include faster and more intuitive item entry and image han- dling, improved performance and safeguards, and a more intelligent user interface. The new features make Xactimate mobile more scalable for large-loss claims while still provid- ing an effective solution for small claims. Insurance Coverages and Emerging Risk ISO is the recognized leader in developing standardized and specialty insurance policy programs to define and cover the risks that policyholders face. We monitor technological, social, and business issues—as well as legislative, regulatory, and legal developments—that may affect our programs. In 2015, we introduced new coverage options for ride- sharing drivers and homeowners roof exposures. The ride- sharing endorsements offer coverage to drivers when they don’t have passengers and allow insurers to offer coverage as part of their insureds’ personal auto policies. For home- owners roof exposure, we introduced new rating tools and coverage options. The rating factors assist insurers in pricing policies with greater precision based on the age and type of roof material. The coverage options can provide premium savings for policyholders while managing the roof loss exposure for insurers. Property/Casualty Insurance | 9 94562 va16024 VeriskAnnual Text.indd 9 3/15/16 10:42 PM New coverage options took effect in 2015 for commercial drones and cyber. The endorsements for drones address growing liability exposures related to bodily injury, property damage, and other potential liability and include vari- ous exclusion and coverage options to give insurers increased flexibility when writing those risks. The optional cyber endorsements target small and midsize businesses—one of the most underserved insurance markets in the United States. ISO’s cyber insurance policies protect insurers’ customers against many significant exposures, such as data breaches, cyber extortion, and business interruption. With the rise in usage of virtual money, such as bitcoin, criminals have found ways to steal the currency. Similarly, executive impersonation has cost com panies millions of dollars. To combat those exposures, we introduced new enhancements in our commercial crime program for commercial and govern- ment entities. Those coverages address virtual currency theft and fraudulent impersonation scams. Verisk continues on the leading edge of insurance telematics—the collection of available information from a vehicle, such as location, speed, acceleration and braking, and driver behavior. We expanded the Verisk Telematics Safety Scoring™ driver discount program, which provides a risk score based on driver behavior that auto underwriters can use to offer discounts that reflect how cus- tomers actually drive. This first-to-market innovation uses patented methods backed by science. The expanded program is now approved by regulators and available in 43 states, enabling policyholders to earn discounts of up to 30 percent for safe driving habits. In 2015, we reviewed and monitored more than 16,000 legislative bills, 1,900 regulatory actions, and 2,000 court decisions and convened more than 35 insurer panel meetings. We provided insight to federal and state entities and to the National Association of Insurance Commissioners (NAIC) on many issues, including cybersecurity, flood insurance, public fire protection, catastrophes, building codes, claims fraud, and the Terrorism Risk Insurance Act (TRIA). Inspection and Aerial Imagery Technologies Verisk released Property InSight™—a powerful data package that offers 3D property models; roof, exterior, and property measurements; information about building characteristics; property risk factors; high-resolution aerial images; and other critical data points for property insurance professionals. Available for commercial and residential structures in the United States, the package helps claims estimators estimate everything from a total loss to replacing damaged building components. Inspectors can perform remote exterior building inspections, and underwriters can use the information to determine insurance-to-value amounts quickly and accurately. Also in 2015, we added to the unique data assets of Property InSight, accelerat- ing the collection of high-quality imagery and data. This milestone supports Verisk’s strategy to extend our leadership in multitier, multispectral imagery solutions—advanced technologies that capture and interpret imagery, teleme- try and sensory data, and other emergent data sets in real time and at scale. 10 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 10 3/15/16 10:42 PM Xactware also established a Remote Sensing Lab, a collabora- tive industry group dedicated to developing remote sensing technologies for insurance and restoration professionals. The lab engages experts in remote sensing, computer vision, geospatial intelligence and analysis, computer science, engi- neering, and geology. These experts collaborate on applica- tions for underwriting, claims handling, catastrophe response, independent adjusting, personal property, and structural contracting. Activities include beta testing new products, collaborating with experts, and joining panel discussions. Verisk made new advances in crop health monitoring and claims adjusting with newly released imagery-based insur- ance solutions. With remote sensing technology, the ability to track crop health efficiently at the field level across the globe will enable insurers to price crop risk more precisely. In 2015, Verisk also launched a property inspection data collection and management platform—360InspectHub™ —to optimize, automate, and measure every stage in the inspection life cycle. The new platform gives insurers control of their inspection workflow and allows them to capture detailed information about the process and inspec- tion results. With its user dashboards, custom business rules engine, reporting features, and underwriting tools, 360InspectHub is a centralized source to aggregate inspec- tion data and improve the quality, productivity, and timeliness of the inspection process. Big Data Data is all around us. And at Verisk, our unique data assets are one of the significant drivers of our business. We’re committed to responsible data stewardship and follow high operational standards and procedures throughout our enterprise. We’ve made significant investments in our data management infrastructure and in the areas of security, education, compliance, and audit—assuring our customers that we safeguard the information assets entrusted to our care. We diligently protect the confidentiality and integrity of our data, and we process personal data in compliance with legal and regulatory requirements. With a vision to be the world’s most effective and respon- sible data analytics company, the reliable and ethical col- lection, storage, protection, retention, analysis, sharing, and reporting of data are key as we use our proprietary data assets to develop products and services that advance our customers’ goals. We focused on several big data initia- tives in 2015 that can benefit all stakeholders in the value chain—from insurers and consumers to society as a whole. Verisk launched the Verisk Telematics Data Exchange™— the first-of-its-kind secure data link between insurers and consumers who drive connected cars. Consenting connected- car owners can contribute their driving data and access insurers’ usage-based insurance (UBI) programs that may reward safe drivers with lower premiums and guide riskier drivers to safe driving habits. For insurers, telematics data can spur innovative UBI programs, help them price policies more accurately, and improve customer acquisition and retention. Automakers play a key role in the Exchange, and in 2015, General Motors became the first auto manufacturer to join. The Exchange manages the data and the technical and operational details of the automaker/insurer relation- ship, freeing them to develop innovative and technologically advanced vehicles. Automakers can also gain a competitive edge by installing vehicle telematic devices that analyze and transmit data to insurers. The insurance industry is starting to develop usage-based rating plans for connected homes. For consumers, connected- home technology can ensure home security, manage energy costs, and protect against property damage. For insurers, safer homes can mean fewer claims and help prevent property loss. Verisk launched a major connected-home research study and onboarded the connected-home data of 350,000 resi- dential properties. For our voluntary pilot study, we provided complimentary smart-home kits that collect data from con- senting homeowners from smoke and carbon monoxide detectors, water leak and moisture sensors, motion sensors, and other devices. Our goal is to understand how connected- home technology affects theft, water, and fire. Research study results will help us develop first-to-market innovations for our customers. Through a strategic alliance with Vehcon, we launched OdometerConfirm™—a service that helps insurers collect validated vehicle odometer readings for rating, underwrit- ing, and UBI programs using their policyholders’ smart- phones. Consumers use a mobile app to capture mileage and other data, which is sent securely to Vehcon for valida- tion before being reported to insurers. Insurers can use other unique data assets from Verisk, such as rating symbols, claims and coverage histories, and vehicle registration, to prefill their policy administration systems automatically. 94562 va16024 VeriskAnnual Text.indd 11 3/18/16 11:12 AM Property/Casualty Insurance | 11 Natural Resources 12 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 12 3/15/16 10:42 PM Expanding Our Deep Domain Expertise In 2015, Verisk acquired Wood Mackenzie— a global leader in data analytics and commercial intelligence for the energy, chemicals, and metals and mining industries. With more than 40 years of history and a reputation for quality and strong customer relationships, the company provides unique and integrated analysis across the global natural resources value chain. Wood Mackenzie is integrated into its customers’ workflows and meets their needs in complex and capital- intensive industries. The company maintains an integrated business model, with its subscription-based research sales achieving industry-leading renewal rates of more than 98 percent in 2015, supported by an estab- lished consulting division. Despite a challenging market environment, customer engagement— defined as usage of the client portal and number of overall users—increased by more than 25 percent. Growing Our Markets and Channels Wood Mackenzie’s more than 20 locations around the world, including Argentina, Australia, Brazil, China, India, Japan, Peru, Russia, Singapore, and the United Kingdom, have enabled Verisk to establish a significant international presence. Augmenting our market position, we acquired Infield Systems Limited and PCI Group in 2015 and integrated them into Wood Mackenzie, growing our customer base from 900 to almost 2,400 relationships. Infield Systems, a provider of business intelligence, analysis, and research to the global offshore oil, gas, renewable energy, and associated marine industries, will enhance our upstream supply chain and modeling capabili- ties. The resulting combined analytics and data sets will give our customers more robust and integrated offerings in those sectors. PCI Group, a consortium of five specialist companies that offer integrated data and subscriptions research in the chemicals, fibers, films, and plastics sectors, will strengthen Wood Mackenzie’s deep domain expertise in the chemicals sector. The innovative North America Well Analysis Tool has unique data on more than 2.5 million U.S. onshore oil and gas wells. Alongside these acquisitions, Wood Mackenzie continued its strong record of innovation in 2015 with the launch of the North America Well Analysis Tool. It contains permitting, comple- tion, production, and cost data for onshore oil and gas wells in the United States. Updated regu- larly, the interactive visualization tool currently includes data for more than 2.5 million wells drilled by 77,000 different companies across 27 states. The analysis-ready data empowers cus- tomers to perform their own analyses or export the data and use it in their own models. Wood Mackenzie took steps to increase its brand awareness and added new channels and customers in 2015. We launched a new e-commerce service that provides access to more than 10,000 of our industry-leading research reports across energy, chemicals, and metals and mining. The on-demand website provides immediate access to reliable data and expert insight, opening up new markets and customers for the company. We also entered into a strategic alliance with Thomson Reuters to offer its customers direct access to Wood Mackenzie oil supply chain data and research reports. Access is provided within Eikon, Thomson Reuters’ flagship desktop plat- form, and through its dedicated data feed for commodities. The new information and analysis provided by Wood Mackenzie and available through Thomson Reuters as of March 2016 includes crude oil production, crude runs, crude slates, oil product balances and stocks, oil prod- uct prices, crack spreads, and refining margins. Natural Resources | 13 94562 va16024 VeriskAnnual Text.indd 13 3/15/16 10:42 PM Financial Services We aggregate depersonalized transaction-level financial data for the world’s largest banks. Actionable Views of Consumer Behavior Verisk business Argus Information and Advisory Services is a major provider of insightful infor- mation for banks and other financial institutions. The company collects and aggregates depersonal- ized transaction-level data on individual credit card, debit card, checking, money market, ATM, personal loan, and deposit accounts and, through a unique Argus-developed algorithm, combines the data to provide every participant with com- prehensive insight on each bank’s share of its customers’ financial worth. Participating finan- cial institutions represent the majority of the banking industry in several large economies around the globe. Argus delivers actionable information and its unique data assets in a variety of flexible formats. The information helps participants with their business strategies in such areas as regulatory compliance; product development; pricing; mar- keting; and mitigation of losses associated with credit default, collections, and fraud. Through Argus, participants receive detailed views of con- sumer behaviors—including spending patterns, revenues, payments, and risk of fraud or default— for participants’ own products in comparison to the rest of the industry. That insight helps banks understand the relationship of product, pricing, promotion, offers, and other programs for their customers. Global Expansion Internationally, Argus continues to play a leading role in supporting the industry in response to increasing regulatory scrutiny, using detailed and comprehensive transaction-level data to develop quantitative analytics that challenge existing qualitative views. Most recently, the U.K. business acted with clients and The UK Cards Association— the trade body for the card payments industry— to provide responses to the Financial Conduct Authority’s (FCA) Credit Card Market Study. Argus continues to help clients build strategies to act on study recommendations. 14 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 14 3/15/16 10:42 PM Following the acquisition and integration of Dart Consulting in 2014, Argus consolidated its position in Australia and New Zealand in 2015 through the expansion of its credit card syndicated studies and other advisory and data-hosting products and services. Argus’s geographical coverage has expanded further to include studies and advisory services in South America, Europe, and Asia. extends to advising lenders across the entire risk spectrum: Its services help alternative lenders target credit card cus- tomers and others to consolidate their high rate balances into affordable long-term installment loans. The company also helps those lenders target small-dollar installment loans to underbanked and unbanked customers. Retail Analytics Argus and Verisk Retail have combined extensive retail subject matter expertise with predictive and prescriptive analytics capabilities to launch a variety of solutions for leading retailers. These offerings will increasingly leverage unique and proprietary capabilities and assets to bring unprecedented levels of analytics-based fraud prevention and marketing insights to retailers. Alternative Lending Argus offers many services in alternative lending—loan options for consumers and businessowners outside tradi- tional banking loans. Services include strategic planning, building and refining underwriting and risk capabilities, portfolio loss forecasting, and business modeling for new product launches. In 2015, Argus significantly expanded its practice into alternative lending covering installment loans, sales finance, small-dollar installment loans, and peer-to-peer (P2P) lend- ing—lending funds to businesses through online services that match lenders directly with borrowers. We now serve a variety of lenders, retailers, P2P marketplaces, and tech- nology platform providers. Argus’s deep domain expertise Financial Services | 15 94562 va16024 VeriskAnnual Text.indd 15 3/15/16 10:42 PM Healthcare The Antifraud Alliance unique data asset aggregates data from participating health plans to identify abuses. Our Verisk Health business helps health plans, employers, providers, and other risk-bearing organizations improve the quality of healthcare delivery, reduce costs, ensure appropriate revenue, pay claims accurately, and support compliance. We accomplish those objectives by providing data services, analytics, and innovative technologies that address the healthcare industry’s complex challenges. In 2015, we continued to enhance our product offerings for significant healthcare growth markets and to expand our current market footprint and reach. Risk Adjustment Accuracy When the Affordable Care Act was introduced in 2013, it provided a framework for risk-adjusted marketplaces to allow individuals to enroll for private coverage. The Congressional Budget Office estimates that about 9.5 million people enrolled in coverage purchased through the Health Insurance Marketplace during 2015, with many of its enrollees newly insured. The Department of Health and Human Services (HHS) established marketplace provisions known as “the 3Rs”—reinsurance program, risk corridors, and risk-adjustment program—to remove health status from premium calculations, so neither individuals nor employer groups with a disproportionate number of higher-risk employees would be rate-disadvantaged. In 2015, Verisk Health delivered our new Commercial Risk Adjustment offering to Qualified Health Plans (QHPs) participating in the 2015 Health Insurance Marketplace. We developed this end-to-end solution using our expertise in Medicare Advantage risk adjustment to optimize the revenues of QHPs based on the risk in their patient populations. Using our in-depth domain expertise and proprietary Suspect Analytics, we assist clients in more precisely targeting, identifying, and ranking members with the highest probability of incomplete or missing diagnosis codes. Verisk Health also submits data on behalf of QHPs to calculate risk scores that measure an enrollee’s current health conditions and expected healthcare expenditures. HHS set a 90 percent submission rate target, and we achieved more than 95 percent for our clients, cementing our foothold in an emerging market. Healthcare Fraud, Waste, and Abuse Verisk Health helps healthcare payers detect and prevent fraud, waste, and abuse—a problem that costs the American healthcare system an estimated $900 billion annually. Our solutions cover the payment continuum, including real-time claims editing, expert clinical validation, healthcare and pharmacy fraud detection and prevention, and high-dollar claim review. In 2015, we developed the technology infrastructure and predictive analytics for our Antifraud Alliance—a unique data asset and the industry’s only consortium of its kind that aggregates data from participating health plans. The alliance now 16 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 16 3/15/16 10:42 PM houses data representing members and providers in all 50 states, with substantial penetration across 70 percent of those states. Nearly one in four providers across the nation (by National Provider Identifier or NPI Standard) is now being evaluated in the pooled data. By applying powerful predictive models and algorithms to this data, Verisk Health can identify suspicious patterns that would go undetected within the silo of a single payer’s data. Healthcare Quality As financial well-being becomes increasingly contingent upon quality, healthcare organizations are broadening and deepening the complexity and impact of their quality improvement programs. HEDIS® (Healthcare Effectiveness Data and Information Set) data is a key performance metric because it provides a foundation not only for the National Committee for Quality Assurance (NCQA) health plan rankings but also for many of the other quality programs in which payers and providers participate. Verisk Health has a commanding presence in the quality measurement and reporting market, due in part to its soft- ware’s ability to handle HEDIS, HEDIS-related, custom, and state-specific measures. In addition, integration with medical record retrieval and abstraction services establishes Verisk Health as one of the industry’s only end-to-end quality improvement solutions. For 2015 HEDIS submissions, Verisk Health processed claims for approximately 40 percent of Americans who are members of plans that submit HEDIS quality metrics to NCQA. Our quality engine evaluated 22 billion clinical events to calculate metrics on behalf of our clients. Ten of Verisk Health’s HEDIS customers ranked in NCQA’s top 20 across commercial, Medicaid, and Medicare lines; and all customers passed the new mandatory medical record validation testing. Value-Based Care With the growth of the population health solutions market, our DxCG® Intelligence risk adjustment and predictive models—the core of all Verisk Health Population Health Analytics solutions—achieved an important milestone: two decades of use by payers, employers, providers, government agencies, academic research institutions, and others. Our client footprint is one of the largest and most diverse in the industry, including nearly 200 payer, employer, and provider contracts. As provider organizations bear increasing clinical and financial risk for populations, this market represents a significant growth opportunity. Healthcare | 17 94562 va16024 VeriskAnnual Text.indd 17 3/15/16 10:42 PM Supply Chain Intelligent Compliance Verisk business 3E Company provides software and services to help companies comply with government-mandated regulatory requirements throughout the product life cycle and supply chain. As regulations related to product safety and content disclosures become more stringent, companies require a clear view of the contents and origins of their raw materials and parts. Environmental Business Journal (EBJ) recognized 3E for the tenth consecutive year for its efforts to provide visibility into those obligations through relevant and unique data and powerful analytical tools. In 2015, 3E released 3EiQ, a new portal that offers customers streamlined access to several of our award-winning envi- ronmental regulatory compliance solutions. The new user- friendly portal provides a single access point to many 3E Company solutions and promotes a consistent user experi- ence across product lines. The launch of 3EiQ underscores 3E’s commitment to supporting businesses in their efforts to execute intelligent compliance strategies. The launch of the portal coincided with the release of a new version of the Ariel® WebInsight chemical regulatory compliance reference solution, which features innovative visualization capabilities and a customizable dashboard. The new version also offers access to additional industry-specific content for the personal care/cosmetics, food contact, and pharmaceuticals industries, supporting our continued content expansion into those important markets. 3E launched a new Regulatory Monitoring service as part of 3EiQ to provide customers with news and analysis on new and proposed regulations. The analysis of impending regulatory changes gives companies advance notice of their changing compliance obligations. The company also expanded its ArielLogic global food, beverage, and flavor regulatory compliance check tool. Enhancements include additional content for restricted and banned substances and hazard communication documen- tation. 3E introduced the first cloud-based data-loading application for the food and flavors industry to streamline content integration with internal systems. Also in 2015, 3E released a new version of 3E Online®-SDS, a web-based safety data sheet (SDS) management platform that facilitates compliance and safety for global enterprises. The enhancements improve accessibility and usefulness of critical compliance information throughout the organiza- tion. The platform recently won an ISHN (Industrial Safety & Hygiene News) Readers’ Choice Award for the second consecutive year. 18 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 18 3/15/16 10:42 PM The innovative Supply Chain Management Tool helps clients manage social and environmental risks. The company enhanced its 3ESC™ supply chain compliance solution with new topics that include material declarations for comprehensive compliance checks. The solution continued to provide customers with the ability to quickly identify risks in their supply chain. 3E released a new version of MSDgen®, an SDS and label- authoring system, with enhancements that streamline con- formance with global hazard communication initiatives. The company also continued to expand the scope of its outsourced authoring services, partnering with a multitude of multi- national organizations to develop compliant SDSs and labels. 3E continued to expand the scope of its diverse partner eco- system, announcing a new collaboration with Airsweb to promote seamless access to critical hazard communication documentation, substance-level regulatory content, and chemical regulatory data. In addition, 3E won the Content Partner of the Year category of the Enablon Excellence Awards for the second consecutive year as a result of its commitment to providing data services that offer benefits to customers, including greater global regulatory coverage, reduced costs, and mitigated risk. Supply Chain Risk Verisk Maplecroft, a leading provider of country and political risk analytics and advisory services, brings comprehensive data, analytics, and visualizations to Verisk’s risk management and supply chain portfolio. In 2015, the company continued to deliver thorough analyses of geopolitical, societal, human rights, economic, and environmental risks for countries and geographies worldwide. Increasingly stringent international laws, such as the Dodd- Frank Act, make it even more important for global businesses to retain transparency about risks associated with physical products. Verisk Maplecroft works with some of the world’s leading organizations to structure their approaches to respon- sible sourcing. The company advises at all stages of the process, including prescreening and conducting risk-based due diligence on new suppliers, understanding the risks and opportunities of doing business in various locations, and monitoring and mitigating risks across the supply chain. The Supply Chain Management Tool is one of Verisk Maplecroft’s most innovative resources to help customers meet responsible and strategic sourcing objectives. The tool helps businesses identify, prioritize, and monitor relevant risks across their global operations, supply chains, and dis- tribution networks—homing in on sites and suppliers that pose the highest risk to supply chain disruption or damage to corporate reputation. In 2015, we continued developing the Supply Chain Management Tool and enhanced it with commodity-specific risk scoring, enabling clients to manage challenging social and environmental risks embedded deep within their extended supply chains. We also enhanced our Business Continuity Management Tool and Human Rights Due Diligence Dashboard—an interactive tool that helps multinational companies assess, monitor, and manage areas of their value chain most at risk for human rights violations. Through collaboration with existing and potential clients, we focused on the areas of responsible and sustainable sourcing, human rights due diligence, and organizational resilience. By deeply integrating our solutions into our customer workflows, we ensure relevance, applicability, and alignment with our customers’ strategies and legal and regulatory requirements. We also made significant enhancements to our Global Alerts Dashboard, which provides global monitoring and alerts for operational and supply chain disruptions through a sub- national risk-mapping and data platform. We integrated existing near-real-time alerts for terrorism incidents, corpo- rate security, environmental risks, and legal and regulatory issues into a single client platform and completed the scoring of terrorism risk for 1,300 of the world’s key commercial centers and urban hubs. We also completed pilot work on predictive analytics to provide insight into supply chain disruption from a range of political risks. Verisk Maplecroft acquired new customers in our six focal sectors: extractives, consumer goods and retail, manufac- turing, information and communications technology, insurance, and finance. In 2016, we’ll continue to grow those customer segments and focus on areas of political risk, human rights, and the environment. We developed an integrated content strategy to increase the commercialization of our data, the foundation for a new product offering that we’re launching in the near future. And we improved the methodologies for 170 political, economic, human rights, and environmental risk indices, resulting in increased scoring objectivity and improved granularity and accuracy of the data. Supply Chain | 19 94562 va16024 VeriskAnnual Text.indd 19 3/15/16 10:42 PM Emerging Opportunities Wood Mackenzie has deep domain expertise and is a global leader across the natural resources value chain. Global Expansion Verisk Analytics continues to expand around the world. In 2015 alone, we increased our presence— through acquisitions, strategic collaborations, and other agreements—in Africa, Asia, Australia, Europe, North America, and South America. Verisk acquired Scotland-based Wood Mackenzie —a global leader in data analytics and commercial intelligence for the energy, chemicals, and metals and mining industries. The company’s more than 20 locations around the globe, including Argentina, Australia, Brazil, China, Denmark, India, Japan, Malaysia, Peru, Russia, Singapore, South Korea, and the United Kingdom, have helped Verisk advance its strategy to expand internationally in a short- ened time frame. Wood Mackenzie’s customers in more than 80 countries include international and national energy and metals companies, financial institutions, and governments. In 2015, Verisk introduced ISO Claims Outcome Advisor® in France; made significant advances in the global reinsurance and insurance-linked securities markets; and pursued opportunities for our claims management products in Canada, Hong Kong, Singapore, Turkey, and countries throughout Europe. Our Argus and Verisk Retail businesses launched in several new countries in Latin America, the Asia Pacific, and Europe. Xactware expanded into Germany with a new suite of claims solutions and added to its foot- print in Australia, Belgium, the Netherlands, and New Zealand. Xactware’s solutions help property insurance professionals in those countries reduce claims-handling costs and give insurers claims transparency and improvements in efficiency. Xactware also created localized building-cost rate schedules for Australia, France, and Germany. These highly localized schedules are based on extensive building-cost research and incorporate costs for the latest building materials and techniques. Property Claim Services® (PCS®) and Istanbul Underwriting Center launched PCS Turkey, offering catastrophe loss estimates for events in Turkey. Insured loss estimates cover natural and man-made catastrophes (with a designation threshold of $10 million) for the residential and commercial property and auto markets. PCS Turkey provides its full scope of services, includ- ing reports, catastrophe designation, survey and resurvey bulletins, and alerts. This significant launch will help improve how the Turkish insur- ance market manages catastrophe response, risk, and capital—enhancing customer service and shareholder value. PCS also entered into a strategic alliance with the Canadian Independent Adjusters’ Association (CIAA) to provide comprehensive resources and services to independent claims adjusters across Canada. Access to catastrophe loss information will help these adjusting firms plan for catastrophes and allocate resources more effectively, ultimately contributing to lower loss adjustment expenses. With nearly 40 international offices and customers that include the top ten global reinsurers and eight of the top ten leaders in global chemical manufacturing, Verisk is committed to an inter- national strategy to pursue strategic opportunities and vertical markets throughout the world. Science and Industry Atmospheric and Environmental Research (AER) is a leading source of research and services that enhance understanding of the environment and improve decision making in response to weather and climate risk. Customers include NASA, NOAA, and other U.S. civilian and defense agencies. 20 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 20 3/15/16 10:42 PM In 2015, AER led the development of an innovative method for analyzing future coastal floods due to sea level rise and tropical cyclone trends along the East Coast of the United States. This is the first time that scientists have performed a detailed combined analysis using those two factors. As busi- nesses and governments plan for climate change, this new technique is a significant contribution to projecting coastal flood risk. Along with the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, AER contributed to a land- mark study on the earth’s greenhouse gas effect—providing the first direct measurement of the earth’s increased green- house gas effect due to rising CO2 levels. Study results con- firmed theoretical predictions that today’s climate models correctly represent the effect of CO2 on the earth’s atmosphere. AER and Harris Corporation demonstrated a new system for 24/7 real-time measurement and mapping of CO2 emis- sions over the Paris, France, metropolitan area. During 2015, the system was also used to evaluate the effectiveness of carbon sequestration facilities in the United States— facilities that reduce CO2 emissions from coal- and gas-fired power plants and large industrial sources. AER scientists are among the recipients of a prestigious 2015 National Aeronautics and Space Administration (NASA) Group Achievement Award for their contributions to the NASA Langley ASCENDS CarbonHawk Experiment Simulator (ACES) program. The ASCENDS (Active Sensing of CO2 Emissions over Nights, Days, and Seasons) mission will give scientists enhanced data to study atmospheric car- bon sources, sinks, and transport—key factors in assessing changes in carbon emissions—and better understand, predict, and model climate change. AER also developed a flood model for the African Risk Capacity (ARC) agency. ARC will use the model to establish a sovereign insurance program for African nations with flood risks. Emerging Opportunities | 21 94562 va16024 VeriskAnnual Text.indd 21 3/15/16 10:42 PM Corporate Social Responsibility At Verisk Analytics, we’re committed to serving the long- term interests of our stakeholders by building a brand that’s recognized for its integrity and excellence, distinguished by its profitability and growth, and respected for its contribu- tion to the greater good. High aspirations require that we set high expectations for ourselves and our work. For Verisk, that translates to con- ducting our business with passion and integrity, acknowl- edging our environmental responsibility, developing an inspired workforce, and contributing professional expertise and financial support to organizations that benefit everyone. Our corporate social responsibility program spans four areas. Company Verisk is committed to the principles of The Verisk Way: to serve, add value, and innovate. Our unqualified commitment to business integrity guides our work within a responsible economic, societal, and environmental framework. Environment Verisk is committed to rightsizing our environmental footprint in our business operations, buildings, and auto- mobile fleet by implementing strategies to reduce energy consumption. People Verisk is committed to the well-being and professional growth of our people. Society Verisk is committed—locally and around the world—to provide financial support to like-minded organizations and support and volunteer in communities in which we work and live. Our actions ripple outward in ways that reflect continuous improvement. In 2015, we continued to expand our corporate social responsibility program with a number of initiatives that benefited customers, employees, shareholders, and communities. • We launched a greenhouse gas (GHG) emissions initiative to measure our global GHG footprint and recommend strategies to help the company manage its environmental impact. • We progressed toward the development of a supplier diversity program that will provide opportunities for increased participation by minority-, women-, and veteran-owned businesses in our procurement process. • Our 2015 Verisk Community Service Week gave employees around the world the opportunity to increase their involve- ment in local communities and promote workplace volunteerism. • Together, the company and its employees contributed nearly $500,000 to the Verisk Nepal Relief and Recovery Fund, helping our Nepalese colleagues and their families following the devastating earthquake in April 2015. And so many more… Visit www.verisk.com/csr and download the 2015 Verisk Corporate Social Responsibility Report to learn more. 22 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 22 3/15/16 10:42 PM ) R O F C I ( h c r a e s e R y r t s e r o F l a n o i t a n r e t n I r o f r e t n e C r o f T A C I / r e m a P l l i e N w a r e f i h S u l i i a h e B / d A r e t a W 94562 va16024 VeriskAnnual Text.indd 23 3/15/16 10:42 PM | 23 Corporate Leadership Corporate Leadership Scott G. Stephenson Chairman, President, and Chief Executive Officer Glenn McConnell Controller Mark V. Anquillare Group Executive and Chief Financial Officer Mark S. Magath Risk and Compliance Kenneth E. Thompson General Counsel and Corporate Secretary Vincent de P. McCarthy Corporate Development and Strategy Nana Banerjee Group Executive and Chief Analytics Officer Patrick McLaughlin Corporate Social Responsibility Nicholas Daffan Chief Information Officer Eva F. Huston Treasurer and Chief Knowledge Officer Christopher H. Perini Chief Marketing Officer Marlene P. Reisman Human Resources Board of Directors Scott G. Stephenson Chairman, President, and Chief Executive Officer Executive Committee Frank J. Coyne Lead Director Executive Committee (Chair) J. Hyatt Brown Brown & Brown, Inc. Finance and Investment Committee; Nominating and Corporate Governance Committee Christopher M. Foskett First Data Corporation Executive Committee; Audit Committee (Chair); Compensation Committee; Finance and Investment Committee Bruce E. Hansen ID Analytics (retired) Audit Committee John F. Lehman, Jr. J.F. Lehman & Co. Executive Committee; Compensation Committee (Chair); Nominating and Corporate Governance Committee Samuel G. Liss WhiteGate Partners, LLC Audit Committee; Finance and Investment Committee (Chair) Andrew G. Mills Archegos Capital Management Audit Committee; Finance and Investment Committee Thomas F. Motamed CNA Financial Corporation Audit Committee; Finance and Investment Committee Therese M. Vaughan Drake College of Business Audit Committee; Nominating and Corporate Governance Committee Constantine P. Iordanou Arch Capital Group Limited Executive Committee; Compensation Committee; Nominating and Corporate Governance Committee (Chair) David B. Wright Innovative Capital Ventures, Inc. Audit Committee; Compensation Committee 24 | Verisk Analytics 2015 Annual Report 94562 va16024 VeriskAnnual Text.indd 24 3/15/16 10:42 PM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 or ‘ 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) 545 Washington Boulevard Jersey City, NJ (Address of principal executive offices) 26-2994223 (I.R.S. Employer Identification No.) 07310-1686 (Zip Code) (201) 469-2000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock $.001 par value Name of each exchange on which registered NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Í Yes ‘ No Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ‘ Yes Í No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 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 Í Yes ‘ No to such filing requirements for the past 90 days. 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 Í Yes ‘ No for such shorter period that the registrant was required to submit and post such files). Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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. Í Large accelerated filer ‘ Smaller reporting company ‘ Non-accelerated filer ‘ Accelerated filer ‘ (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 Act). ‘ Yes Í No As of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $11,382,668,479 based on the closing price reported on the NASDAQ Global Select Market on such date. As of February 19, 2016, there were 168,034,463 shares outstanding of the registrant’s Common Stock, par value $.001. DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Part III of this annual report on Form 10-K is incorporated by reference to our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2015. INDEX PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Page 3 16 25 25 25 28 28 31 33 53 53 61 62 63 64 65 67 53 54 54 54 55 55 55 55 Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Exhibit 21.1 Exhibit 23.1 Exhibit 31.1 Exhibit 31.2 Exhibit 32.1 2 Unless the context otherwise indicates or requires, as used in this annual report on Form 10-K, references to “we,” “us,” “our” or the “Company” refer to Verisk Analytics, Inc. and its subsidiaries. In this annual report on Form 10-K, all dollar amounts are expressed in thousands, unless indicated otherwise. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Verisk Analytics, Inc., or Verisk, has made statements under the captions “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other sections of this annual report on Form 10-K that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors.” You should specifically consider the numerous risks outlined under “Risk Factors.” Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this annual report on Form 10-K to conform our prior statements to actual results or revised expectations. Item 1. Business Our Company PART I Verisk Analytics is a leading data analytics provider serving customers in insurance, natural resources, healthcare, financial services, government, and risk management. Using advanced technologies to collect and analyze billions of records, we draw on unique data assets and deep domain expertise to provide innovations that may be integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. In the United States and around the world, we help customers protect people, property, and financial assets. Our customers use our solutions to make better decisions about risk and opportunities with greater efficiency and discipline. We refer to these products and services as “solutions” due to the integration among our services and the flexibility that enables our customers to purchase components or the comprehensive package. These “solutions” take various forms, including data, expert insight, statistical models or tailored analytics, all designed to allow our clients to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs. In 2015, our customers included all of the top 100 Property and Casualty, or P&C, insurance providers in the U.S. for the lines of P&C services we offer, 29 of the top 30 credit card issuers in North America, the United Kingdom and Australia, as well as 9 of the top 10 health plan providers in the U.S. We also work with a wide range of companies, governments and institutions across the energy, metals and mining value chains. We believe that our commitment to our customers and the embedded nature of our solutions serve to strengthen and extend our relationships. 3 We believe that Verisk is uniquely positioned because of the set of distinctives-or competitive advantages-we cultivate and continue to expand. Our legacy businesses, in addition to new product innovations, integrate these four singular qualities into the foundation of our strategy. Our Distinctives • Unique Data Assets — Data is at the core of what we do. We use our proprietary data assets to develop predictive analytics and transformative models for our customers. • Deep Domain Expertise — We have specialized and in-depth knowledge in a number of defined vertical markets, including insurance, healthcare, energy, financial services, and risk management. We understand that different verticals require different approaches, and our deep domain expertise adds value to our analytics in the markets we serve. • Steady Stream of First-to-Market Innovations — We move quickly to be the first to market with new solutions. Generally speaking, the marketplace assumes that those that are first to market are superior to the competition and better positioned to succeed. • Deep Integration into Customer Workflows — By embedding our solutions into customer workflows, we help our customers better manage risk and optimize their bottom line. We achieve this goal by remaining closely connected to our customers at all times and serving their distinct needs. We offer our solutions and services primarily through annual subscriptions or long-term agreements, which are typically pre-paid and represented approximately 75% of our revenues in 2015. For the year ended December 31, 2015, we had revenues of $2,068.0 million and net income of $507.6 million. For the five year period ended December 31, 2015, our revenues and net income grew at a compound annual growth rate, or CAGR, of 14.8% and 15.8%, respectively. Our History We trace our history to 1971, when Insurance Services Office, Inc., or ISO, started operations as a not- for-profit advisory and rating organization providing services for the U.S. P&C insurance industry. ISO was formed as an association of insurance companies to gather statistical data and other information from insurers and report to regulators, as required by law. ISO’s original functions also included developing programs to help insurers define and manage insurance products and providing information to help insurers determine their own independent premium rates. Insurers used and continue to use our offerings primarily in their product development, underwriting and rating functions. Today, those businesses form the core of our Risk Assessment segment. Over the past two decades, we have transformed our business beyond its original functions by deepening and broadening our data assets, developing a set of integrated risk management solutions and services and addressing new markets through our Decision Analytics segment. Our expansion into analytics began when we acquired the American Insurance Services Group, or AISG, and certain operations and assets of the National Insurance Crime Bureau in 1997 and 1998, respectively. Those organizations brought to the company large databases of insurance claims, as well as expertise in detecting and preventing claims fraud. To further expand our Decision Analytics segment, we acquired AIR Worldwide, or AIR, in 2002, the technological leader in catastrophe modeling. In 2004, we entered the healthcare space by acquiring several businesses that now offer web-based analytical and reporting systems for health insurers, provider organizations and self-insured employers. In 2005, we entered the mortgage sector, acquiring the first of several businesses that provided automated fraud detection, compliance and decision support solutions for the U.S. mortgage industry, which we sold in March 2014. In 2006, to bolster our position in the insurance claims field we acquired Xactware, a leading supplier of estimating software for professionals involved in building repair and reconstruction. In 2010, we acquired 3E Company, creating a scale presence in supply chain and environmental health and safety. In 2011 and 2012, we further bolstered our healthcare solutions by acquiring Health Risk Partners, LLC, or HRP, which 4 provides solutions to optimize revenue, improve compliance and improve quality of care for Medicare Advantage health plans and MediConnect Global, Inc. or MediConnect, which provides medical record retrieval, digitization, coding, extraction, and analysis to the healthcare and property casualty industry. Also in 2012, we acquired Argus Information & Advisory Services, LLC, or Argus, to expand our presence in providing information, competitive benchmarking, analytics, and customized services to financial institutions in the payments space globally. In 2014, we acquired Maplecroft.Net Limited, or Maplecroft; as part of our risk management and supply chain solutions business, Maplecroft continues to deliver thorough analyses of geopolitical, societal, human rights, economic, and environmental risks for many countries in the world. In 2015, we acquired Wood Mackenzie Limited, or Wood Mackenzie, to advance our strategy to expand internationally and position us in the global energy market. These acquisitions have added scale, geographic reach, highly skilled workforces, and a wide array of new capabilities to our Decision Analytics segment. They have helped to make us a leading provider of information and decision analytics for customers involved in the business of risk in the U.S. and selectively around the world. On May 23, 2008, in contemplation of our initial public offering, or IPO, ISO formed Verisk Analytics, Inc., or Verisk, a Delaware corporation, to be the holding company for our business. Verisk was initially formed as a wholly-owned subsidiary of ISO. On October 6, 2009, in connection with our IPO, the Company effected a reorganization whereby ISO became a wholly-owned subsidiary of Verisk. Verisk common stock began trading on the NASDAQ Global Select Market on October 7, 2009 under the symbol “VRSK.” On October 1, 2010, we completed a follow-on public offering. We did not receive any proceeds from the sale of common stock in the offering. The primary purpose of the offering was to manage and organize the sale by Class B insurance company shareholders while providing incremental public float. Concurrently with the closing of the offering, we repurchased shares of common stock, for an aggregate purchase price of $192.5 million, directly from selling shareholders owning Class B common stock. We converted all Class B shares to Class A shares in 2011 and currently have no outstanding Class B shares. On May 26, 2015, we eliminated the separate classes of common stock, and as a result, Verisk Class A and Class B common stock were renamed common stock. Our senior management team, which includes our president and chief executive officer, chief financial officer, general counsel, and nine senior officers who lead our business and operational units, have been with us for an average of almost 15 years. This team has led our transformation to a successful for-profit entity, focused on growth with our U.S. P&C insurer customers and expansion into a variety of new vertical markets, including healthcare, financial services, and energy and specialized markets. Segments We organize our business in two segments: Risk Assessment and Decision Analytics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this annual report for additional information regarding our segments. See Note 18 of our consolidated financial statements included in this annual report on Form 10-K for further information. Risk Assessment Segment Our Risk Assessment segment serves our P&C insurance customers and focuses on prediction of loss and selection and pricing of risk. Within this segment, we also provide solutions to help our insurance customers comply with their reporting requirements in each U.S. state in which they operate. Our customers include most of the P&C insurance providers in the U.S. 5 Industry-Standard Insurance Programs We are the recognized leader in the U.S. for industry-standard insurance programs that help P&C insurers define coverages and issue policies. Our policy language, prospective loss cost information and policy writing rules can serve as integrated turnkey insurance programs for our customers. Insurance companies need to ensure that their policy language, rules, and rates comply with all applicable legal and regulatory requirements. Insurers must also make sure their policies remain competitive by promptly changing coverages in response to changes in statutes or case law. To meet their needs, we process and interface with state regulators in all 50 states plus the District of Columbia, Guam, Puerto Rico and the Virgin Islands approximately 2,800 regulatory filings each year ensuring smooth implementation of our rules and forms. When insurers choose to develop their own alternative programs, our industry-standard insurance programs also help regulators make sure that such insurers’ policies meet basic coverage requirements. Standardized coverage language, which has been tested in litigation and tailored to reflect judicial interpretation, helps to ensure consistent treatment of claimants. As a result, our industry-standard language also simplifies claim settlements and can reduce the occurrence of costly litigation, because our language causes the meaning of coverage terminology to become established and known. Our policy language includes standard coverage language, endorsements and policy writing support language that assist our customers in understanding the risks they assume and the coverages they are offering. With these policy programs, insurers also benefit from economies of scale. We have over 107 specialized lawyers and insurance experts reviewing changes in each state’s insurance rules and regulations, including on average over 16,000 legislative bills, 1,900 regulatory actions and 2,000 court cases per year, to make any required changes to our policy language and rating information. To cover the wide variety of risks in the marketplace, we offer a broad range of policy programs. For example, in the homeowner’s line of insurance, we maintain policy language and rules for 6 basic coverages, 261 national endorsements, and 602 state-specific endorsements. Overall, we provide policy language, prospective loss costs, policy writing rules, and a variety of other solutions for 26 lines of insurance. The P&C insurance industry is heavily regulated in the U.S. P&C insurers are required to collect statistical data about their premiums and losses and to report that data to regulators in every state in which they operate. Our statistical agent services have enabled P&C insurers to meet these regulatory requirements for over 40 years. We aggregate the data and, as a licensed or appointed “statistical agent” in all 50 states, Puerto Rico, and the District of Columbia, we report these statistics to insurance regulators. We are able to capture significant economies of scale given the level of penetration of this service within the U.S. P&C insurance industry. To provide our customers and the regulators the information they require, we maintain one of the largest private databases in the world. Over the past four decades, we have developed core expertise in acquiring, processing, managing, and operating large and comprehensive databases that are the foundation of our Risk Assessment segment. We use our proprietary technology to assemble, organize and update vast amounts of detailed information submitted by our customers. We supplement this data with publicly available information. Each year, P&C insurers send us approximately 3.4 billion detailed individual records of insurance transactions, such as insurance premiums collected or losses incurred. We maintain a database of over 19.0 billion statistical records, including approximately 7.8 billion commercial lines records and approximately 11.2 billion personal lines records. We collect unit-transaction detail of each premium and loss record, which enhances the validity, reliability and accuracy of our data sets and our actuarial analyses. Our proprietary quality process includes over 2,500 separate checks to ensure that data meet our high standards of quality. We provide actuarial services to help our customers analyze and price their risks. Using our large database of premium and loss data, our actuaries are able to perform sophisticated analyses using our predictive models and analytic methods to help our P&C insurance customers with pricing, loss reserving, and marketing. We distribute a number of actuarial solutions and offer flexible services to meet our customers’ needs. In addition, our actuarial consultants provide customized services for our clients that include assisting them with the development of independent insurance programs, analysis of their own underwriting experience, development of 6 classification systems and rating plans, and a wide variety of other business decisions. We also supply information to a wide variety of customers in other markets including reinsurance and government agencies. We project future losses and loss expenses utilizing a broad set of data. These projections tend to be more reliable than if our customers used solely their own data. We make a number of actuarial adjustments before the data is used to estimate future costs. Our customers can use our estimates of future costs in making independent decisions about the prices charged for their policies. For most P&C insurers, in most lines of business, we believe our estimates of future costs are an essential input to rating decisions. Our actuarial products and services are also used to create the analytics underlying our industry-standard insurance programs described above. Property-Specific Rating and Underwriting Information We gather information on individual properties and communities so that insurers can use our information to evaluate and price personal and commercial property insurance, as well as commercial liability insurance. Our property-specific rating and underwriting information allow our customers to understand, quantify, underwrite, mitigate, and avoid potential loss for commercial properties. Our database contains loss costs and other vital information on more than 3.6 million commercial buildings in the United States and also holds information on more than 6.4 million individual businesses occupying those buildings. We have a staff of more than 600 field representatives strategically located around the United States who observe and report on conditions at commercial and residential properties, evaluate community fire-protection capabilities and assess the effectiveness of municipal building-code enforcement. Each year, our field staff visits over 285,000 commercial properties to collect information on new buildings and verify building attributes. We also provide proprietary analytic measures of the ability of individual communities to mitigate losses from important perils. Nearly every property insurer in the U.S. uses our evaluations of community firefighting capabilities to help determine premiums for fire insurance throughout the country. We provide field-verified and validated data on the fire protection services for more than 47,000 fire response jurisdictions. We also offer services to evaluate the effectiveness of community enforcement of building codes and the efforts of communities to mitigate damage from flooding. Further, we provide information on the insurance rating territories, premium taxes, crime risk, and hazards of windstorm, earthquake, wildfire, and other perils. To supplement our data on specific commercial properties and individual communities, we have assembled, from a variety of internal and third-party sources, information on hazards related to geographic locations representing every postal address in the U.S. Insurers use this information not only for policy quoting but also for analyzing risk concentration in geographical areas. We also make our data and analytics available to commercial real estate lenders to allow them to better understand risks associated with people they lend against. Decision Analytics Segment In the Decision Analytics segment, we develop predictive models to forecast scenarios and produce both standard and customized analytics that help our customers better manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying losses. The businesses are categorized by the primary vertical end market for their services. As we develop our models, our ability to provide value to our customers is enhanced by our solutions, which are constantly recalibrated by refreshed data of actual events. These unique data sets, combined with our deep industry expertise, provide us significant competitive advantage over our competitors Insurance We are a leading provider of fraud-detection tools for the P&C insurance industry. Our fraud solutions improve our customers’ profitability by both predicting the likelihood that fraud is occurring and detecting suspicious activity after it has occurred. When a claim is submitted, our system searches our database and returns information about other claims filed by the same individuals or businesses (either as claimants or insurers) which helps our customers determine if fraud has occurred. The system searches for matches in identifying information 7 fields, such as name, address, Social Security number, vehicle identification number, driver’s license number, tax identification number, or other parties to the loss. Our system also includes advanced name and address searching to perform intelligent searches and improve the overall quality of the matches. Information from match reports speeds payment of meritorious claims while providing a defense against fraud and can lead to denial of a claim, negotiation of a reduced award or further investigation by the insurer or law enforcement. We have a comprehensive system used by claims adjusters and investigations professionals to process claims and fight fraud. Claims databases are one of the key tools in the fight against insurance fraud. The benefits of a single all-claims database include improved efficiency in reporting data and searching for information, enhanced capabilities for detecting suspicious claims and superior information for investigating fraudulent claims, suspicious individuals and possible fraud rings. Our database contains information on approximately 1.1 billion claims and is the world’s largest database of P&C claims information used for claims and investigations. Insurers and other participants submit new claims, more than 197,000 a day on average, across all categories of the U.S. P&C insurance industry. We also provide an expert scoring system that helps distinguish between suspicious and meritorious claims; and products that use link-analysis technology to help visualize and fight insurance fraud. We pioneered the field of probabilistic catastrophe modeling used by insurers, reinsurers and financial institutions to manage their catastrophe risk. Our models of global natural hazards, which form the basis of our solutions, enable companies to identify, quantify and plan for the financial consequences of catastrophic events. We have developed models, covering natural hazards, including hurricanes, earthquakes, winter storms, tornadoes, hailstorms, and flood, for potential loss events in more than 100 countries. We have also developed and introduced a probabilistic terrorism model capable of quantifying the risk in the U.S. from this emerging threat, which supports pricing and underwriting decisions down to the level of an individual policy. We also provide data, analytic and networking products for professionals involved in estimating all phases of building repair and reconstruction. We provide solutions for every phase of a building’s life, including: • • • quantifying the ultimate cost of repair or reconstruction of damaged or destroyed buildings; aiding in the settlement of insurance claims; and tracking the process of repair or reconstruction and facilitating communication among insurers, adjusters, contractors and policyholders. To help our customers estimate repair costs, we provide a solution that assists contractors and insurance adjusters to estimate repairs using a patented plan-sketching program. The program allows our customers to sketch floor plans, roof plans and wall-framing plans and automatically calculates material and labor quantities for the construction of walls, floors, footings and roofs. We also offer our customers access to wholesale and retail price lists, which include structural repair and restoration pricing for 468 separate economic areas in North America. We revise this information monthly and, in the aftermath of a major disaster, we can update the price lists as often as weekly to reflect rapid price changes. Our structural repair and cleaning database contains more than 21,000 unit-cost line items. For each line item such as smoke cleaning, water extraction and hazardous cleanup, we report time and material pricing, including labor, labor productivity rates (for new construction and restoration), labor burden and overhead, material costs, and equipment costs. We improve our reported pricing data by several methods including direct market surveys and an analysis of the actual claims experience of our customers. We estimate that about 80% of insurance repair contractors and service providers in the U.S. and Canada with computerized estimating systems use our building and repair pricing data. Utilization of such a large percentage of the industry’s claims leads to accurate reporting of pricing information, which we believe is unmatched in the industry. Our estimates allow our customers to set loss reserves, deploy field adjusters and verify internal company estimates. Our estimates also keep insurers, their customers, regulators, and other interested parties informed about the total costs of disasters. We also provide our customers access to daily reports on severe weather and catastrophes and we maintain a database of information on catastrophe losses in the U.S. since 1950. 8 Financial Services We focus on providing competitive benchmarking, scoring solutions, analytics, and customized services to financial services institutions in North and South America and Europe. We maintain the most comprehensive de-personalized direct observation consortia data sets for the payments industry. We leverage this consortia data and provide proprietary solutions and information that enable clients to achieve higher profitability and growth through enhanced marketing and risk management decisions. We have deployed unique technology to manage vast data sets efficiently and manage vast amount of payments data. We offer services and a suite of solutions to a client base that includes credit and debit card issuers, retail banks and other consumer financial services providers, payment processors, insurance companies, and other industry stakeholders. Our professionals have substantial industry knowledge in providing solutions to the financial services sector. We are known for our unique ability to blend the highly technical, data-centered aspects of our projects with expert communication and business knowledge. Our solutions enhance our clients’ ability to manage their businesses profitably and position them better to handle present day challenges (competitive, regulatory, and economic). Specifically, we use comprehensive transaction, risk, behavioral, and bureau-sourced account data to assist clients in making better business decisions through analysis and analytical solutions. We maintain a comprehensive and granular direct observation database for credit card, debit card, and deposit transactions in the industry. Healthcare We offer payment accuracy solutions that help healthcare claims payors detect fraud, abuse and overpayment. Our approach combines computer-based modeling and profiling of claims with analysis performed by clinical experts. We run our customers’ claims through our proprietary analytic system to identify potential fraud, abuse and overpayment, and then a registered nurse, physician or other clinical specialist skilled in coding and reimbursement decisions reviews all suspect claims and billing patterns. This combination of system and human review is unique in the industry and we believe offers improved accuracy for paying claims. We analyze the patterns of claims produced by individual physicians, physicians’ practices, hospitals, dentists, and pharmacies to locate sources of fraud. After a suspicious source of claims is identified, our real-time analytic solutions investigate each claim individually for particular violations, including upcoding, multiple billings, services claimed but not rendered, and billing by unlicensed providers. By finding the individual claims with the most cost-recovery potential and also minimizing the number of false-positive indications of fraud, we enable the special investigation units of healthcare payors to efficiently control their claims costs while maintaining high levels of customer service to their insureds. We also offer web-based reporting tools that let payors take definitive action to prevent overpayments or payment of fraudulent claims. The tools provide the documentation that helps to identify, investigate and prevent abusive and fraudulent activity by providers. We provide enterprise analytics and reporting systems to health insurers, provider organizations and self- insured employers. Those organizations use our healthcare business intelligence solutions to review their data, including information on claims, membership, providers and utilization, and provide cost trends, forecasts and actuarial, financial and utilization analyses. For example, our solutions allow our customers to predict medical costs and improve the financing and organization of health services. Our predictive models help our customers identify high-cost cases for care-and disease-management intervention, compare providers adjusting for differences in health, predict resource use for individuals and populations, establish health-based and performance-based payments, negotiate payments and incentives, negotiate premium rates, and measure return on investment. We also provide our customers healthcare services using complex clinical analyses to uncover reasons behind cost and utilization increases. Physicians and hospitals are adopting and acquiring new technologies, drugs and devices more rapidly than ever before. We provide financial and actuarial analyses, clinical, technical and implementation services and training services to help our customers manage costs and risks to their practices. We are a provider of solutions for revenue & quality intelligence and compliance for certain aspects of the healthcare industry. We have systems, including our revenue integrity business, which analyze Medicare data 9 for compliance with CMS (Centers for Medicare & Medicaid Services) guidelines, assist payers in payment integrity, data collection, and encounter data submission. By using our ReconEdge™, a web-based risk adjustment reconciliation system, healthcare payers can assess their organizations’ opportunities and compliance in payments. In addition, we offer proprietary systems and services that facilitate the aggregation, retrieval, coding, and analysis of medical records. We have a repository of medical records that are digitized, indexed, and securely hosted online. We use custom-built, proprietary technology to deliver medical records from facilities and provider locations. Our clients can access the clinical data through a cloud-based workflow management system. We are also a provider of HEDIS® (Healthcare Effectiveness Data and Information Set) software solutions. Our solution suite allows managed care organizations to calculate and submit HEDIS results to NCQA (National Committee for Quality Assurance), improve quality in covered populations, and reduce administrative overhead associated with quality reporting. Energy and Specialized Markets As a result of our acquisition of Wood Mackenzie in 2015, we are a provider of industry standard commercial analytics for the global energy, chemicals and metals and mining industries. We provide comprehensive and integrated coverage of relevant commodities across these interconnected sectors. We have gathered proprietary information, insight and analysis on thousands of oil and gas fields, mines, refineries and other assets, as well as detailed assessments of the market fundamentals across each value chain. Our experts analyze the data and work directly with customers to address their business challenges. Our diverse customer base includes international and national energy companies, as well as chemicals, metals and mining companies, financial institutions and governments. We help businesses and governments better anticipate and manage climate-and weather-related risks. We prepare certain agencies and companies to anticipate, manage, react to and profit from weather and climate- related risk. We serve our clients by providing state-of-the-art research, development and analysis delivered in reports, databases and software solutions. We are dedicated to the advancement of scientific understanding of the atmospheric, climate and weather, ocean, and planetary sciences. Through research conducted by our in-house scientific staff, and often in collaboration with world-renowned scientists at academic and other research institutions, we have developed analytical tools to help measure and observe the properties of the environment and to translate these measurements into useful information to take action. We also offer a comprehensive suite of data and information services that enables improved compliance with global Environmental Health & Safety, or EH&S requirements related to the safe manufacturing, distribution, transportation, usage and disposal of chemicals and products. From the supply chain or solutions lifecycle, we deliver a program specific to the EH&S compliance information and management needs of our customers. We have a full solutions lifecycle and cross-supply chain approach that provide a single, integrated solution for managing EH&S capabilities, resulting in reduced cost, risk and liability while improving process. Our Growth Strategy Over the past five years, we have grown our revenues at a CAGR of 14.8% through the successful execution of our business plan. These results reflect strong organic revenue growth, new product development and acquisitions. We have made, and continue to make, investments in people, data sets, analytic solutions, technology, and complementary businesses. The key components of our strategy include: Increase Solution Penetration with Customers. We expect to expand the application of our solutions in insurance customers’ internal risk and underwriting processes. Building on our deep knowledge of, and embedded position in, the insurance industry, we expect to sell more solutions to existing customers tailored to individual insurance segments. By increasing the breadth and relevance of our offerings, we believe we can strengthen our relationships with customers and increase our value to their decision making in critical ways. We also have opportunities to expand solution penetration in our health and financial services customers. 10 Develop New, Proprietary Data Sets and Predictive Analytics. We work with our customers to understand their evolving needs. We plan to create new solutions by enriching our mix of proprietary data sets, analytic solutions and effective decision support across the markets we serve. We constantly seek to add new data sets that can further leverage our analytic methods, technology platforms and intellectual capital. Leverage Our Intellectual Capital to Expand into Adjacent Markets and New Customer Sectors. Our organization is built on over four decades of intellectual property in risk management. We believe we can continue to profitably expand the use of our intellectual capital and apply our analytic methods in new markets, where significant opportunities for long-term growth exist. We also continue to pursue growth through targeted international expansion. We have already demonstrated the effectiveness of this strategy with our expansion into healthcare and non-insurance financial services. Pursue Strategic Acquisitions that Complement Our Leadership Positions. We will continue to expand our data and analytics capabilities across industries. While we expect this will occur primarily through organic growth, we have and will continue to acquire assets and businesses that strengthen our value proposition to customers. We have developed an internal capability to source, evaluate and integrate acquisitions that have created value for shareholders. Our Customers Risk Assessment Customers The customers in our Risk Assessment segment for the lines of P&C services we offer include the top 100 P&C insurance providers in the United States, as well as insurers in international markets. Our statistical agent services are used by a substantial majority of P&C insurance providers in the U.S. to report to regulators. Our actuarial services and industry-standard insurance programs are used by the majority of insurers and reinsurers in the U.S. In addition, certain agencies of the federal government, as well as county and state governmental agencies and organizations, use our solutions to help satisfy government needs for risk assessment and emergency response information. Decision Analytics Customers In the Decision Analytics segment, we provide our P&C insurance solutions to the majority of the P&C insurers in the U.S. Specifically, our claims database serves thousands of customers, representing over 90% of the P&C insurance industry by premium volume, 27 state workers’ compensation insurance funds, 570 self- insurers, 410 third-party administrators, several state fraud bureaus, and many law-enforcement agencies involved in investigation and prosecution of insurance fraud. We estimate that about 80% of insurance repair contractors and service providers in the U.S. and Canada with computerized estimating systems use our building and repair pricing data. In the U.S. healthcare industry, our customers include 9 of the top 10 health plan providers. Our customers included 29 of the top 30 credit card issuers in North America, the United Kingdom and Australia. We also work with a wide range of companies, governments and institutions across the energy, metals and mining value chains. Our Competitors We believe no single competitor currently offers the same scope of services and market coverage we provide. The breadth of markets we serve exposes us to a broad range of competitors as described below. Businesses that we acquire may introduce us to additional competitors. Risk Assessment Competitors Our Risk Assessment segment operates primarily in the U.S. P&C insurance industry, where we enjoy a leading market presence. We have a number of competitors in specific lines or services. 11 We encounter competition from a number of sources, including insurers who develop internal technology and actuarial methods for proprietary insurance programs. Competitors also include other statistical agents, including the National Independent Statistical Service, the Independent Statistical Service and other advisory organizations, providing underwriting rules, prospective loss costs and coverage language such as the American Association of Insurance Services and Mutual Services Organization, although we believe none of our competitors has the breadth or depth of data we have. Competitors for our property-specific rating and underwriting information are primarily limited to a number of regional providers of commercial property inspections and surveys, including Overland Solutions, Inc. and Regional Reporting, Inc. We also compete with a variety of organizations that offer consulting services, primarily specialty technology and consulting firms. In addition, a customer may use its own internal resources rather than engage an outside firm for these services. Our competitors also include information technology product and services vendors, management and strategy consulting firms including Deloitte Consulting LLP, and smaller specialized information technology firms and analytical services firms including Pinnacle Consulting and EMB, a unit of Towers Watson. Decision Analytics Competitors In the P&C insurance claims market and catastrophe modeling market, certain products are offered by a number of companies, including Risk Management Solutions (catastrophe modeling) and CoreLogic (property replacement value ), LexisNexis Risk Solutions (loss histories and motor vehicle records for personal lines underwriting), Solera (personal automobile underwriting) and Simbility. We believe that our P&C insurance industry expertise, combined with our ability to offer multiple applications, services and integrated solutions to individual customers, enhances our competitiveness against these competitors with more limited offerings. In the healthcare market, certain products are offered by a number of companies, including ViPS, Inc., OptumInsight, McKesson, Truven Health Analytics, Inovalon, and iHealth (healthcare predictive modeling and business intelligence). Competitive factors include application features and functions, ease of delivery and integration, ability of the provider to maintain, enhance and support the applications or services and price. In the natural resource commercial intelligence market, certain products are offered by a number of companies, including IHS (natural resources), Rystad (upstream), Global Data (upstream), PIRA (oil and gas markets) and CRU (metals). We believe that our global integrated value chain knowledge and insight, bottom-up proprietary data, and long term trusted relationships developed over the years enhance our competitiveness against these companies. Development of New Solutions We take a market-focused team approach to developing our solutions. Our operating units are responsible for developing, reviewing and enhancing our various products and services. Our data management and production team designs and manages our processes and systems for market data procurement, proprietary data production and quality control. Our Joint Development Environment, or JDE, and Enterprise Data Management, or EDM, teams support our efforts to create new information and products from available data and explores new methods of collecting data. EDM is focused on understanding and documenting business-unit and corporate data assets and data issues; sharing and combining data assets across the enterprise; creating an enterprise data strategy; facilitating research and product development; and promoting cross-enterprise communication. Our Verisk Innovative Analytics, or VIA, team is a corporate center of excellence for analytical methods in applying modeling techniques to predict risk outcomes. Our software development teams build the technology used in many of our solutions. As part of our product-development process, we continually solicit feedback from our customers on the value of our products and services and the market’s needs. We have established an extensive system of customer advisory panels, which meet regularly throughout the year to help us respond effectively to the needs of our markets. In addition, we use frequent sales calls, executive visits, user group meetings, and other industry forums to gather information to match the needs of the market with our product development efforts. We also use a variety of market research techniques to enhance our understanding of our clients and the markets in which they operate. 12 We also add to our offerings through an active acquisition program. Since 2011, we have acquired twelve businesses, which have allowed us to enter new markets, offer new solutions and enhance the value of existing services with additional proprietary sources of data. When we find it advantageous, we augment our proprietary data sources and systems by forming alliances with other leading information providers and technology companies and integrating their product offerings into our offerings. This approach gives our customers the opportunity to obtain the information they need from a single source and more easily integrate the information into their workflows. Sales, Marketing and Customer Support We sell our products and services primarily through direct interaction with our clients. We employ a three-tier sales structure that includes salespeople, product specialists and sales support. As of December 31, 2015, we had a sales force of 325 people. Within the company, several areas have sales teams that specialize in specific products and services. These specialized sales teams sell specific, highly technical product sets to targeted markets in coordination with account management. To provide account management to our largest customers, we segment the insurance carrier market into three groups. Tier One or “National” Accounts constitutes our largest customers, Tier Two or “Strategic” Accounts represents both larger carrier groups and middle-market carriers. Tier Three are the small insurance companies that may represent one line of business and/or be one-state or regional writers. A Sales Generalist is assigned to every insurer account and is responsible for our overall relationship with these insurance companies. Our senior executives are also involved with the senior management of our customers. Sales people participate in both customer-service and sales activities. They provide direct support, interacting frequently with assigned customers to assure a positive experience using our services. Salespeople primarily seek out new sales opportunities and work with the various sales teams to coordinate sales activity and provide the best solutions for our customers. We believe our salespeople’s product knowledge and local presence differentiates us from our competition. Product specialists are subject-matter experts and work with salespeople on specific opportunities for their assigned products. Both salespeople and product specialists have responsibility for identifying new sales opportunities. A team approach and a common customer relationship management system allow for effective coordination between the two groups. Sources of our Data The data we use to perform our analytics and power our solutions are sourced through seven different kinds of data arrangements. First, we gather data from our customers within agreements that also permit our customers to use the solutions created upon their data. These agreements remain in effect unless the data contributor chooses to opt out and represent our primary method of data gathering. It is very rare that contributors elect not to continue providing us data. Second, we have agreements with data contributors in which we specify the particular uses of their data and provide to the data contributors their required levels of privacy, protection of data and where necessary de-identification of data. These agreements represent no cost to us and generally feature a specified period of time for the data contributions and require renewal. Third, we “mine” data found inside the transactions supported by our solutions; as an example, we utilize the claims settlement data generated inside our repair cost estimating solution to improve the cost factors used in our models. Again, these arrangements represent no cost to us and we obtain the consent of our customers to make use of their data in this way. Fourth, we source data generally at no cost from public sources including federal, state and local governments. Fifth, we gather data about the physical characteristics of commercial properties through the direct observation of our field staff that also perform property surveys at the request of, and facilitated by, property insurers. Sixth, we purchase data from data aggregators under contracts that reflect prevailing market pricing for the data elements purchased, including county tax assessor records, descriptions of hazards such as flood plains and professional licenses. Lastly, we retrieve medical records from facilities and provider locations at prevailing 13 market prices under agreements between our insurer customers and their provider networks. In all our modes of data collection, we are the owners of whatever derivative solutions we create using the data. Our costs for data received from our customers were 1.0% and 1.2% of revenues for the years ended December 31, 2015 and 2014, respectively. Information Technology Technology Our information technology systems are fundamental to our success. They are used for the storage, processing, access and delivery of the data which forms the foundation of our business and the development and delivery of our solutions provided to our clients. Much of the technology we use and provide to our customers is developed, maintained and supported by approximately 1,631 employees. We generally own or have secured ongoing rights to use for the purposes of our business all the customer-facing applications which are material to our operations. We support and implement a mix of technologies, focused on implementing the most efficient technology for any given business requirement or task. Data Centers We have two primary data centers in Somerset, New Jersey and Lehi, Utah creating redundancy and back-up capabilities. In addition, we have data centers dedicated to certain business units located in other states. Disaster Recovery We are committed to a framework for business continuity management and carry out annual reviews of the state of preparedness of each business unit. All of our critical databases, systems and contracted client services are also regularly recovered. We also have documented disaster recovery plans in place for each of our major data centers and each of our solutions. Our primary data center recovery site is in New York State, approximately 50 miles northwest of Jersey City, New Jersey. Security We have adopted a wide range of measures to ensure the security of our IT infrastructure and data. Security measures generally cover the following key areas: physical security; logical security of the perimeter; network security such as firewalls; logical access to the operating systems; deployment of virus detection software; and appropriate policies and procedures relating to removable media such as laptops. All laptops are encrypted and media leaving our premises that is sent to a third-party storage facility is also encrypted. This commitment has led us to achieve certification from CyberTrust (an industry leader in information security certification) since 2002. Intellectual Property We own a significant number of intellectual property rights, including copyrights, trademarks, trade secrets and patents. Specifically, our policy language, insurance manuals, software and databases are protected by both registered and common law copyrights, and the licensing of those materials to our customers for their use represents a large portion of our revenue. We also own in excess of 500 trademarks in the U.S. and foreign countries, including the names of our products and services and our logos and tag lines, many of which are registered. We believe many of our trademarks, trade names, service marks and logos to be of material importance to our business as they assist our customers in identifying our products and services and the quality that stands behind them. We consider our intellectual property to be proprietary, and we rely on a combination of statutory (e.g., copyright, trademark, trade secret and patent) and contractual safeguards in a comprehensive intellectual property enforcement program to protect them wherever they are used. 14 We also own several software method and processing patents and have several pending patent applications in the U.S. that complement our products. The patents and patent applications include claims which pertain to technology, including a patent for our Claims Outcome Advisor software, and for our Xactware Sketch product. We believe the protection of our proprietary technology is important to our success and we will continue to seek to protect those intellectual property assets for which we have expended substantial research and development capital and which are material to our business. In order to maintain control of our intellectual property, we enter into license agreements with our customers, granting each customer a license to use our products and services, including our software and databases. This helps to maintain the integrity of our proprietary intellectual property and to protect the embedded information and technology contained in our solutions. As a general practice, employees, contractors and other parties with access to our proprietary information sign agreements that prohibit the unauthorized use or disclosure of our proprietary rights, information and technology. Employees As of December 31, 2015, we employed 7,647 full-time and 271 part-time employees. None of our employees are represented by unions. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements. Our employees include over 170 actuarial professionals, including 35 Fellows and 24 Associates of the Casualty Actuarial Society, as well as 139 Chartered Property Casualty Underwriters, 17 Certified and 15 Associate Insurance Data Managers, and 592 professionals with advanced degrees, including PhDs in mathematics and statistical modeling who review both the data and the models. Regulation Because our business involves the distribution of certain personal, public and non-public data to businesses and governmental entities that make eligibility, service and marketing decisions based on such data, certain of our solutions and services are subject to regulation under federal, state and local laws in the United States and, to a lesser extent, foreign countries. Examples of such regulation include the Fair Credit Reporting Act, which regulates the use of consumer credit report information; the Gramm-Leach-Bliley Act, which regulates the use of non-public personal financial information held by financial institutions and applies indirectly to companies that provide services to financial institutions; the Health Insurance Portability and Accountability Act, which restricts the public disclosure of patient information and applies indirectly to companies that provide services to healthcare businesses; the Drivers Privacy Protection Act, which prohibits the public disclosure, use or resale by any state’s department of motor vehicles of personal information about an individual that was obtained by the department in connection with a motor vehicle record, except for a “permissible purpose”, and various other federal, state and local laws and regulations. These laws generally restrict the use and disclosure of personal information and provide consumers certain rights to know the manner in which their personal information is being used, to challenge the accuracy of such information and/or to prevent the use and disclosure of such information. In certain instances, these laws also impose requirements for safeguarding personal information through the issuance of data security standards or guidelines. Certain state laws impose similar privacy obligations, as well as obligations to provide notification of security breaches in certain circumstances. We are also licensed as a rating, rate service, advisory or statistical organization under state insurance codes in all fifty states, Puerto Rico, Guam, the Virgin Islands and the District of Columbia. As such an advisory organization, we provide statistical, actuarial, policy language development and related products and services to property/casualty insurers, including advisory prospective loss costs, other prospective cost information, manual rules and policy language. We also serve as an officially designated statistical agent of state insurance regulators to collect policy-writing and loss statistics of individual insurers and compile that information into reports used by the regulators. 15 Many of our products, services and operations as well as insurer use of our services are subject to state rather than federal regulation by virtue of the McCarran-Ferguson Act. As a result, many of our operations and products are subject to review and/or approval by state regulators. Furthermore, our operations involving licensed advisory organization activities are subject to periodic examinations conducted by state regulators and our operations and products are subject to state antitrust and trade practice statutes within or outside state insurance codes, which are typically enforced by state attorneys general and/or insurance regulators. Available Information We maintain an Investor Relations website on the Internet at investor.verisk.com. We make available free of charge, on or through this website, our annual, quarterly, and current reports and any amendments to those reports as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC. To access these, click on the “Financial Information” — “SEC Filings” link found on our Investor Relations homepage. Verisk trades on the NASDAQ Global Select Market under the ticker symbol “VRSK.” Our stock was first publicly traded on October 7, 2009. The public may read and copy any materials filed by Verisk with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Item 1A. Risk Factors You should carefully consider the following risks and all of the other information set forth in this annual report on Form 10-K before deciding to invest in any of our securities. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our securities including our common stock could decline due to any of these risks, and you may lose all or part of your investment. We could lose our access to data from external sources which could prevent us from providing our solutions. We depend upon data from external sources, including data received from customers and various government and public record services, for information used in our databases. In general, we do not own the information in these databases, and the participating organizations could discontinue contributing information to the databases. Our data sources could withdraw or increase the price for their data for a variety of reasons, and we could also become subject to legislative, judicial, or contractual restrictions on the use of such data, in particular if such data is not collected by the third parties in a way which allows us to legally use and/or process the data. In addition, some of our customers are significant stockholders of our company. Specifically, a portion of common stock is owned by insurers who are also our customers. If our customers’ percentage of ownership of our common stock decreases in the future, there can be no assurance that our customers will continue to provide data to the same extent or on the same terms. If a substantial number of data sources, or certain key sources, were to withdraw or be unable to provide their data, or if we were to lose access to data due to government regulation or if the collection of data became uneconomical, our ability to provide solutions to our customers could be impacted, which could materially adversely affect our business, reputation, financial condition, operating results and cash flows. Agreements with our data suppliers are short-term agreements. Some suppliers are also competitors, which may make us vulnerable to unpredictable price increases and may cause some suppliers not to renew certain agreements. Our competitors could also enter into exclusive contracts with our data sources. If our competitors enter into such exclusive contracts, we may be precluded from receiving certain data from these 16 suppliers or restricted in our use of such data, which would give our competitors an advantage. Such a termination or exclusive contracts could have a material adverse effect on our business, financial position, and operating results if we were unable to arrange for substitute sources. We derive a substantial portion of our revenues from U.S. P&C primary insurers. If there is a downturn in the U.S. insurance industry or that industry does not continue to accept our solutions, our revenues will decline. Revenues derived from solutions we provide to U.S. P&C primary insurers account for a substantial portion of our total revenues. During the year ended December 31, 2015, approximately 44% of our revenue was derived from solutions provided to U.S. P&C primary insurers. Also, invoices for certain of our solutions are linked in part to premiums in the U.S. P&C insurance market, which may rise or fall in any given year due to loss experience and capital capacity and other factors in the insurance industry beyond our control. In addition, our revenues will decline if the insurance industry does not continue to accept our solutions. Factors that might affect the acceptance of these solutions by P&C primary insurers include the following: • • • • • • • changes in the business analytics industry; changes in technology; our inability to obtain or use state fee schedule or claims data in our insurance solutions; saturation of market demand; loss of key customers; industry consolidation; and failure to execute our customer-focused selling approach. A downturn in the insurance industry, pricing pressure or lower acceptance of our solutions by the insurance industry could result in a decline in revenues from that industry and have a material adverse effect on our financial condition, results of operations and cash flows. Acquisitions could result in operating difficulties, dilution and other harmful consequences, and we may not be successful in achieving growth through acquisitions. Our long-term business strategy includes growth through acquisitions. Future acquisitions may not be completed on acceptable terms and acquired assets, data or businesses may not be successfully integrated into our operations, and we may ultimately divest unsuccessful acquirees. Any acquisitions or investments will be accompanied by the risks commonly encountered in acquisitions of businesses. Such risks include, among other things: • • • • failing to implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies; paying more than fair market value for an acquired company or assets; failing to integrate the operations and personnel of the acquired businesses in an efficient, timely manner; assuming potential liabilities of an acquired company; • managing the potential disruption to our ongoing business; • distracting management focus from our core businesses; 17 • • • • • • • failing to retain management at acquired company; difficulty in acquiring suitable businesses, including challenges in predicting the value an acquisition will ultimately contribute to our business; possibility of overpaying for acquisitions, particularly those with significant intangible assets that derive value using novel tools and/or are involved in niche markets; impairing relationships with employees, customers, and strategic partners; incurring expenses associated with the amortization of intangible assets particularly for intellectual property and other intangible assets; incurring expenses associated with an impairment of all or a portion of goodwill and other intangible assets due to changes in market conditions, weak economies in certain competitive markets, or the failure of certain acquisitions to realize expected benefits; and diluting the share value and voting power of existing stockholders. The anticipated benefits of many of our acquisitions may not materialize. Future acquisitions or dispositions could result in the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill and other intangible assets, any of which could harm our financial condition. We typically fund our acquisitions through our debt facilities. Although we have capacity under committed facilities, those may not be sufficient. Therefore, future acquisitions may require us to obtain additional financing through debt or equity, which may not be available on favorable terms or at all and would result in dilution. In addition, to the extent we cannot identify or consummate, on terms acceptable to us, acquisitions that are complementary or otherwise attractive to our business, we may experience difficulty in achieving future growth. There may be consolidation in our end customer market, which would reduce the use of our services. Mergers or consolidations among our customers could reduce the number of our customers and potential customers. This could adversely affect our revenues even if these events do not reduce the aggregate number of customers or the activities of the consolidated entities. If our customers merge with or are acquired by other entities that are not our customers, or that use fewer of our services, they may discontinue or reduce their use of our services. The adverse effects of consolidation will be greater in sectors that we are particularly dependent upon, for example, in the P&C insurance and healthcare services sector. Any of these developments could materially and adversely affect our business, financial condition, operating results and cash flows. If we are unable to develop successful new solutions or if we experience defects, failures and delays associated with the introduction of new solutions, our business could suffer serious harm. Our growth and success depends upon our ability to develop and sell new solutions. If we are unable to develop new solutions, or if we are not successful in introducing and/or obtaining regulatory approval or acceptance for new solutions, or products we develop face sufficient pricing pressure to make them unattractive to pursue, we may not be able to grow our business, or growth may occur more slowly than we anticipate. In addition, significant undetected errors or delays in new solutions may affect market acceptance of our solutions and could harm our business, financial condition or results of operations. In the past, we have experienced delays while developing and introducing new solutions, primarily due to difficulties in developing models, acquiring data and adapting to particular operating environments. Errors or defects in our solutions that are significant, or are perceived to be significant, could result in rejection of our solutions, damage to our reputation, loss of revenues, diversion of development resources, an increase in product liability claims, and increases in service and support costs and warranty claims. 18 We will continue to rely upon proprietary technology rights, and if we are unable to protect them, our business could be harmed. Our success depends, in part, upon our intellectual property rights. To date, we have relied primarily on a combination of copyright, patent, trade secret, and trademark laws and nondisclosure and other contractual restrictions on copying and distribution to protect our proprietary technology. This protection of our proprietary technology is limited, and our proprietary technology could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Business we acquire also often involve intellectual property portfolios, which increase the challenges we face in protecting our strategic advantage. Any disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact our competitive position, and ultimately, our business. Our protection of our intellectual property rights in the United States or abroad may not be adequate and others, including our competitors, may use our proprietary technology without our consent. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of resources and could harm our business, financial condition, results of operations and cash flows. We could face claims for intellectual property infringement, which if successful could restrict us from using and providing our technologies and solutions to our customers. There has been substantial litigation and other proceedings, particularly in the United States, regarding patent and other intellectual property rights in the information technology industry. There is a risk that we are infringing, or may in the future infringe, the intellectual property rights of third parties. We monitor third-party patents and patent applications that may be relevant to our technologies and solutions and we carry out freedom to operate analysis where we deem appropriate. However, such monitoring and analysis has not been, and is unlikely in the future to be, comprehensive, and it may not be possible to detect all potentially relevant patents and patent applications. Since the patent application process can take several years to complete, there may be currently pending applications, unknown to us, that may later result in issued patents that cover our products and technologies. As a result, we may infringe existing and future third-party patents of which we are not aware. As we expand our operations there is a higher risk that such activity could infringe the intellectual property rights of third parties. Third-party intellectual property infringement claims and any resultant litigation against us or our technology partners or providers, could subject us to liability for damages, restrict us from using and providing our technologies and solutions or operating our business generally, or require changes to be made to our technologies and solutions. Even if we prevail, litigation is time consuming and expensive to defend and would result in the diversion of management’s time and attention. If a successful claim of infringement is brought against us and we fail to develop non-infringing technologies and solutions or to obtain licenses on a timely and cost effective basis, this could materially and adversely affect our business, reputation, financial condition, operating results and cash flows. Regulatory developments could negatively impact our business. Because personal, public and non-public information is stored in some of our databases, we are vulnerable to government regulation and adverse publicity concerning the use of our data. We provide many types of data and services that already are subject to regulation under the Fair Credit Reporting Act, Gramm- Leach-Bliley Act, Driver’s Privacy Protection Act, Health Insurance Portability and Accountability Act, the European Union’s Data Protection Directive, the Dodd Frank Wall Street Reform and Consumer Protection Act and to a lesser extent, various other federal, state, and local laws and regulations. These laws and regulations are designed to protect the privacy of the public and to prevent the misuse of personal information in the marketplace. However, many consumer advocates, privacy advocates, and government regulators believe that the existing laws and regulations do not adequately protect privacy. They have become increasingly concerned with 19 the use of personal information, particularly social security numbers, department of motor vehicle data and dates of birth. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors. Similar initiatives are under way in other countries in which we do business or from which we source data. The following legal and regulatory developments also could have a material adverse effect on our business, financial position, results of operations or cash flows: • • • • amendment, enactment, or interpretation of laws and regulations which restrict the access and use of personal information and reduce the supply of data available to customers; changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions; failure of our solutions to comply with current laws and regulations; and failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner. Fraudulent or unpermitted data access and other security or privacy breaches may negatively impact our business and harm our reputation. Security breaches in our facilities, computer networks, and databases may cause harm to our business and reputation and result in a loss of customers. Our systems may be vulnerable to physical break-ins, computer viruses, attacks by hackers and similar disruptive problems. Third-party contractors also may experience security breaches involving the storage and transmission of proprietary information. If users gain improper access to our databases, they may be able to steal, publish, delete or modify confidential third-party information that is stored or transmitted on our networks. In addition, customers’, employees’ or other’s misuse of and/or gaining unpermitted access to or failure to properly secure our information or services could cause harm to our business and reputation and result in loss of customers. Any such misappropriation and/or misuse of or failure to properly secure our information could result in us, among other things, being in breach of certain data protection and related legislation. A security or privacy breach may affect us in the following ways: deterring customers from using our solutions; deterring data suppliers from supplying data to us; harming our reputation; exposing us to liability; increasing operating expenses to correct problems caused by the breach; affecting our ability to meet customers’ expectations; and/or causing inquiry from governmental authorities. • • • • • • • Incidents in which consumer data has been fraudulently or improperly acquired or viewed, or any other security or privacy breaches, may occur and could go undetected. The number of potentially affected consumers identified by any future incidents is obviously unknown. Any such incident could materially and adversely affect our business, reputation, financial condition, operating results and cash flows. We typically face a long selling cycle to secure new contracts that requires significant resource commitments, which result in a long lead time before we receive revenues from new relationships. We typically face a long selling cycle to secure a new contract and there is generally a long preparation period in order to commence providing the services. We typically incur significant business development expenses during the selling cycle and we may not succeed in winning a new customer’s business, in which case we receive no revenues and may receive no reimbursement for such expenses. Even if we succeed in developing 20 a relationship with a potential new customer, we may not be successful in obtaining contractual commitments after the selling cycle or in maintaining contractual commitments after the implementation cycle, which may have a material adverse effect on our business, results of operations and financial condition. We may lose key business assets, including loss of data center capacity or the interruption of telecommunications links, the internet, or power sources, which could significantly impede our ability to do business. Our operations depend on our ability, as well as that of third-party service providers to whom we have outsourced several critical functions, to protect data centers and related technology against damage from hardware failure, fire, flood, power loss, telecommunications failure, impacts of terrorism, breaches in security (such as the actions of computer hackers), natural disasters, or other disasters. Certain of our facilities are located in areas that could be impacted by coastal flooding, earthquakes or other disasters. The on-line services we provide are dependent on links to telecommunications providers. In addition, we generate a significant amount of our revenues through telesales centers and websites that we utilize in the acquisition of new customers, fulfillment of solutions and services and responding to customer inquiries. We may not have sufficient redundant operations to cover a loss or failure in all of these areas in a timely manner. Certain of our customer contracts provide that our on-line servers may not be unavailable for specified periods of time. Any damage to our data centers, failure of our telecommunications links or inability to access these telesales centers or websites could cause interruptions in operations that materially adversely affect our ability to meet customers’ requirements, resulting in decreased revenue, operating income and earnings per share. We are subject to competition in many of the markets in which we operate and we may not be able to compete effectively. Some markets in which we operate or which we believe may provide growth opportunities for us are highly competitive, and are expected to remain highly competitive. We compete on the basis of quality, customer service, product and service selection and price. Our competitive position in various market segments depends upon the relative strength of competitors in the segment and the resources devoted to competing in that segment. Due to their size, certain competitors may be able to allocate greater resources to a particular market segment than we can. As a result, these competitors may be in a better position to anticipate and respond to changing customer preferences, emerging technologies and market trends. In addition, new competitors and alliances may emerge to take market share away, and as we enter into new lines of business, due to acquisition or otherwise, we face competition from new players with different competitive dynamics. We may be unable to maintain our competitive position in our market segments, especially against larger competitors. We may also invest further to upgrade our systems in order to compete. If we fail to successfully compete, our business, financial position and results of operations may be adversely affected. To the extent the availability of free or relatively inexpensive information increases, the demand for some of our solutions may decrease. Public sources of free or relatively inexpensive information have become increasingly available recently, particularly through the Internet, and this trend is expected to continue. Governmental agencies in particular have increased the amount of information to which they provide free public access. Public sources of free or relatively inexpensive information may reduce demand for our solutions. To the extent that customers choose not to obtain solutions from us and instead rely on information obtained at little or no cost from these public sources, our business and results of operations may be adversely affected. Our senior leadership team is critical to our continued success and the loss of such personnel could harm our business. Our future success substantially depends on the continued service and performance of the members of our senior leadership team. These personnel possess business and technical capabilities that are difficult to replace. Members of our senior management operating team have been with us for an average of almost 15 years. 21 However, we do not have employee contracts with the members of our senior management operating team. If we lose key members of our senior management operating team, we may not be able to effectively manage our current operations or meet ongoing and future business challenges, and this may have a material adverse effect on our business, results of operations and financial condition. We may fail to attract and retain enough qualified employees to support our operations, which could have an adverse effect on our ability to expand our business and service our customers. Our business relies on large numbers of skilled employees and our success depends on our ability to attract, train and retain a sufficient number of qualified employees. If our attrition rate increases, our operating efficiency and productivity may decrease. We compete for employees not only with other companies in our industry but also with companies in other industries, such as software services, engineering services and financial services companies, and there is a limited pool of employees who have the skills and training needed to do our work. If our business continues to grow, the number of people we will need to hire will increase. We will also need to increase our hiring if we are not able to maintain our attrition rate through our current recruiting and retention policies. Increased competition for employees could have an adverse effect on our ability to expand our business and service our customers, as well as cause us to incur greater personnel expenses and training costs. We are subject to antitrust, consumer protection and other litigation, and may in the future become subject to further such litigation; an adverse outcome in such litigation could have a material adverse effect on our financial condition, revenues and profitability. We participate in businesses (particularly insurance-related businesses and services) that are subject to substantial litigation, including antitrust and consumer protection litigation. In addition, our insurance specialists are in the business of providing advice on standard contract terms, which if challenged could expose us to substantial reputational harm and possible liability. We are subject to the provisions of a 1995 settlement agreement in an antitrust lawsuit brought by various state Attorneys General and private plaintiffs which imposes certain constraints with respect to insurer involvement in our governance and business. We currently are defending against putative class action lawsuits in which it is alleged that certain of our subsidiaries unlawfully have conspired with insurers with respect to their payment of insurance claims. See “Item 3. Legal Proceedings.” Our failure to successfully defend or settle such litigation could result in liability that, to the extent not covered by our insurance, could have a material adverse effect on our financial condition, revenues and profitability. Given the nature of our business, we may be subject to similar litigation in the future. Even if the direct financial impact of such litigation is not material, settlements or judgments arising out of such litigation could include further restrictions on our ability to conduct business, including potentially the elimination of entire lines of business, which could increase our cost of doing business and limit our prospects for future growth. General economic, political and market forces and dislocations beyond our control could reduce demand for our solutions and harm our business. The demand for our solutions may be impacted by domestic and international factors that are beyond our control, including macroeconomic, political and market conditions, the availability of short-term and long-term funding and capital, the level and volatility of interest rates, currency exchange rates and inflation. The United States economy recently experienced periods of contraction and both the future domestic and global economic environments may continue to be less favorable than those of prior years. Any one or more of these factors may contribute to reduced activity and prices in the securities markets generally and could result in a reduction in demand for our solutions, which could have an adverse effect on our results of operations and financial condition. A significant additional decline in the value of assets for which risk is transferred in market transactions could have an adverse impact on the demand for our solutions. 22 If there are substantial sales of our common stock, our stock price could decline. The market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market, or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem attractive. As of December 31, 2015, our ten largest shareholders owned 38.3% of our common stock including 5.7% of our common stock owned by our Employee Stock Ownership Plan or ESOP. Such stockholders are able to sell their common stock in the public market from time to time without registration, and subject to limitations on the timing, amount and method of those sales imposed by securities laws. If any of these stockholders were to sell a large number of their common stock, the market price of our common stock could decline significantly. In addition, the perception in the public markets that sales by them might occur could also adversely affect the market price of our common stock. Pursuant to our equity incentive plans, options to purchase approximately 9,057,243 shares of common stock were outstanding as of February 19, 2016. We filed a registration statement under the Securities Act, which covers the shares available for issuance under our equity incentive plans (including for such outstanding options) as well as shares held for resale by our existing stockholders that were previously issued under our equity incentive plans. Such further issuance and resale of our common stock could cause the price of our common stock to decline. Also, in the future, we may issue our securities in connection with investments and acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding common stock. Our capital structure, level of indebtedness and the terms of anti-takeover provisions under Delaware law and in our amended and restated certificate of incorporation and bylaws could diminish the value of our common stock and could make a merger, tender offer or proxy contest difficult or could impede an attempt to replace or remove our directors. We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our certificate of incorporation and bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable or make it more difficult for stockholders to replace directors even if stockholders consider it beneficial to do so. Our certificate of incorporation and bylaws: • • • • • • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares to thwart a takeover attempt; prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors; require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office; limit who may call special meetings of stockholders; prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of the stockholders; and establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. In addition, Section 203 of the Delaware General Corporation Law may inhibit potential acquisition bids for us. As a public company, we are subject to Section 203, which regulates corporate acquisitions and limits the 23 ability of a holder of 15.0% or more of our stock from acquiring the rest of our stock. Under Delaware law, a corporation may opt out of the anti-takeover provisions, but we do not intend to do so. These provisions may prevent a stockholder from receiving the benefit from any premium over the market price of our common stock offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future. We incurred substantial additional indebtedness in connection with the acquisition of Wood Mackenzie. On May 19, 2015, we consummated the acquisition of Wood Mackenzie (the “Acquisition”). In order to finance the Acquisition, we incurred $2,180.0 million of indebtedness. As of December 31, 2015, we had total consolidated indebtedness of approximately $3,168.0 million, and our leverage ratio (debt to EBITDA) increased from 1.57x at March 31, 2015 to 2.89x. Our increased leverage resulting from the Acquisition could adversely affect our business. In particular, it could increase our vulnerability to sustained, adverse macroeconomic weakness, limit our ability to obtain further financing and limit our ability to pursue certain operational and strategic opportunities. The increased leverage, potential lack of access to financing and increased expenses could have a material adverse effect on our financial condition, results of operations and cash flows. We may not realize the expected benefits of the Acquisition. We may fail to realize all the expected benefits of the Acquisition or successfully integrate Wood Mackenzie’s operations or preserve its customers and employees in an efficient or timely manner. The necessity of coordinating geographically separated organizations, systems and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. This integration effort may also distract our management’s focus from our existing core businesses or impair our existing relationships with employees, customers and our strategic partners. We may not be able to achieve the targeted operating or long-term strategic benefits of the Acquisition or could incur higher transition costs. An inability to realize the full extent of, or any of, the anticipated benefits of the Acquisition, as well as any delays encountered in the integration process or an inability to integrate the operations of the two companies could have a material adverse effect on our financial condition, results of operations and cash flows. General economic uncertainties, including downward trends in the energy industry, could reduce demand by Wood Mackenzie’s customers for its products and services. Demand for Wood Mackenzie’s products and services may be negatively influenced by general economic uncertainties, particularly any downward trends in the energy industry. Many factors could negatively affect the revenues, profits and discretionary spending of Wood Mackenzie’s customers. Such factors include commodity prices (in particular, oil and coal), the state of the local economy, interest rates, currency exchange rates, political uncertainty or restrictions and regulations, the availability of industry resources and other matters. A downturn or perceived downturn in the economy, particularly the energy industry, could add pricing pressure, delay subscription renewals or lead to more challenging or protracted fee negotiations or generally lower acceptance of our solutions by Wood Mackenzie’s customers, which could cause a decline in our revenues and have a material adverse effect on our financial condition, results of operations and cash flows. Our operations are subject to additional risks inherent in international operations. Wood Mackenzie is based in the United Kingdom and conducts its principal operations outside the United States. As a result, the percentage of our revenues generated outside of the United States has increased materially. Conducting extensive international operations subjects us to risks that are inherent in international operations, including challenges posed by different pricing environments and different forms of competition; lack of familiarity and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs and other barriers; unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom 24 duties or other trade restrictions; differing technology standards; difficulties in collecting accounts receivable; difficulties in managing and staffing international operations; varying expectations as to employee standards; potentially adverse tax consequences, including possible restrictions on the repatriation of earnings; and reduced or varied protection for intellectual property rights in some countries. Moreover, international operations could be interrupted and negatively affected by economic changes, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war and other economic or political uncertainties. All of these risks could result in increased costs or decreased revenues, either of which could have a material adverse effect on our financial condition, results of operations and cash flows. We are subject to the increased risk of exchange rate fluctuations. The revenues and costs of Wood Mackenzie are primarily denominated in pound sterling. As a result of the Acquisition, we face greater exposure to movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. Our operating results could be negatively affected depending on the amount of revenue and expense denominated in foreign currencies. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when remeasured in U.S. dollars, may differ materially from expectations. Although we may apply certain strategies to mitigate foreign currency risk, these strategies may not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. Item 1B. Unresolved Staff Comments Not Applicable. Item 2. Properties Our headquarters are in Jersey City, New Jersey. As of December 31, 2015, our principal offices consisted of the following properties: Location Square Feet Lease Expiration Date Jersey City, New Jersey . . . . . . . . . . . . . . . Lehi, Utah . . . . . . . . . . . . . . . . . . . . . . . . . . South Jordan, Utah . . . . . . . . . . . . . . . . . . . Boston, Massachusetts . . . . . . . . . . . . . . . . Draper, Utah . . . . . . . . . . . . . . . . . . . . . . . . 352,765 200,000 105,605 69,806 66,880 December 31, 2033 January 31, 2024 August 31, 2025 November 30, 2020 November 30, 2022 We also lease offices in 16 states in the United States, and offices outside the United States to support our international operations in Argentina, Australia, Bahrain, Brazil, Canada, China, Denmark, Germany, India, Indonesia, Israel, Japan, Kazakhstan, Malaysia, Nepal, Nigeria, Russia, Singapore, South Africa, South Korea, Spain, United Arab Emirates and the United Kingdom. We believe that our properties are in good operating condition and adequately serve our current business operations. We also anticipate that suitable additional or alternative space, including those under lease options, will be available at commercially reasonable terms for future expansion. Item 3. Legal Proceedings We are party to legal proceedings with respect to a variety of matters in the ordinary course of business, including those matters described below. With respect to the ongoing matters, we are 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 our 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 25 completed. Although we believe we have strong defenses and intend to vigorously defend these matters, we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations, financial position or cash flows. Intellicorp Records, Inc. Litigation On September 9, 2015, we were served with a nationwide putative class action complaint filed in the Court of Common Pleas, Cuyahoga County in Ohio naming the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp.”) titled Sherri Legrand v. Intellicorp Records, Inc. and The Cato Corporation et al. Defendants removed the case to the United States District Court for the Northern District of Ohio on October 8, 2015. Plaintiffs filed their First Amended Class Action Complaint on November 5, 2015 (“Amended Complaint”), which like the prior complaint claims violations of the Fair Credit Reporting Act and alleges two putative class claims against Intellicorp, namely (i) a section 1681k(a) claim on behalf of all individuals who were the subjects of consumer reports furnished by Intellicorp which contained public record information in the “Government Sanctions” section of the report on or after September 4, 2013 and continuing through the date the class list is prepared and (ii) a section 1681e(b) claim on behalf of all individuals who were the subjects of consumer reports furnished by Intellicorp which contained public record information in the “Government Sanctions” section of the report where the address or social security number of the subject of the report do not match the social security number or address contained in the government database on or after September 4, 2013 and continuing through the date the class list is prepared. Count I of the Amended Complaint alleges that defendant Cato violated the FCRA by procuring consumer reports on the plaintiff and other class members without making the stand-alone disclosure required by FCRA section 1681b(b)(2)(A)(i). Counts II and III allege that Intellicorp violated the FCRA section 1681e (b) by failing to follow reasonable procedures to assure maximum accuracy of the adverse information included in its consumer reports and FCRA section 1681k (a) by failing to maintain strict procedures to assure that the public record information reported which was likely to have an adverse effect on the consumer was complete and up to date, respectively. The Amended Complaint alleges that defendants acted willfully and seeks statutory damages for the classes in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, equitable relief, 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 February 1, 2016, we were served with a nationwide putative class action complaint filed in the United States District Court for the Eastern District of North Carolina naming the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp.”) The complaint titled Frank DiSalvo v. Intellicorp Records, Inc. claims violations of the Fair Credit Reporting Act and alleges a section 1681b(b)(1) claim on behalf of all individuals residing in the United States who were the subjects of consumer reports furnished by Intellicorp for employment purposes within the period prescribed by the FCRA, 15 U.S.C. Section 1681p without first obtaining from the user of the report a certification that such user had complied with the obligations under Section 1681b(b)(2) as to the subject of the consumer report. The class complaint alleges that Intellicorp violated the FCRA section 1681b(b)(1) by failing to obtain the required specific certification from its customers to whom Intellicorp furnished consumer reports as to each consumer report provided before providing the specific consumer report that was the subject of the certification. The complaint alleges that the violations were willful or in the alternative negligent and 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, equitable relief, 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. Xactware Solutions, Inc. Patent Litigation On October 8, 2015, we were served with a summons and complaint in an action titled Eagle View Technologies, Inc. and Pictometry International Group, Inc. v. Xactware Solutions, Inc. and Verisk Analytics, Inc. filed in the United States District Court for the District of New Jersey. The complaint alleges that the 26 Company’s Roof InSight, Property InSight and Aerial Sketch products infringe seven patents owned by Eagle View and Pictometry namely, Patent Nos. 436, 840, 152, 880, 770, 732 and 454 (collectively the “Patents-in- Suit.”) On November 30, 2015, plaintiffs filed a First Amended Complaint (“Amended Complaint”) adding Patent Nos. 376 and 737 to the Patents in Suit. The Amended Complaint seeks an entry of judgment by the Court that defendants have and continue to directly infringe and/or indirectly infringe, by way of inducement the Patents in Suit, permanent injunctive relief, damages, 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. Interthinx, Inc. Litigation On April 20, 2015, we were served with a putative class action titled John Weber v. Interthinx, Inc. and Verisk Analytics, Inc. The plaintiff, a former employee of the Company’s former subsidiary Interthinx, Inc. in Missouri, filed the class action complaint in the United States District Court for the Eastern District of Missouri on behalf of all review appraisers and individuals holding comparable positions with different titles who were employed by Interthinx for the last three years nationwide and who were not paid overtime wages. The class complaint claims that the review appraiser 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 a Collective Action under section 216(b) of the Fair Labor Standards Act for unpaid overtime and seeks overtime wages, liquidated damages, declaratory relief, interest, costs and attorneys’ fees. On March 11, 2014, we sold 100 percent of the stock of Interthinx, Inc. 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, we were 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., arises from MediConnect’s buyout of Naveen Trehan and his family members’ shares on October 15, 2010. Plaintiff claims that the sale of the shares was based on MediConnect’s representations concerning third parties that had expressed interest in an acquisition, merger or investment in MediConnect at that time. Plaintiff claims that MediConnect did not disclose the Company, which purchased MediConnect on March 23, 2012, as a possible suitor. The complaint 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 recoveries 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. On November 2, 2015, the court issued a judgement in favor of the defendants and dismissed all claims with prejudice. Plaintiff filed a Notice of Appeal on November 30, 2015. At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter. 27 Insurance Services Office, Inc. Litigation On August 1, 2014, we were served with an Amended Complaint filed in the United States District Court for the District of Colorado titled Snyder, et. al. v. ACORD Corp., et al. The action is brought by nineteen individual plaintiffs, on their own behalf and on behalf of a putative class, against more than 120 defendants, including us and our subsidiary, Insurance Services Office, Inc. (“ISO”). Except for us, ISO and the defendant Acord Corporation, which provides standard forms to assist in insurance transactions, most of the other defendants are property and casualty insurance companies that plaintiffs claim conspired to underpay property damage claims. Plaintiffs claim that we and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law. On September 8, 2014, the Court entered an Order striking the Amended Complaint and granting leave to the plaintiffs to file a new complaint. On October 13, 2014, plaintiffs filed their Second Amended Complaint, which was re-filed by plaintiffs to correct errors as the Third Amended Complaint. The Third Amended Complaint similarly alleges that the defendants conspired to underpay property damage claims, but does not specifically allege what role we or ISO played in the alleged conspiracy. It claims that we and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law, and seeks all available relief including, injunctive, statutory, actual and punitive damages as well as attorneys’ fees. On January 15, 2016, the court granted defendants’ motions to dismiss all claims asserted in the Third Amended Complaint and plaintiffs filed a Motion for Reconsideration on February 16, 2016 At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter. On February 19, 2016, we were served with a notice of a summons and complaint filed on January 29, 2016 against our subsidiary Insurance Services Office, Inc. (“ISO”) in the U.S. District Court for the District of Connecticut titled Halloran et al. v. Harleysville Preferred Insurance Co. et al. The putative class action is brought on behalf of four policyholders and similarly situated policyholders in Eastern Connecticut who complain that their homeowner’s insurance carriers denied their claims for the deterioration and collapse of their foundations caused by defective concrete. The lawsuit alleges a breach of contract claim against insurers Harleysville, Nationwide and Kemper and an anticipatory breach of contract claim against insurer MetLife. It also alleges that ISO as the drafter of the standardized policy language at issue participated with over 100 insurance companies to deny claims for defective concrete and collapsed foundations and violated the Connecticut Unfair Trade Practices (CUTPA) and the Connecticut Unfair Insurance Practices Act (CUIPA). The plaintiffs ask that the Court certify a class of persons similarly situated and seek recovery from over 100 insurance carriers equal to the cost for the replacement of their concrete foundations, injunctive relief, attorneys’ fees, costs and interest. At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter. Item 4. Mine Safety Disclosures Not Applicable. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of PART II Equity Securities Market Information Verisk trades under the ticker symbol “VRSK” on the NASDAQ Global Select Market. Our common stock was first publicly traded on October 7, 2009. As of February 19, 2016, the closing price of our common stock was $67.95 per share, as reported by the NASDAQ Global Select Market. As of February 19, 2016, there 28 were approximately 38 stockholders of record. We believe the number of beneficial owners is substantially greater than the number of record holders for, because a large portion of common stock is held in “street name” by brokers. We have not paid or declared any cash dividends on our common stock during the two most recent fiscal years and we currently do not intend to pay dividends on our common stock. We do have a publicly announced share repurchase plan and have repurchased 46,310,780 shares since our IPO. As of December 31, 2015, we had 374,578,057 shares of treasury stock. The following table shows the quarterly range of the closing high and low per share sales prices for our common stock as reported by the NASDAQ Global Select Market for the years ending December 31: Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First Quarter $81.50 $78.60 $76.85 $72.27 $69.03 $70.77 $71.53 $62.70 $65.15 $64.77 $61.79 $66.05 $59.07 $59.42 $56.55 $59.87 2015 2014 High Low High Low Performance Graph The graph below compares the cumulative total stockholder return on $100 invested in our common stock, with the cumulative total return (assuming reinvestment of dividends) on $100 invested in each of the NASDAQ Composite Index, S&P 500 Index, an aggregate of peer issuers in the information industry used in last year’s statement, and a new group of aggregate of peer issuers in the information industry. The Company has selected a new peer group to include a broader selection of peer companies because of acquisitions and dispositions within Company’s lines of business. In this transition year, the table and the graph below include both the prior and new indices of peer companies. The prior peer issuers used for this graph are Dun & Bradstreet Corporation, Equifax Inc., Factset Research Systems Inc., Fair Isaac Corporation, IHS Inc, Morningstar, Inc., MSCI Inc., and Solera Holdings, Inc. The new peer issuers used for this graph are Equifax Inc., Factset Research Systems Inc., IHS Inc, MSCI Inc., Moody’s Corporation, McGraw Hill Financial, Inc., Nielsen Holdings plc, and Solera Holdings, Inc. Each peer issuer was weighted according to its respective market capitalization on December 31, 2010. COMPARISON OF CUMULATIVE TOTAL RETURN Assumes $100 Invested on December 31, 2010 Assumes Dividend Reinvested Fiscal Year Ended December 31, 2015 290 280 270 260 250 240 230 220 210 200 190 180 170 160 150 140 130 120 110 100 90 Dec -10 Jun -11 Dec -11 Jun -12 Dec -12 Jun -13 Dec -13 Jun -14 Dec -14 Jun -15 Dec -15 Verisk Analytics, Inc. S&P 500 Index - Total Returns NASDAQ Composite - Total Returns Peer Group Prior Peer Group 29 Recent Sales of Unregistered Securities There were no unregistered sales of equity securities by the Company during 2015. Issuer Purchases of Equity Securities Our board of directors has authorized a share repurchase program, or Repurchase Program, up to $2.3 billion, including an additional authorization of $300.0 million announced on December 1, 2015. As of December 31, 2015, $469.4 million remains available for share repurchases. Under the Repurchase Program, we may repurchase stock in the market or as otherwise determined by us. These authorizations have no expiration dates and may be suspended or terminated at any time. Our shares repurchased for the quarter ended December 31, 2015 are set forth below: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2015 through October 31, 2015 . . . . . . . . . November 1, 2015 through November 30, 2015 . . . . . December 1, 2015 through December 31, 2015 . . . . . — $ — $73.10 $73.98 248,153 31,300 279,453 (in thousands) $189,807 $171,667 $469,351 — 248,153 31,300 279,453 In connection with the accelerated share repurchase program, or ASR program, upon payment of the aggregate purchase price in December 2014, we received an initial delivery of 6,372,472 shares of common stock. Upon final settlement of the ASR agreement in June 2015, we received an additional 809,021 shares of common stock. 30 Item 6. Selected Financial Data The following selected historical financial data should be read in conjunction with, and are qualified by reference to, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10- K. The consolidated statement of operations data for the years ended December 31, 2015, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015 and 2014 are derived from the audited consolidated financial statements included elsewhere in this annual report on Form 10-K. The consolidated statement of operations data for the years ended December 31, 2012 and 2011 and the consolidated balance sheet data as of December 31, 2013, 2012 and 2011 are derived from consolidated financial statements that are not included in this annual report on Form 10-K. Results for the year ended December 31, 2015 are not necessarily indicative of results that may be expected in any other future period. Between January 1, 2011 and December 31, 2015, we acquired 12 businesses (most notably Wood Mackenzie on May 19, 2015), which may affect the comparability of our consolidated financial statements. Our consolidated financial statements have been retroactively adjusted in all periods presented to give recognition to the discontinued operations of our mortgage services business. The following table sets forth our statement of operations for the years ended December 31: Revenues: Decision Analytics . . . . . . . . . . . . . . . . . . . . . . . . $ 1,379,819 $ Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688,191 2,068,010 1,096,074 $ 650,652 1,746,726 977,427 $ 618,276 1,595,703 828,342 $ 579,506 1,407,848 639,100 552,293 1,191,393 2015 2014 2013 2012 2011 (In thousands, except for share and per share data) Expenses: Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . Depreciation and amortization of fixed assets . . . Amortization of intangible assets . . . . . . . . . . . . . Acquisition related liabilities adjustment(1) . . . .. Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income (expense): Investment income and others, net . . . . . . . . . . . . Gain on derivative instruments . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other expense, net Income before income taxes from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . Income from discontinued operations, net of 803,274 312,690 120,620 94,864 — 1,331,448 736,562 17,003 85,187 (121,316) (19,126) 717,436 (209,859) 507,577 716,598 227,306 85,506 56,870 — 1,086,280 660,446 158 — (69,984) (69,826) 622,523 228,982 66,190 63,741 — 981,436 614,267 609 — (76,136) (75,527) 516,708 220,068 46,637 52,207 — 835,620 572,228 106 — (72,508) (72,402) 440,979 199,495 40,135 32,985 (3,364) 710,230 481,163 879 — (53,847) (52,968) 590,620 (219,755) 370,865 538,740 (196,426) 342,314 499,826 (182,363) 317,463 428,195 (165,739) 262,456 tax(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ — 507,577 $ 29,177 400,042 $ 6,066 348,380 $ 11,679 329,142 $ 20,302 282,758 Basic net income per share Income from continuing operations . . . . . . . . . $ Income from discontinued operations . . . . . . . Basic net income per share . . . . . . . . . . . . . . $ Diluted net income per share Income from continuing operations . . . . . . . . . $ Income from discontinued operations . . . . . . . Diluted net income per share . . . . . . . . . . . . $ Weighted average sharesoutstanding: 3.07 $ — 3.07 $ 3.01 $ — 3.01 $ 2.24 $ 0.17 2.41 $ 2.20 $ 0.17 2.37 $ 2.04 $ 0.03 2.07 $ 1.99 $ 0.03 2.02 $ 1.91 $ 0.07 1.98 $ 1.85 $ 0.07 1.92 $ 1.58 0.12 1.70 1.51 0.12 1.63 Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,090,380 165,823,803 168,031,412 165,890,258 166,015,238 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,451,343 169,132,423 172,276,360 171,709,518 173,325,110 31 The financial operating data below sets forth the information we believe is useful for investors in evaluating our overall financial performance for the years ended December 31: 2015 2014 2013 2012 2011 (In thousands) Other data: EBITDA(3): Decision Analytics EBITDA . . . . . . . . . . . . . . . . . Risk Assessment EBITDA . . . . . . . . . . . . . . . . . . $ 647,738 406,498 $489,798 368,770 $413,342 346,931 $379,655 316,260 $305,837 287,050 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,054,236 $858,568 $760,273 $695,915 $592,887 The following is a reconciliation of net income to EBITDA: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization of fixed and intangible assets from continuing operations . . . . Interest expense from continuing operations . . . . . . Provision for income taxes from continuing $ 507,577 $400,042 $348,380 $329,142 $282,758 215,484 121,316 142,376 69,984 129,931 76,136 98,844 72,508 73,120 53,847 operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,859 219,755 196,426 182,363 165,739 Depreciation, amortization, interest and provision for income taxes from discontinued operations . . — 26,411 9,400 13,058 17,423 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,054,236 $858,568 $760,273 $695,915 $592,887 The following table sets forth our consolidated balance sheet data as of the years ended December 31: 2015 2014 2013 2012 2011 (In thousands) Balance Sheet Data: Cash and cash equivalents . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . Total debt(4) . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity (deficit)(5) . . . . . . . . . . $ 138,348 $5,615,927 $3,167,990 $1,372,011 $ 39,359 $2,345,330 $1,436,932 $ 211,043 $ 165,801 $2,504,451 $1,275,887 $ 547,589 $ 89,819 $2,360,336 $1,461,425 $ 255,591 $ 191,603 $1,541,106 $1,105,886 $ (98,490) (1) During the second quarter of 2011, we reevaluated the probability of D2Hawkeye and Strategic Analytics achieving the specified predetermined EBITDA and revenue targets for exceptional performance in fiscal year 2011 and reversed the contingent consideration related to these acquisitions. (2) On March 11, 2014, we sold our mortgage services business. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. As necessary, the amounts have been retroactively adjusted in all periods presented to give recognition to the discontinued operations. See Note 10 of our consolidated financial statements included in this annual report on Form 10-K. (3) EBITDA is the financial measure which management uses to evaluate the performance of our segments. “EBITDA” is defined as net income before interest expense, provision for income taxes, depreciation and amortization of fixed and intangible assets. Because EBITDA is calculated from net income, this presentation includes EBITDA from discontinued operations of our mortgage services business. In addition, this Management’s Discussion and Analysis includes references to EBITDA margin, which is computed as EBITDA divided by revenues from continuing and discontinued operations. See Note 18 of our consolidated financial statements included in this annual report on Form 10-K. Although EBITDA is a non-GAAP financial measure, EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our results of operations or cash 32 flow from operating activities reported under GAAP. Management uses EBITDA in conjunction with traditional GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are: • EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future and EBITDA does not reflect any cash requirements for such replacements; and • Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. (4) Includes capital lease obligations. (5) Subsequent to our corporate reorganization on October 6, 2009, share repurchases are recorded as treasury stock within stockholders’ equity (deficit), as we intend to reissue shares from treasury stock in the future. For the years ended December 31, 2015 and 2014, we repurchased $120.5 million and $675.4 million, respectively, of treasury stock. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our historical financial statements and the related notes included elsewhere in this annual report on Form 10-K, as well as the discussion under “Selected Consolidated Financial Data.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in or implied by any of the forward- looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” We enable risk-bearing businesses to better understand and manage their risks and opportunities associated with those risks. We provide value to our customers by supplying proprietary data that, combined with our analytic methods, creates embedded decision support solutions. We are the largest aggregator and provider of data pertaining to U.S. property and casualty, or P&C, insurance risks. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. Our customers use our solutions to make better risk decisions with greater efficiency and discipline. We refer to these products and services as “solutions” due to the integration among our products and the flexibility that enables our customers to purchase components or the comprehensive package of products. These solutions take various forms, including data, statistical models or tailored analytics, all designed to allow our clients to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs. We organize our business in two segments: Risk Assessment and Decision Analytics. Our Risk Assessment segment provides statistical, actuarial and underwriting data for the U.S. P&C insurance industry. Our Risk Assessment segment revenues represented approximately 33.3% and 37.2% of our revenues for the years ended December 31, 2015 and 2014, respectively. Our Decision Analytics segment provides solutions to our customer in insurance, financial services, healthcare, and energy and specialized markets. Our Decision Analytics segment revenues represented approximately 66.7% and 62.8% of our revenues for the years ended December 31, 2015 and 2014, respectively. On March 11, 2014, we sold our mortgage services business, Interthinx, Inc., or Interthinx. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended 33 December 31, 2014 and for all prior periods presented. See Note 10 of our consolidated financial statements included in this annual report on Form 10-K. As necessary, the amounts have been retroactively adjusted in all periods presented to give recognition to the discontinued operations. Executive Summary Key Performance Metrics We believe our business’s ability to generate recurring revenue and positive cash flow is the key indicator of the successful execution of our business strategy. We use year over year revenue growth and EBITDA margin as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures (see Note 3 within Item 6. Selected Financial Data section of Management’s Discussion and Analysis of Financial Condition and Results of Operations). Revenue growth. We use year over year revenue growth as a key performance metric. We assess revenue growth based on our ability to generate increased revenue through increased sales to existing customers, sales to new customers, sales of new or expanded solutions to existing and new customers and strategic acquisitions of new businesses. EBITDA margin. We use EBITDA margin as a metric to assess segment performance and scalability of our business. We assess EBITDA margin based on our ability to increase revenues while controlling expense growth. Revenues We earn revenues through subscriptions, long-term agreements and on a transactional basis. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the business. Our long-term agreements are generally for periods of three to five years. We recognize revenue from subscriptions ratably over the term of the subscription and most long-term agreements are recognized ratably over the term of the agreement. Certain of our solutions are also paid for by our customers on a transactional basis. For example, we have solutions that allow our customers to obtain property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance, medical or workers’ compensation claim with information in our databases. For the years ended December 31, 2015 and 2014, 25.3% and 27.7% of our revenues, respectively, were derived from providing transactional solutions. We earn transactional revenues as our solutions are delivered or services performed. In general, transactions are billed monthly at the end of each month. Approximately 90.1% and 89.6% of the revenues in our Risk Assessment segment for the years ended December 31, 2015 and 2014, respectively, were derived from subscriptions and long-term agreements for our solutions. Our customers in this segment include most of the P&C insurance providers in the United States. Approximately 67.0% and 61.9% of the revenues in our Decision Analytics segment, for the years ended December 31, 2015 and 2014, respectively, were derived from subscriptions and long-term agreements for our solutions. In this segment, customer bases are within the insurance, financial services, energy and specialized markets, and healthcare verticals. Principal Operating Costs and Expenses Personnel expenses are the major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented 57.1% and 56.8% of our total expenses for the 34 years ended December 31, 2015 and 2014, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs. We allocate personnel expenses between two categories, cost of revenues and selling, general and administrative costs, based on the actual costs associated with each employee. We categorize employees who maintain our solutions as cost of revenues, and all other personnel, including executive managers, sales people, marketing, business development, finance, legal, human resources, and administrative services, as selling, general and administrative expenses. A significant portion of our other operating costs, such as facilities and communications, are also either captured within cost of revenues or selling, general and administrative expense based on the nature of the work being performed. While we expect to grow our headcount over time to take advantage of our market opportunities, we believe that the economies of scale in our operating model will allow us to grow our personnel expenses at a lower rate than revenues. Historically, our EBITDA margin has improved because we have been able to increase revenues without a proportionate corresponding increase in expenses. However, part of our corporate strategy is to invest in new solutions which may offset margin expansion. Cost of Revenues. Our cost of revenues consists primarily of personnel expenses. Cost of revenues also includes the expenses associated with the acquisition and verification of data, the maintenance of our existing solutions and the development and enhancement of our next-generation solutions. Our cost of revenues excludes depreciation and amortization. Selling, General and Administrative Expense. Our selling, general and administrative expense also consists primarily of personnel costs. A portion of the other operating costs such as facilities, insurance and communications are also allocated to selling, general and administrative costs based on the nature of the work being performed by the employee. Our selling, general and administrative expenses excludes depreciation and amortization. Trends Affecting Our Business We serve customers in four primary vertical markets: property/casualty insurance, healthcare, energy, and financial services. The industry trends in each of those markets can affect our business. A significant change in property/casualty insurers’ profitability could positively or negatively affect demand for our solutions. For insurers, the keys to profitability include investment income and premium growth. Investment income remains under pressure as a result of low interest rates. Growth in property/casualty insurers’ direct written premiums is cyclical, with total industry premium growth receding from a peak of 14.8% in 2002 to a trough of negative 3.1% in 2009 and subsequently recovering to 4.4% in 2012, 4.3% in 2013, and 4.4% in 2014. Based on our experience, insurers more closely scrutinize their spending in periods of more challenging growth. In recent years, we have signed multi-year contracts with certain customers, and pricing is fixed at the beginning of each multi-year period; pricing for other customers is still linked to prior years’ premiums. Trends in catastrophe and noncatastrophe weather losses can have an effect on our customers’ profitability and therefore their appetite for buying analytics to help them manage their risks. The apparent increase in the frequency and severity of weather events that cause losses for insurers could lead to increased demand for our catastrophe modeling, catastrophe loss information, and repair cost solutions. A significant decrease in the number or severity of catastrophes could negatively affect our revenues. We also have a portion of our revenue related to the number of claims processed due to losses which can be impacted by seasonal storm activity. The need by our customers to fight insurance fraud — both in claims and at policy inception — could lead to increased demand for our underwriting and claims solutions. 35 Market trends continue to influence our financial services vertical in important ways. Most notable among the recent trends affecting the vertical includes a significant increase in the number of alternative lenders and alternative payment instruments in the market. We are adapting our offerings to address the needs of alternative lenders, backed by our deep expertise in and datasets covering the performance of customers across a full range of credit histories. As well, our unique ability to analyze the customer adoption rates of new alternative payment instruments from our syndicated study datasets is enabling us to serve as the “go to” solution for the industry’s analytic needs in the space. A strengthening of the U.S. dollar relative to the currencies of our international clients and a softening of the global economy is putting an even greater level of downward pressure on our revenues from such clients. However, we are also observing a growing appetite for our expense and regulatory focused solutions among those clients. Lastly, we are seeing a greater number of companies entering the ad effectiveness space, potential competitors to our position in this space. We stand confident of our position at this stage, given the unique nature and strength of our partnerships coupled by the comprehensiveness of our data, particularly as it relates to seeing the full wallet spend of a consumer. Trends in the energy, metals and mining sectors and activity in financial markets can influence our revenues. Movements of commodity prices affect the profitability of energy and metals and mining companies, while stock markets and mergers and acquisitions, or M&A, are the principal drivers of activity for financial institutions. Among the specific trends influencing commodity prices are global gross domestic product growth, supply of individual commodities, and geopolitical factors. The slow down of the Chinese economy is currently contributing to an oversupply of a number of commodities. Rising U.S. oil and gas production, OPEC policy, and the partial lifting of sanctions against Iran in January 2016 has led to a sharp fall in crude oil prices; and most metals markets are currently in oversupply. Lower commodity prices have reduced discretionary spending for clients and has stalled M&A activity. However, the uncertainty also increases client demand for our data and services. Commodity prices are expected to recover over time to incentivize the investment required to meet growing energy demand. Longer term the Paris global accord on climate change signals a period of change in the energy mix, incentivizing growth in renewable energy and other low carbon technologies, while fossil fuels are expected to remain a core part of energy demand for the foreseeable future. We will continue to evolve our offerings to meet the needs of our clients in an increasingly complex market. Trends in the U.S. healthcare market can affect a portion of our revenues in the Decision Analytics segment. That market continues to undergo significant change as the result of healthcare reform legislation. The specific trends affecting our current healthcare business include payment reform, expansion of insurance coverage, and efforts at cost containment. Payment reform is driving the market to value-based reimbursement, which has caused healthcare providers to bear increased financial risk and responsibility for quality outcomes. The expansion of insurance coverage has reduced the uninsured population through both increased enrollment in Medicaid and in the commercial market through statewide health exchanges. As the government seeks to control fraud, waste, and abuse, efforts to contain costs will likely continue to become more prevalent. Although such changes have the potential to disrupt the healthcare marketplace, we believe the requirements for reform could increase demand for our analytic solutions in the areas of population health management, quality measurement, risk adjustment for Medicare Advantage and Qualified Health Plans participating on statewide health exchanges, and detection of prepayment fraud, waste and abuse. We experience seasonality in our Medicare Advantage risk adjustment business in the second half of our fiscal year, related to the CMS submission deadline. Description of Acquisitions We acquired six businesses since January 1, 2013. These acquisitions affect the comparability of our consolidated results of operations between periods. On May 19, 2015, we acquired 100% of the stock of Wood Mackenzie. Wood Mackenzie is a global provider of data analytics and commercial intelligence for the energy, chemicals, metals and mining verticals. This acquisition advances our strategy to expand internationally and positions ourselves in the global energy market. Wood Mackenzie is included in the energy and specialized markets vertical, formerly named the 36 specialized markets vertical, of the Decision Analytics segment. See Note 9 to our consolidated financial statements included in this annual report on Form 10-K for the preliminary purchase price allocations. On November 6, 2015, we acquired 100% of the stock of Infield Systems Limited, or Infield. Infield is a provider of business intelligence, analysis, and research to the oil, gas, and associated marine industries. Infield has become part of Wood Mackenzie and continues to provide services to enhance Wood Mackenzie’s upstream and supply chain capabilities in the Decision Analytics segment. See Note 9 to our consolidated financial statements included in this annual report on Form 10-K for the preliminary purchase price allocations. On November 20, 2015, we acquired 100% of the stock of The PCI Group, or PCI. PCI is a consortium of five specialist companies that offer integrated data and subscriptions research in the chemicals, fibers, films, and plastics sectors. PCI has become part of Wood Mackenzie, and continues to provide services to enhance Wood Mackenzie’s chemicals capabilities in the Decision Analytics segment. See Note 9 to our consolidated financial statements included in this annual report on Form 10-K for the preliminary purchase price allocations. On December 8, 2014, we acquired 100% of the stock of Maplecroft. Using a proprietary data aggregation and analytical approach, Maplecroft enables its customers to assess, monitor, and forecast a growing range of worldwide risks, including geopolitical and societal risks. Within our Decision Analytics segment, this acquisition positions us as a provider of value chain optimization tools, providing comprehensive quantitative risk analytics and platforms by which customers can visualize, quantify, mitigate, and manage their risk. Maplecroft is headquartered in Bath, England. On October 31, 2014, we acquired the net assets of Dart Consulting Limited, or Dart. Dart is a provider of benchmarking and advisory solutions to financial services institutions in Australia, New Zealand, and other key Asia-Pacific markets. As part of our Decision Analytics segment, Dart provides benchmarking solutions and professional services critical to financial services institutions in the management of lending and payment portfolios. On January 29, 2014, we acquired the net assets of Inovatus, LLC, or Inovatus. 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 our Decision Analytics segment as part of its solutions to leverage data and analytics to help insurance companies improve results. Description of Discontinued Operations On March 11, 2014, we sold our mortgage services business, Interthinx, for a price of $151.2 million. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. See Note 10 to our consolidated financial statements included in this annual report on Form 10-K. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 Consolidated Results of Continuing Operations Revenues Revenues were $2,068.0 million for the year ended December 31, 2015 compared to $1,746.7 million for the year ended December 31, 2014, an increase of $321.3 million or 18.4%. In December 2014, we acquired Maplecroft and in 2015, we acquired Wood Mackenzie, Infield, and PCI, all within our Decision Analytics segment; these comprise our recent acquisitions. These recent acquisitions provided an increase of $219.6 million in revenues for the year ended December 31, 2015. Excluding recent acquisitions, revenues increased $101.7 million or 5.8%. Revenue growth within Decision Analytics was primarily driven by our insurance and financial services categories. Both categories, industry-standard insurance programs and property-specific rating and underwriting information, within Risk Assessment contributed to its revenue growth. Refer to the Results of Continuing Operations by Segment within this section for further information regarding our revenues. 37 Cost of Revenues Cost of revenues was $803.3 million for the year ended December 31, 2015 compared to $716.6 million for the year ended December 31, 2014, an increase of $86.7 million or 12.1%. Our recent acquisitions within the Decision Analytics segment accounted for an increase of $82.4 million in cost of revenues, of which $6.0 million were non-recurring equity compensation associated with the Wood Mackenzie acquisition and the remaining amount was primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased $4.3 million or 0.6%. The increase was primarily due to increases in salaries and employee benefits cost of $18.7 million. Other increases include rent expense of $3.0 million, travel expense of $1.4 million, information technology expense of $0.5 million and other operating costs of $0.9 million. These are offset by a decrease in data costs and data processing fees of $20.2 million. Selling, General and Administrative Expenses Selling, general and administrative expenses, or SGA, were $312.7 million for the year ended December 31, 2015 compared to $227.3 million for the year ended December 31, 2014, an increase of $85.4 million or 37.6%. Our recent acquisitions accounted for an increase of $83.7 million in SGA, of which $20.7 million were non-recurring transaction costs associated with the Wood Mackenzie acquisition and the remaining amount was primarily related to salaries and employee benefits, rent expense and professional consulting fees. Excluding the impact of our recent acquisitions, SGA increased $1.7 million or 0.8%. The increase was primarily due to increases in salaries and employee benefits of $3.4 million, information technology expense of $1.0 million, rent expense of $1.1 million, and travel expense of $0.5 million. These increases were offset by a decrease in professional consulting fees of $1.3 million and other general and administrative of $3.0 million. Depreciation and Amortization of Fixed Assets Depreciation and amortization of fixed assets was $120.6 million for the year ended December 31, 2015 compared to $85.5 million for the year ended December 31, 2014, an increase of $35.1 million or 41.1%. The increase in depreciation and amortization of fixed assets includes depreciation of furniture and equipment, software, computer hardware and related equipment, and depreciation and amortization related to our recent acquisitions of $9.7 million. Amortization of Intangible Assets Amortization of intangible assets was $94.8 million for the year ended December 31, 2015 compared to $56.9 million for the year ended December 31, 2014, an increase of $37.9 million or 66.8%. The increase was primarily related to intangible assets related to our recent acquisitions of $44.0 million. Excluding recent acquisitions, the amortization of intangible assets decreased $6.1 million associated with assets from prior acquisitions that have been fully amortized. Investment Income and Others Investment income and others, was a gain of $17.0 million for the year ended December 31, 2015 as compared to a gain of $0.2 million for the year ended December 31, 2014, an increase of $16.8 million. The increase was primarily related to a gain of $15.6 million in connection with the exercise and payout of common stock warrants held by us in Eagleview Technology Corporation, or EVT. The remaining increase was mostly attributable to a net gain on foreign currencies. Gain on Derivative instruments Gain on derivative instruments was $85.2 million for the year ended December 31, 2015 resulting from the execution of a nonrecurring foreign currency hedging strategy in connection with the acquisition of Wood Mackenzie within our Decision Analytics segment. There was no gain on derivative instruments for the year ended December 31, 2014. 38 Interest Expense Interest expense was $121.4 million for the year ended December 31, 2015 compared to $70.0 million for the year ended December 31, 2014, an increase of $51.4 million or 73.3%. The increase is primarily due to the interest on the additional debt incurred in connection with the acquisition of Wood Mackenzie as well as the bridge financing arrangement. Provision for Income Taxes The provision for income taxes was $209.9 million for the year ended December 31, 2015 compared to $219.8 million for the year ended December 31, 2014, a decrease of $9.9 million or 4.5%. The effective tax rate was 29.3% for the year ended December 31, 2015 compared to 37.2% for the year ended December 31, 2014. EBITDA Margin The EBITDA margin for our consolidated results was 51.0% for the year ended December 31, 2015 compared to 48.8% for the year ended December 31, 2014. The non-recurring derivative gain offset by the transaction costs related to the Wood Mackenzie acquisition and the EVT warrant exercise and payout positively impacted our EBITDA margin by 3.6% for year ended December 31, 2015. The discontinued operations including the gain on the sale of our mortgage services business increased our margin by 2.8% for the year ended December 31, 2014. Results of Continuing Operations by Segment Decision Analytics Revenues Revenues for our Decision Analytics segment were $1,379.8 million for the year ended December 31, 2015 compared to $1,096.1 million for the year ended December 31, 2014, an increase of $283.7 million or 25.9% . Our recent acquisitions accounted for an increase of $219.6 million in revenues for the year ended December 31, 2015. Excluding recent acquisitions, our Decision Analytics revenue increased $64.1 million or 5.9%. Our revenue by category for the periods presented is set forth below for the years ended December 31: 2015 2014 (In thousands) Percentage Change Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy and specialized markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 647,161 116,556 307,291 308,811 $ 598,757 96,763 315,628 84,926 8.1% 20.5% (2.6)% 263.6% Total Decision Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,379,819 $1,096,074 25.9% Our insurance revenue increased $48.4 million or 8.1% primarily due to an increase within our loss quantification solutions, insurance anti-fraud claims revenue, underwriting solutions, and catastrophe modeling services. Our financial services revenue increased $19.7 million or 20.5%, primarily due to a media effectiveness project revenue that occurred in the first quarter and the continued demand for our analytic solutions and services. Our healthcare revenue decreased $8.3 million or 2.6% primarily due to changes in our customer contract language related to our revenue and quality intelligence solution. For comparability, had the contract language also been in effect in the prior period, our revenue growth would have been 6.2%. 39 Our energy and specialized markets revenue, formerly named specialized markets revenue, increased $223.9 million or 263.6%, primarily due to the recent acquisitions. Excluding the recent acquisitions’ revenue of $219.6 million, our specialized markets revenue increased $4.3 million or 5.1%, primarily due to growth in our environmental health and safety services and weather risk solutions, and was partially offset by lower activity related to government contracts. Cost of Revenues Cost of revenues for our Decision Analytics segment was $603.3 million for the year ended December 31, 2015 compared to $508.4 million for the year ended December 31, 2014, an increase of $94.9 million or 18.7%. Our recent acquisitions within the Decision Analytics segment, accounted for an increase of $82.4 million in cost of revenues of which $6.0 million were non-recurring equity compensation associated with the Wood Mackenzie acquisition and the remaining amount was primarily related to salaries and employee benefits. Excluding the impact of our recent acquisitions, our cost of revenues increased by $12.5 million or 2.5%. This increase is primarily due to increases in salary and employee benefits of $27.5 million, rent expense of $3.2 million, information technology expense of $0.8 million, travel expense of $0.5 million, and other operating costs of $1.7 million. These increases were offset by a decrease in data costs and data processing fees of $21.2 million (mostly related to the change in our customer contract terms within our healthcare vertical described above). Selling, General and Administrative Expenses Selling, general and administrative expenses for our Decision Analytics segment were $230.9 million for the year ended December 31, 2015 compared to $153.5 million for the year ended December 31, 2014, an increase of $77.4 million or 50.4%. Our recent acquisitions within the Decision Analytics segment accounted for an increase of $83.7 million in SGA of which $20.7 million were non-recurring transaction costs associated with the Wood Mackenzie acquisition and the remaining amount was primarily related to salaries and employee benefits. Excluding costs associated with our recent acquisitions, SGA decreased $6.3 million or 4.1%. The decrease was primarily due to decreases in salary and employee benefits of $3.2 million, professional fees of $0.9 million and other general expenses of $3.1 million. These decreases were offset by increases in information technology expense of $0.5 million, travel expense of $0.2 million and rent expense of $0.2 million. EBITDA Margin The EBITDA margin for our Decision Analytics segment including our discontinued operations, was 46.9% for the year ended December 31, 2015 and 44.2% for the year ended December 31, 2014. The non- recurring derivative gain offset by the transaction costs related to the Wood Mackenzie acquisition and the EVT warrant exercise and payout positively impacted our EBITDA margin by 5.4% for year ended December 31, 2015. The discontinued operations, including the gain on sale of the mortgage services business, increased our margin by 4.6% for the year ended December 31, 2014. Risk Assessment Revenues Revenues for our Risk Assessment segment were $688.2 million for the year ended December 31, 2015 as compared to $650.6 million for the year ended December 31, 2014, an increase of $37.6 million or 5.8%. The overall increase within this segment primarily resulted from an increase in prices derived from continued enhancements to the content of our industry-standard insurance programs’ solutions as well as selling expanded solutions to existing customers. 40 Our revenue by category for the periods presented is set forth below for the years ended December 31: Industry-standard insurance programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property-specific rating and underwriting information . . . . . . . . . . . . . . . . . . . $524,606 163,585 $495,065 155,587 Total Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $688,191 $650,652 2015 2014 (In thousands) Percentage Change 6.0% 5.1% 5.8% Cost of Revenues Cost of revenues for our Risk Assessment segment was $200.0 million for the year ended December 31, 2015 compared to $208.2 million for the year ended December 31, 2014, a decrease of $8.2 million or 4.0%. The decrease was primarily due to a decrease in salaries and employee benefits costs of $8.8 million related to a slight reduction in headcount that occurred in the fourth quarter in 2014. Other decreases were related to information technology expenses of $0.3 million, rent expense of $0.2 million, and other operating costs of $0.8 million. These decreases were offset by increases in data costs and data processing fees of $1.0 million and travel expenses of $0.9 million. Selling, General and Administrative Expenses Selling, general and administrative expenses for our Risk Assessment segment were $81.8 million for the year ended December 31, 2015 compared to $73.8 million for the year ended December 31, 2014, an increase of $8.0 million or 10.8%. The increase was primarily due to increases in salaries and employee benefits of $6.6 million, rent expense of $0.9 million, information technology expense of $0.5 million, travel expense of $0.3 million and other general expenses of $0.1 million. These increases were offset by a decrease in professional consulting fees of $0.4 million. EBITDA Margin The EBITDA margin for our Risk Assessment segment was 59.1% for the year ended December 31, 2015 compared to 56.7% for the year ended December 31, 2014. The increase in margin is primarily attributed to operating leverage in the segment as well as cost efficiencies. Year Ended December 31, 2014 Compared to Year Ended December 31, 2013 Consolidated Results of Continuing Operations Revenues Revenues were $1,746.7 million for the year ended December 31, 2014 compared to $1,595.7 million for the year ended December 31, 2013, an increase of $151.0 million or 9.5%. In December 2014, we acquired Maplecroft within our Decision Analytics segment, a recent acquisition. Maplecroft provided an increase of $0.6 million in revenues for the year ended December 31, 2014. Excluding this recent acquisition, revenues increased $150.4 million or 9.4%. Revenue growth within Decision Analytics was primarily driven by our financial services, healthcare, and insurance categories. Both categories, industry-standard insurance programs and property-specific rating and underwriting information, within Risk Assessment contributed to its revenue growth. Refer to the Results of Continuing Operations by Segment within this section for further information regarding our revenues. Cost of Revenues Cost of revenues was $716.6 million for the year ended December 31, 2014 compared to $622.5 million for the year ended December 31, 2013, an increase of $94.1 million or 15.1%. Our recent acquisition of Maplecroft within the Decision Analytics segment, accounted for an increase of $0.5 million in cost of revenues for the year ended December 31, 2014 which were primarily related to salaries and employee benefits. Excluding the impact of our recent 41 acquisition, our cost of revenues increased $93.6 million or 15.0%. The increase was primarily due to increases in salaries and employee benefits cost of $38.1 million. Other increases include data costs and data processing fees of $46.3 million (mostly related to our Decision Analytics segment), rent expense of $8.2 million, and information technology expense of $1.5 million. These are offset by a decrease in other operating costs of $0.5 million. Selling, General and Administrative Expenses Selling, general and administrative expenses, or SGA, were $227.3 million for the year ended December 31, 2014 compared to $229.0 million for the year ended December 31, 2013, a decrease of $1.7 million or 0.7%. Excluding costs associated with our recent acquisition of $0.1 million, SGA decreased $1.8 million or 0.8%. The decrease was primarily due to lower salaries and employee benefits of $7.3 million mostly related to the executive transition that took place in 2013, travel expenses of $0.9 million, and a decrease in other general expenses of $2.5 million. These decreases were offset by an increase in professional fees of $4.6 million, primarily related to our attempted acquisition of EVT, and information technology expense of $4.3 million. Depreciation and Amortization of Fixed Assets Depreciation and amortization of fixed assets was $85.5 million for the year ended December 31, 2014 compared to $66.2 million for the year ended December 31, 2013, an increase of $19.3 million or 29.2%. Depreciation and amortization of fixed assets includes depreciation of furniture and equipment, software, computer hardware, and related equipment. The majority of the increase relates to software and hardware costs to support data capacity expansion and revenue growth. Amortization of Intangible Assets Amortization of intangible assets was $56.9 million for the year ended December 31, 2014 compared to $63.7 million for the year ended December 31, 2013, a decrease of $6.8 million or 10.8%. The decrease was primarily related to intangible assets associated with prior acquisitions that have been fully amortized. Investment Income and Others, Net Investment income and others, was a gain of $0.2 million for the year ended December 31, 2014 as compared to a gain of $0.6 million for the year ended December 31, 2013, a decrease of $0.4 million. Interest Expense Interest expense was $70.0 million for the year ended December 31, 2014 compared to $76.1 million for the year ended December 31, 2013, a decrease of $6.1 million or 8.1%. The decrease was primarily due to the repayment of the private placement debt of $180.0 million during 2013, consisting of $45.0 million that matured in April 2013, $100.0 million that matured in August 2013 and $35.0 million that matured in October 2013. Provision for Income Taxes The provision for income taxes was $219.8 million for the year ended December 31, 2014 compared to $196.4 million for the year ended December 31, 2013, an increase of $23.4 million or 11.9%. The effective tax rate was 37.2% for the year ended December 31, 2014 compared to 36.5% for the year ended December 31, 2013. EBITD A Margin The EBITDA margin for our consolidated results including discontinued operations, was 48.8% for the year ended December 31, 2014 compared to 44.6% for the year ended December 31, 2013. The discontinued operations including the gain on the sale of our mortgage services business increased our margin by 2.8% for the year ended December 31, 2014. 42 Results of Continuing Operations by Segment Decision Analytics Revenues Revenues for our Decision Analytics segment were $1,096.1 million for the year ended December 31, 2014 compared to $977.4 million for the year ended December 31, 2013, an increase of $118.7 million or 12.1%. Our recent acquisition accounted for an increase of $0.6 million in revenues for the year ended December 31, 2014. Excluding Maplecroft, our Decision Analytics revenue increased $118.1 million or 12.1%. As described, our results in the Decision Analytics segment do not include the discontinued operations of our mortgage services business, which was part of our financial services vertical. Our revenue by category for the periods presented is set forth below for the years ended December 31: Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specialized markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 598,757 96,763 315,628 84,926 (In thousands) $539,150 81,113 271,538 85,626 11.1% 19.3% 16.2% (0.8)% Total Decision Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,096,074 $977,427 12.1% 2014 2013 Percentage Change Our insurance revenue increased $59.6 million or 11.1% primarily due to an increase within our loss quantification solutions and in catastrophe modeling services for existing customers. Underwriting and claims solutions as well contributed to the growth. Our financial services revenue increased $15.7 million or 19.3%, primarily due to the continued demand for our analytic solutions and services within this category. Our healthcare revenue increased $44.1 million or 16.2% primarily due to an increase in transactions within our revenue and quality intelligence solutions and due to an increase in payment accuracy solutions. Our specialized markets revenue decreased $0.7 million or 0.8%, and excluding the Maplecroft acquisition revenue within this category, our specialized markets revenue decreased $1.3 million or 1.5% as a result of lower activity related to government contracts partially offset by growth in our supply chain services. Cost of Revenues Cost of revenues for our Decision Analytics segment was $508.4 million for the year ended December 31, 2014 compared to $428.0 million for the year ended December 31, 2013, an increase of $80.4 million or 18.8%. Excluding the impact of Maplecroft, our recent acquisition, of $0.5 million, our cost of revenues increased by $79.9 million or 18.7%. This increase is primarily due to a net increase in salary and employee benefits of $28.3 million, data costs and data processing fees of $45.5 million (primarily related to our healthcare services) and rent expense of $7.2 million. These increases were offset by decreases in information technology expenses of $1.1 million. Selling, General and Administrative Expenses Selling, general and administrative expenses for our Decision Analytics segment were $153.5 million for the year ended December 31, 2014 compared to $151.6 million for the year ended December 31, 2013, an increase of $1.9 million or 1.3%. Excluding the impact of Maplecroft, our recent acquisition, of $0.1 million, 43 SGA increased $1.8 million or 1.2%. The increase was primarily due to an increase in professional consulting fees of $4.5 million, which includes expenses of $6.9 million related to the EVT transaction offset by lower other consulting expenses. Other increases include information technology expenses of $3.5 million. These increases are offset by decrease in salaries and employee benefits of $4.3 million, travel cost of $0.5 million and other general and administrative expenses of $1.4 million. EBITDA Margin The EBITDA margin for our Decision Analytics segment including our discontinued operations, was 44.2% for the year ended December 31, 2014 and 38.0% for the year ended December 31, 2013. The discontinued operations, including the gain on sale of the mortgage services business increased our margin by 4.6% for the year ended December 31, 2014. Risk Assessment Revenues Revenues for our Risk Assessment segment were $650.6 million for the year ended December 31, 2014 as compared to $618.3 million for the year ended December 31, 2013, an increase of $32.3 million or 5.2%. The overall increase within this segment primarily resulted from an increase in prices derived from continued enhancements to the content of our industry-standard insurance programs’ solutions as well as selling expanded solutions to existing customers. Our revenue by category for the periods presented is set forth below for the years ended December 31: Industry-standard insurance programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property-specific rating and underwriting information . . . . . . . . . . . . . . . . . . . $495,065 155,587 (In thousands) $471,130 147,146 Total Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $650,652 $618,276 5.1% 5.7% 5.2% 2014 2013 Percentage Change Cost of Revenues Cost of revenues for our Risk Assessment segment was $208.2 million for the year ended December 31, 2014 compared to $194.5 million for the year ended December 31, 2013, an increase of $13.7 million or 7.0%. The increase was primarily due to an increase in salaries and employee benefits costs of $9.8 million, which includes severance costs of $4.8 million that occurred in the fourth quarter in 2014. Other increases were related to information technology expenses of $2.6 million, rent expense of $1.0 million, and data and consulting costs of $0.8 million. These increases were offset by a decrease in other general expenses of $0.5 million. Selling, General and Administrative Expenses Selling, general and administrative expenses for our Risk Assessment segment were $73.8 million for the year ended December 31, 2014 compared to $77.4 million for the year ended December 31, 2013, a decrease of $3.6 million or 4.6%. The decrease was primarily due to a decrease in salaries and employee benefits of $3.0 million, a decrease in travel cost of $0.4 million and other general expenses of $1.1 million. These decreases were offset by an increase in information technology of $0.8 million and professional consulting fees of $0.1 million. EBITDA Margin The EBITDA margin for our Risk Assessment segment was 56.7% for the year ended December 31, 2014 compared to 56.1% for the year ended December 31, 2013. The increase in margin is primarily attributed to operating leverage in the segment as well as cost efficiencies. 44 Quarterly Results of Operations The following table sets forth our quarterly unaudited consolidated statement of operations data for each of the eight quarters in the period ended December 31, 2015. In management’s opinion, the quarterly data has been prepared on the same basis as the audited consolidated financial statements included in this annual report on Form 10-K, and reflects all necessary adjustments for a fair presentation of this data. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period. Statement of operations data: Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic net income per share: Diluted net income per share: . . . . . . . . . . . . . . For the Quarters Ended March 31, June 30, September 30, December 31, Full Year 2015 2015 (in thousands, except for per share data) $459,397 $178,292 $ 98,686 $ 98,686 0.62 $ 0.61 $ $497,650 $153,722 $163,320 $163,320 0.99 $ 0.97 $ $550,401 $208,880 $131,814 $131,814 0.78 $ 0.77 $ $560,562 $195,668 $113,757 $113,757 0.67 $ 0.66 $ $2,068,010 $ 736,562 $ 507,577 $ 507,577 3.07 $ 3.01 $ For the Quarters Ended March 31, June 30, September 30, December 31, Full Year 2014 2014 (in thousands, except for per share data) Statement of operations data: Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . Income from discontinued operations . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic net income per share: Diluted net income per share: . . . . . . . . . . . . . . $409,643 $148,843 $ 84,441 $ 31,117 $115,558 0.69 $ 0.68 $ Liquidity and Capital Resources $423,554 $159,066 $ 88,099 $ $ 88,099 0.53 $ 0.52 $ $448,665 $175,490 $ 99,015 — $ 99,015 0.60 $ 0.58 $ — $ $464,864 $177,047 $ 99,310 $ (1,940) $ 97,370 0.59 $ 0.58 $ $1,746,726 $ 660,446 $ 370,865 $ 29,177 $ 400,042 2.41 $ 2.37 $ As of December 31, 2015 and 2014, we had cash and cash equivalents and available-for-sale securities of $141.9 million and $43.2 million, respectively. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year. Subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our syndicated revolving credit facility, we believe we will have sufficient cash to meet our working capital and capital expenditure needs, and to fuel our future growth plans. We have historically managed the business with a working capital deficit due to the fact that, as described above, we offer our solutions and services primarily through annual subscriptions or long-term contracts, which are generally prepaid quarterly or annually in advance of the services being rendered. When cash is received for prepayment of invoices, we record an asset (cash and cash equivalents) on our balance sheet with the offset recorded as a current liability (deferred revenues). This current liability is deferred revenue that does not require a direct cash outflow since our customers have prepaid and are obligated to purchase the services. In most businesses, growth in revenue typically leads to an increase in the accounts receivable balance causing a use of cash as a company grows. Unlike these businesses, our cash position is favorably affected by revenue growth, which results in a source of cash due to our customers prepaying for most of our services. 45 Our capital expenditures as a percentage of revenues for the years ended December 31, 2015 and 2014, were 8.0% and 8.4%, respectively. We estimate our capital expenditures for 2016 will be approximately $175 million, which primarily consists of expenditures on our technology infrastructure and our continuing investments in developing and enhancing our solutions. Expenditures related to developing and enhancing our solutions are predominately related to internal use software and are capitalized in accordance with ASC 350-40, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use.” We also capitalize amounts in accordance with ASC 985-20, “Software to be Sold, Leased or Otherwise Marketed.” We have also historically used a portion of our cash for repurchases of our common stock from our stockholders. For the years ended December 31, 2015, 2014 and 2013, we repurchased $20.5 million, $778.5 million and $277.4 million, respectively, of our common stock. In prior years, we provided pension and postretirement benefits to certain qualifying active employees and retirees. On February 29, 2012, we instituted a hard freeze, which eliminated all future compensation and service credits, to all participants in the pension plans. In April 2012, we completed a voluntary prefunding to our qualified pension plan of $72.0 million, which resulted in a contribution of $78.8 million for the year, of which $28.2 million was the minimum contribution requirement for 2012. As a result of the prefunding, we do not expect to make any contribution in 2016 with respect to our qualified pension plan. Under the postretirement plan, we provided certain healthcare and life insurance benefits to qualifying participants; however, participants are required to pay a stated percentage of the premium coverage. We expect to contribute approximately $1.0 million to the postretirement plan in 2016. See Note 17 to our consolidated financial statements included in this annual report on Form 10-K. Financing and Financing Capacity We had total debt, excluding capital lease obligations and the discounts on our senior notes, of $3,170.0 million and $1,430.0 million at December 31, 2015 and 2014, respectively. The debt at December 31, 2015 was primarily issued under senior notes in May 2015, during 2012 and 2011 and borrowings outstanding under the new Credit Facility described below. On May 15, 2015, we completed issuances of senior notes in aggregate principal amounts of $900.0 million and $350.0 million due on June 15, 2025 and June 15, 2045, respectively, that accrue interest at a rate of 4.000% and 5.500%, respectively. Interest is payable semi-annually on both series of senior notes on June 15th and December 15th of each year, beginning on December 15, 2015. The senior notes were issued at a discount of $4.8 million and $1.2 million, respectively, and we incurred debt issuance costs on the senior notes of $7.6 million and $4.1 million, respectively. The discount and debt issuance costs were recorded as “Long-term debt” and “Other assets,” respectively, in the accompanying consolidated balance sheets, and these costs will be amortized to “Interest expense” in the accompanying consolidated statements of operations within this Form 10-K over the life of the respective senior note. The net proceeds from the issuance of these notes were utilized to partially fund the acquisition of Wood Mackenzie. The indenture governing the senior notes restricts our ability to, among other things, create certain liens, enter into sale/leaseback transactions and consolidate with, sell, lease, convey or otherwise transfer all or substantially all of our assets, or merge with or into, any other person or entity. As of December 31, 2015, we had senior notes with an aggregate principal amount of $2,300.0 million outstanding, and we were in compliance with our debt covenants. On April 22, 2015, we signed an agreement to enter into a $1,750.0 million committed senior unsecured Syndicated Revolving Credit Facility, or new Credit Facility, with Bank of America N.A., JP Morgan Chase, N.A., Sun Trust Bank, Wells Fargo Bank N.A., Citizens Bank, N.A., Morgan Stanley Senior Funding, Inc., HSBC Bank USA, N.A., Royal Bank of Canada, BNP Paribas, TD Bank, N.A., The Northern Trust Company, and Capital One N.A. The new Credit Facility became effective on May 15, 2015, and we utilized borrowings of $930.0 million from the new Credit Facility to partially fund the purchase of Wood Mackenzie. The new Credit Facility may also be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program, or Repurchase Program. The new Credit Facility has replaced the previously existing $990.0 million Syndicated Revolving Credit Facility, or old Credit Facility. 46 On July 24, 2015, we entered into the First Amendment to the new Credit Facility which modified the definitions of Consolidated EBIT and Consolidated EBITDA to permit the adding back of certain non-recurring expenses related to the acquisition of Wood Mackenzie. The new Credit Facility contains certain financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants also place restrictions on mergers, asset sales, sale/leaseback transactions, payments between us and our subsidiaries, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated interest coverage ratio of at least 3.0 to 1.0 and that we maintain, during any period of four fiscal quarters, a consolidated funded debt leverage ratio of 3.75 to 1.0, which ratio steps down to 3.5 to 1.0 at the end of the fourth fiscal quarter ending after the consummation of the acquisition of Wood Mackenzie. We were in compliance with all financial covenants under the new Credit Facility as of December 31, 2015. As of December 31, 2015, we had total combined borrowings under the old Credit Facility and new Credit Facility of $1,155.0 million and repaid $445.0 million during the year ended December 31, 2015. Interest on borrowings under the new Credit Facility is payable at an interest rate of LIBOR plus 1.125% to 1.625%, depending upon the consolidated funded debt leverage ratio. A commitment fee on any unused balance is payable periodically and may range from 12.5 to 25.0 basis points based upon the consolidated funded debt leverage ratio. As of December 31, 2015 and 2014, we had outstanding borrowings under the new Credit Facility and old Credit Facility of $870.0 million and $160.0 million, respectively. All borrowings under the new Credit Facility are and shall continue to remain unsecured. The debt outstanding at December 31, 2015 under the new Credit Facility contains maturity dates in 2016. Throughout 2016, we plan to repay a portion of this debt through cash from operations and to refinance the remainder through our new Credit Facility. In January and February 2016, we utilized cash from operations to repay a total of $165.0 million of the $870.0 million outstanding borrowings at December 31, 2015 under the new Credit Facility. As of December 31, 2015, we no longer have any outstanding private placement debt. On April 29, 2015, we repaid $85.0 million and $50.0 million of private placement debt with Prudential Capital Group and New York Life, respectively, that came due utilizing $55.0 million from cash on hand and $80.0 million from borrowings under the Credit Facility. In addition, on May 14, 2015, we prepaid the remaining private placement debt with New York Life of $17.5 million, which had been due on October 26, 2015, and $17.5 million and $50.0 million of remaining private placement debt with Prudential, which had been due on October 26, 2015 and June 15, 2016, respectively. To prepay this debt, we utilized $25.0 million of cash on hand and borrowings from our old Credit Facility of $60.0 million. The contractual costs for the prepayment of this debt was $4.8 million and was recorded to “Interest expense” in the accompanying consolidated statements of operations within this Form 10-K for the year ended December 31, 2015. On March 10, 2015, in connection with our agreement to acquire Wood Mackenzie, we entered into a commitment letter for a $2,300.0 million 364-day bridge financing arrangement with Bank of America N.A. and Morgan Stanley Bank N.A. acting as joint lead arrangers. This financing arrangement was only to be utilized in the event we did not carry out the debt and equity offerings relating to its acquisition of Wood Mackenzie by a certain date, and was terminated upon the closing of the acquisition. See Note 9 of our consolidated financial statements included within this Form 10-K. We paid fees associated with this financing arrangement of $9.1 million. Due to the completion of the debt and equity offerings, this arrangement was terminated and the full $9.1 million of fees were recorded to “Interest expense” in the accompanying consolidated statements of operations within this Form 10-K for the year ended December 31, 2015. 47 Cash Flow The following table summarizes our cash flow data for the years ended December 31: Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . 2015 2014 2013 623,687 (In thousands) $ $ 506,920 $ 489,452 $(3,006,317) $ (35,530) $(145,626) $(579,078) $(284,472) $ 2,481,013 Operating Activities Net cash provided by operating activities increased to $623.7 million for the year ended December 31, 2015 compared to $489.5 million for the year ended December 31, 2014. The increase in net cash provided by operating activities was primarily due to an increase in cash receipts from customers driven by an increase in revenues and operating profit and additional operating cash flow from Wood Mackenzie, partially offset by acquisition fees related to the acquisition of Wood Mackenzie and interest payments on our senior notes that were issued in May 2015. Net cash provided by operating activities decreased to $489.5 million for the year ended December 31, 2014 compared to $506.9 million for the year ended December 31, 2013. Net cash provided by operating activities was primarily affected by the sale of our mortgage services business and the timing of excess tax benefits from exercised stock options in the first quarter of 2013. Investing Activities Net cash used in investing activities was $3,006.3 million and $35.5 million for the years ended December 31, 2015 and 2014, respectively. The change in investing activities was primarily due to the cash used for the acquisition of Wood Mackenzie of $2,889.6 million on May 19, 2015. Net cash used in investing activities was $35.5 million and $145.6 million for the years ended December 31, 2014 and 2013, respectively. The decrease in net cash used in investing activities was primarily due to the sale of our mortgage services business for $155.0 million on March 11, 2014, partially offset by the acquisition of Maplecroft of $30.1 million. Financing Activities Net cash provided by financing activities was $2,481.0 million for the year ended December 31, 2015 and net cash used in financing activities was $579.1 million for the year ended December 31, 2014. Net cash provided by financing activities for the year ended December 31, 2015 was primarily related to the net proceeds from the debt and equity offerings of $1,244.0 million and $720.8 million, respectively, and other borrowings from our old and new Credit Facilities, partially offset by repurchases of common stock $20.5 million. Net cash used in financing activities for the year ended December 31, 2014 was primarily related to the repurchase of common stock of $778.5 million, partially offset by proceeds from stock option exercises and other stock option related items of $47.2 million. Net cash used in financing activities was $579.1 million and $284.5 million for the years ended December 31, 2014 and 2013, respectively. The increase of net cash used in financing activities for the year ended December 31, 2014 was primarily due to the repurchase of common stock of $778.5 million related to the ASR, partially offset by net debt draw downs of $160.0 million. 48 Contractual Obligations The following table summarizes our contractual obligations and commercial commitments at December 31, 2015 and the future periods in which such obligations are expected to be settled in cash: Payments Due by Period Total Less than 1 year 2-3 years 4-5 years (In thousands) More than 5 years Contractual obligations Long-term debt, current portion of long-term debt and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension and postretirement plans(1) . . . . . . . . . . . Capital lease obligations . . . . . . . . . . . . . . . . . . . . Other long-term liabilities(2) . . . . . . . . . . . . . . . . . $3,480,575 446,564 41,236 7,378 21,016 $107,975 46,245 3,189 4,976 19,338 $215,950 82,864 5,715 2,098 831 $442,083 77,990 5,281 273 303 $2,714,567 239,465 27,051 31 544 Total(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,996,769 $181,723 $307,458 $525,930 $2,981,658 (1) Our funding policy is to contribute at least equal to the minimum legal funding requirement. (2) Other long-term liabilities consist of our ESOP contributions and employee-related deferred compensation plan. We also have a deferred compensation plan for our Board of Directors; however, based on past performance and the uncertainty of the dollar amounts to be paid, if any, we have excluded such amounts from the above table. (3) Unrecognized tax benefits of approximately $14.5 million have been recorded as liabilities in accordance with ASC 740, which have been omitted from the table above, and we are uncertain as to if or when such amounts may be settled, with the exception of those amounts subject to a statute of limitation. Related to the unrecognized tax benefits, we also have recorded a liability for potential penalties and interest of $2.8 million. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Critical Accounting Policies and Estimates Our management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require management to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, goodwill and intangible assets, pension and other post retirement benefits, stock based compensation, and income taxes. Actual results may differ from these assumptions or conditions. Revenue Recognition The Company’s revenues are primarily derived from sales of services and revenue is recognized as services are performed and information is delivered to our customers. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, fees and/or price are fixed or determinable and collectability is reasonably assured. Revenues for subscription services are recognized ratably over the subscription term, usually one year. Revenues from transaction-based fees are recognized as information is delivered to customers, assuming all other revenue recognition criteria are met. 49 The Company also has term based software licenses where the only remaining undelivered element is post-contract customer support or PCS, including unspecified upgrade rights on a when and if available basis. The Company recognizes revenue for these licenses ratably over the duration of the license term. The PCS associated with these arrangements is coterminous with the duration of the license term. The Company also provides hosting or software solutions that provide continuous access to information and include PCS and recognizes revenue ratably over the duration of the license term. In addition, the determination of certain of our services revenues requires the use of estimates, principally related to transaction volumes in instances where these volumes are reported to us by our clients on a monthly basis in arrears. In these instances, we estimate transaction volumes based on average actual volumes reported by our customers in the past. Differences between our estimates and actual final volumes reported are recorded in the period in which actual volumes are reported. We have not experienced significant variances between our estimates of these services revenues reported to us by our customers and actual reported volumes in the past. We invoice our customers in annual, quarterly, or monthly installments. Amounts billed and collected in advance are recorded as deferred revenues on the balance sheet and are recognized as the services are performed and revenue recognition criteria are met. Stock Based Compensation The fair value of equity awards is measured on the date of grant using a Black-Scholes option-pricing model, which requires the use of several estimates, including expected term, expected risk-free interest rate, expected volatility and expected dividend yield. Stock based compensation cost is measured at the grant date, based on the fair value of the awards granted, and is recognized as expense over the requisite service period. Option grants and restricted stock awards are generally expensed ratably over the four-year vesting period. We follow the substantive vesting period approach for awards granted after January 1, 2005, which requires that stock based compensation expense be recognized over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service. We estimate expected forfeitures of equity awards at the date of grant and recognize compensation expense only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. Goodwill and Intangibles Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have definite lives are amortized over their useful lives. 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, using the guidance and criteria described in the accounting standard for Goodwill and Other Intangible Assets. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. As of December 31, 2015, we had goodwill and net intangible assets of $4,511.6 million, which represents 80.3% of our total assets. During 2015, we performed an impairment test as of June 30, 2015 and confirmed that no impairment charge was necessary. There are many assumptions and estimates used that directly impact the results of impairment testing, including an estimate of future expected revenues, earnings and cash flows, useful lives and discount rates applied to such expected cash flows in order to estimate fair value. We have the ability to influence the outcome and ultimate results based on the assumptions and estimates we choose for determining the fair value of our reporting units. To mitigate undue influence, we set criteria and benchmarks that are reviewed and approved by various levels of management and reviewed by other independent parties. The 50 determination of whether or not goodwill or indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions and estimates underlying the approach used to determine the value of our reporting units. Changes in our strategy or market conditions could significantly impact these judgments and require an impairment to be recorded to intangible assets and goodwill. As part of this regular process, the Company conducted the annual impairment test of our newly acquired energy reporting unit at June 30, 2015, at which time the fair value exceeded its carrying value by less than 5%. This outcome is consistent with the Company’s expectation due to the proximity of the impairment test date of June 30 to the acquisition date of May 19, 2015. Our valuation has not indicated any impairment of our goodwill asset of $3,134.8 million as of December 31, 2015. For the year ended December 31, 2015, there were no impairment indicators related to our intangible assets. There was a significant estimate this year related to the acquisition of Wood Mackenzie. The preliminarily estimated fair values of the tangible and intangible assets acquired and liabilities assumed in connection with the purchase of Wood Mackenzie have been recognized in the accompanying consolidated balance sheets based on known facts that existed on the date of acquisition. The excess of the purchase price over the preliminary fair values of the net tangible and intangible assets was recorded as goodwill. We determined the estimated fair values of the assets and liabilities of Wood Mackenzie with the assistance of valuations performed by third party specialists, discounted cash flow analysis and estimates made by management. These estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) and may have a significant impact on the consolidated financial statements. See Note 9 of our consolidated financial statements included in this Form 10-K for further information. Pension and Postretirement On February 29, 2012, we instituted a hard freeze, which eliminates all future compensation and service credits, to all participants in the pension plans. See Note 17 to our consolidated financial statements included in this annual report on Form 10-K. We account for our pension and postretirement benefit plans in accordance with the accounting standard for Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. This standard requires that employers recognize on a prospective basis the funded status of their defined benefit pension and other postretirement benefit plans on their consolidated balance sheets and recognize as a component of other comprehensive income (loss), net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit (credit) cost. Certain assumptions are used in the determination of our annual net period benefit (credit) cost and the disclosure of the funded status of these plans. The principal assumptions concern the discount rate used to measure the projected benefit obligation and the expected return on plan assets. We revise these assumptions based on an annual evaluation of long-term trends and market conditions that may have an impact on the cost of providing retirement benefits. In determining the discount rate, we utilize quoted rates from long-term bond indices, and changes in long-term bond rates over the past year, cash flow models and other data sources we consider reasonable based upon the life expectancy and mortality rate of eligible employees. As part of our evaluation, we calculate the approximate average yields on securities that were selected to match our separate projected cash flows for both the pension and postretirement plans. Our separate benefit plan cash flows are input into actuarial models that include data for corporate bonds rated AA or better at the measurement date. The output from the actuarial models are assessed against the prior year’s discount rate and quoted rates for long-term bond indices. For our pension plans at December 31, 2015, we determined this rate to be 4.73%, an increase of 0.74% from the 3.99% rate used at December 31, 2014. Our postretirement rate is 3.25% at December 31, 2015, an increase of 0.25% from the 3.00% used at December 31, 2014. The expected return on plan assets is determined by taking into consideration our analysis of our actual historical investment returns to a broader long-term forecast adjusted based on our target investment allocation, and the current economic environment. Our pension asset investment guidelines target an investment portfolio 51 allocation of 40.00% debt securities and 60.00% equity securities. As of December 31, 2015, the pension plan assets were allocated 39.60% debt, 60.00% equity securities and 0.40% other. The VEBA Plan target allocation is 100% debt. We have used our target investment allocation to derive the expected return as we believe this allocation will be retained on an ongoing basis that will be commensurate with the projected cash flows of the plan. The expected return for each investment category within our target investment allocation is developed using average historical rates of return for each targeted investment category, considering the projected cash flow of the qualified pension plan and postretirement plan. The difference between this expected return and the actual return on plan assets is generally deferred and recognized over subsequent periods through future net periodic benefit (credits) costs. We believe these considerations provide the basis for reasonable assumptions with respect to the expected long-term rate of return on plan assets. The measurement date used to determine the benefit obligation and plan assets is December 31. The future benefit payments for the postretirement plan are net of the federal medical subsidy. As a result of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at least actuarially equivalent to the corresponding benefits provided under Medicare Part D was effectively changed. This legislative change reduces future tax benefits of the coverage we provided to participants in the postretirement plan. We are required to account for this change in the period during which the law is enacted. A one percent change in discount rate and future rate of return on plan assets would have the following effects: Pension Postretirement 1% Decrease 1% Increase 1% Decrease 1% Increase Benefit (Credit) Cost Projected Benefit Obligation Benefit (Credit) Cost Projected Benefit Obligation Benefit (Credit) Cost Projected Benefit Obligation Benefit (Credit) Cost Projected Benefit Obligation $ (735) $45,968 $ 349 $(38,530) $ (50) $1,220 $ 42 $(1,083) (In thousands) Discount Rate . . . . . . . . . . . . Expected Rate of Return on Assets . . . . . . . . . . . . . . . . $4,591 $ — $(4,591) $ — $141 $ — $(141) $ — Income Taxes In projecting future taxable income, we develop assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use to manage the underlying businesses. The calculation of our tax liabilities also involves dealing with uncertainties in the application and evolution of complex tax laws and regulations in other jurisdictions. We account for uncertain tax positions in accordance with Accounting for Uncertainty in Income Taxes — an interpretation of ASC 740, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this interpretation, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. We recognize and adjust our liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. 52 We estimate unrecognized tax positions of $0.5 million that may be recognized by December 31, 2016, due to expiration of statutes of limitations and resolution of audits with taxing authorities, net of additional uncertain tax positions. As of December 31, 2015, we have gross federal, state, and foreign income tax net operating loss carryforwards of $56.6 million, which will expire at various dates from 2016 through 2035. Such net operating loss carryforwards expire as follows: 2016 - 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 - 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2029 - 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (In thousands) $ 3,428 12,418 40,720 $56,566 The net deferred income tax liability of $396.4 million consists primarily of timing differences involving depreciation and amortization. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, refer to Note 2(s) to the audited consolidated financial statements included elsewhere in this annual report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We are exposed to market risk from fluctuations in interest rates. At December 31, 2015, we had borrowings outstanding under our credit facility of $870.0 million, which bear interest at variable rates based on LIBOR plus 1.125% to 1.625%, depending on certain ratios defined in the credit agreement. A change in interest rates on variable rate debt impacts our pre-tax income and cash flows, but does not impact the fair value of the instruments. Based on our overall interest rate exposure at December 31, 2015, a one percent change in interest rate would result in a change in annual pre-tax interest expense of approximately $8.7 million based on our current borrowing levels. Foreign Currency Risk Our foreign-based businesses and results of operations are exposed to movements in the U.S. dollar to British pounds and other foreign currency exchange rates. A portion of our revenue is denominated in British pounds and other foreign currencies. If the U.S. dollar strengthens against British pounds and other foreign currencies, our revenues reported in U.S. dollars would decline. With regard to operating expense, our primary exposure to foreign currency exchange risk relates to operating expense incurred in British pounds and other foreign currencies. If British pounds and other foreign currencies strengthen, costs reported in U.S. dollars will increase. Movements in the U.S. dollar to British pounds and other foreign currency exchange rates did not have a material effect on our revenue for the year ended December 31, 2015. A hypothetical ten percent change in average exchange rates versus the U.S. dollar would not have resulted in a material change to our earnings. Item 8. Financial Statements and Supplementary Data The information required by this Item is set forth on pages 56 through 112 of this annual report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 53 Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We are required to maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives at the reasonable assurance level. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report on Form 10-K for the Company and our subsidiaries other than Wood Mackenzie and its subsidiaries which we acquired on May 19, 2015, Infield which we acquired on November 6, 2015 and PCI which we acquired on November 20, 2015. Management excluded from its assessment the internal control over financial reporting at Wood Mackenzie and subsidiaries, Infield, and PCI and collectively represented approximately 4.9% of total assets, and 10.2% of revenues as of and for the year ended December 31, 2015. Based upon the foregoing assessments, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2015, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control Over Financial Reporting Management’s Report on Internal Control Over Financial Reporting as of December 31, 2015 is set forth in Item 8. Financial Statement and Supplementary Data. Attestation Report of the Registered Public Accounting Firm The Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting as of December 31, 2015 is set forth in Item 8. Financial Statement and Supplementary Data. Changes in Internal Control Over Financial Reporting We are in the process of integrating Wood Mackenzie and its subsidiaries, Infield and PCI (which we acquired in May 2015 and November 2015, respectively) into our overall internal control over financial reporting process. Other than this ongoing integration, there have been no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the fourth quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required to be furnished by this Item 10. is incorporated herein by reference to our Notice of Annual Meeting of Stockholders and Proxy Statement to be filed within 120 days of December 31, 2015 (the “Proxy Statement”). 54 Item 11. Executive Compensation The information required to be furnished by this Item 11. is incorporated herein by reference to our Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required to be furnished by this Item 12. is incorporated herein by reference to our Proxy Statement. Item 13. Certain Relationships and Related Transactions and Director Independence The information required to be furnished by this Item 13. is incorporated herein by reference to our Proxy Statement. Item 14. Principal Accounting Fees and Services The information required to be furnished by this Item 14. is incorporated herein by reference to our Proxy Statement. Item 15. Exhibits and Financial Statement Schedule (a) The following documents are filed as part of this report. PART IV (1) Financial Statements. See Index to Financial Statements and Schedules in Part II, Item 8. on this Form 10-K. (2) Financial Statement Schedule. See Schedule II. Valuation and Qualifying Accounts and Reserves. (3) Exhibits. See Index to Exhibits in this annual report on Form 10-K. 55 Item 8. Consolidated Financial Statements and Supplementary Data Index to Consolidated Financial Statements and Schedule Verisk Analytics, Inc. Consolidated Financial Statements as of December 31, 2015 and 2014 and for the Years Ended December 31, 2015, 2014 and 2013. Management’s Report on Internal Controls Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Report of Independent Registered Public Accounting Firm on Internal Controls Over Financial Reporting . . . Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Stockholders’ Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements Schedule 57 58 59 61 62 63 64 65 67 Schedule II, Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 56 MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management concluded that our internal control over financial reporting was effective at December 31, 2015. Management excluded from its assessment the internal control over financial reporting at Wood Mackenzie Limited (“Wood Mackenzie”), which was acquired on May 19, 2015, Infield Systems Limited (“Infield”), which was acquired on November 6, 2015, and The PCI Group (“PCI”), which was acquired on November 20, 2015. The excluded financial statements of the acquisitions constitute approximately 4.9% of total assets and 10.2% of total revenues collectively included within our consolidated financial statement amounts as of and for the year ended December 31, 2015. Due to the timing of the acquisitions, management did not assess the effectiveness of internal control over financial reporting for Wood Mackenzie, Infield and PCI. Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this annual report on Form 10-K has also audited the effectiveness of our internal control over financial reporting as of December 31, 2015, as stated in their report which is included herein. 57 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Verisk Analytics, Inc. Jersey City, New Jersey We have audited the accompanying consolidated balance sheets of Verisk Analytics, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Verisk Analytics, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting. /s/ Deloitte & Touche LLP Parsippany, New Jersey February 23, 2016 58 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Verisk Analytics, Inc. Jersey City, New Jersey We have audited the internal control over financial reporting of Verisk Analytics, Inc. and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Controls over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Wood Mackenzie Limited, which was acquired on May 19, 2015, Infield Systems Limited, which was acquired on November 6, 2015, and The PCI Group, which was acquired on November 20, 2015. The financial statements of these acquisitions constitute 4.9% of total assets and 10.2% of revenues collectively of the consolidated financial statements of the Company as of and for the year ended December 31, 2015. Accordingly, our audit did not include the internal control over financial reporting at WoodMackenzie Limited, Infield Systems Limited or The PCI Group. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 59 We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated February 23, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule. /s/ Deloitte & Touche LLP Parsippany, New Jersey February 23, 2016 60 VERISK ANALYTICS, INC CONSOLIDATED BALANCE SHEETS As of December 31, 2015 and 2014 2015 2014 (In thousands, except for share and per share data) Current assets: ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,348 3,576 320,099 40,741 — 48,853 52,952 604,569 $ 39,359 3,801 220,668 31,496 4,772 65,512 18,875 384,483 Noncurrent assets: Fixed assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets, net Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,168 1,376,745 3,134,826 32,922 48,697 302,273 406,476 1,207,146 18,589 26,363 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,615,927 $ 2,345,330 Current liabilities: LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term debt and current portion of long-term debt Pension and postretirement benefits, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 245,664 874,811 1,831 356,951 $ Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,479,257 Noncurrent liabilities: Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,293,179 12,971 1,981 396,430 60,098 180,726 336,058 1,894 252,592 771,270 1,100,874 13,805 2,410 202,540 43,388 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,243,916 2,134,287 Commitments and contingencies Stockholders’ equity: Verisk common stock, $.001 par value; 2,000,000,000 and 1,200,000,000 shares authorized, respectively; 544,003,038 shares issued and 169,424,981 and 157,913,227 shares outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unearned KSOP contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock, at cost, 374,578,057 and 386,089,811 shares, respectively . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 — 2,023,390 (2,571,190) 2,161,726 (242,052) 137 (161) 1,171,196 (2,533,764) 1,654,149 (80,514) Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,372,011 211,043 Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,615,927 $ 2,345,330 The accompanying notes are an integral part of these consolidated financial statements. 61 VERISK ANALYTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For The Years Ended December 31, 2015, 2014 and 2013 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,068,010 $ 1,746,726 $ 1,595,703 2015 2014 2013 (In thousands, except for share and per share data) Expenses: Cost of revenues (exclusive of items shown separately below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization of fixed assets . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . 803,274 312,690 120,620 94,864 716,598 227,306 85,506 56,870 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,331,448 1,086,280 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736,562 660,446 Other income (expense): Investment income and others, net . . . . . . . . . . . . . . . . . . . . . . Gain on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . Income from discontinued operations, net of tax of $0, $25,305 and $4,753, respectively (Note 10) . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic net income per share: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . Diluted net income per share: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . Weighted average shares outstanding: $ $ $ $ $ 17,003 85,187 (121,316) (19,126) 717,436 (209,859) 507,577 — 507,577 3.07 — 3.07 3.01 — 3.01 $ $ $ $ $ 158 — (69,984) (69,826) 590,620 (219,755) 370,865 29,177 400,042 2.24 0.17 2.41 2.20 0.17 2.37 $ $ $ $ $ 622,523 228,982 66,190 63,741 981,436 614,267 609 — (76,136) (75,527) 538,740 (196,426) 342,314 6,066 348,380 2.04 0.03 2.07 1.99 0.03 2.02 Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,090,380 165,823,803 168,031,412 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,451,343 169,132,423 172,276,360 The accompanying notes are an integral part of these consolidated financial statements. 62 VERISK ANALYTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For The Years Ended December 31, 2015, 2014 and 2013 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 507,577 Other comprehensive income (loss), net of tax: 2015 2014 (In thousands) $400,042 2013 $348,380 Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized holding gain (loss) on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension and postretirement adjustment (162,742) 113 1,091 (1,286) (35) (35,705) (840) (147) 46,659 Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . (161,538) (37,026) 45,672 Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 346,039 $363,016 $394,052 The accompanying notes are an integral part of these consolidated financial statements. 63 2 9 7 , 9 3 0 5 5 3 6 5 , 1 1 1 0 , 0 2 2 4 2 ) 5 2 6 , 1 ( — — — — — — — — — — — — 8 9 6 — 9 4 1 — 1 2 1 8 7 , 5 1 1 0 , 4 3 ) 8 4 1 ( 4 1 4 , 1 1 1 0 , 0 2 1 2 2 ) 5 2 6 , 1 ( — — — — — — — — — — — — — — — — — — 9 8 5 , 7 4 5 2 4 0 , 0 0 4 ) 6 2 0 , 7 3 ( ) 6 4 4 , 5 7 7 ( 1 5 3 , 5 1 — — — ) 8 8 4 , 3 4 ( ) 6 2 0 , 7 3 ( — — — 2 4 0 , 0 0 4 7 0 1 , 4 5 2 , 1 — — — ) 6 4 4 , 5 7 6 ( — — 6 0 2 , 5 1 ) 0 0 0 , 0 0 1 ( ) 7 6 9 , 4 6 8 , 1 ( 6 0 1 , 2 0 2 , 1 ) 6 0 3 ( — — — 5 4 1 — — — — 7 3 1 — — — — 8 3 0 , 3 0 0 , 4 4 5 3 4 0 , 1 1 2 7 7 5 , 7 0 5 ) 6 5 4 , 0 2 ( ) 8 3 5 , 1 6 1 ( 6 7 0 , 4 1 — — — ) 4 1 5 , 0 8 ( ) 8 3 5 , 1 6 1 ( — — — 7 7 5 , 7 0 5 9 4 1 , 4 5 6 , 1 — — 7 2 3 ) 6 5 4 , 0 2 1 ( — — 8 8 5 , 3 1 0 0 0 , 0 0 1 ) 4 6 7 , 3 3 5 , 2 ( 6 9 1 , 1 7 1 , 1 ) 1 6 1 ( — — — 1 6 1 — — — — 7 3 1 — — — — 8 3 0 , 3 0 0 , 4 4 5 3 3 2 , 9 6 8 3 2 , 1 8 9 7 , 1 6 1 1 , 0 3 6 2 4 ) 0 5 3 , 2 ( 8 4 8 , 0 2 7 — — — — — — — — — — — — — — 0 9 5 , 9 6 0 3 7 , 1 1 0 7 1 , 1 — 3 7 1 — 0 4 8 5 2 , 1 5 6 3 0 5 , 7 5 8 6 5 2 6 , 1 6 1 1 , 0 3 6 8 3 ) 0 5 3 , 2 ( 1 1 0 , 2 7 3 , 1 $ ) 2 5 0 , 2 4 2 ( $ 6 2 7 , 1 6 1 , 2 $ ) 0 9 1 , 1 7 5 , 2 ( $ 0 9 3 , 3 2 0 , 2 $ — — — — — — — — — — — — — — — — — — — — — — $ 7 3 1 $ 8 3 0 , 3 0 0 , 4 4 5 1 9 9 9 5 7 , 7 3 1 — — — — 8 5 6 3 2 5 , 8 1 3 3 3 6 3 2 , 9 1 1 — — — — — — 1 9 5 , 5 5 2 0 8 3 , 8 4 3 2 7 6 , 5 4 0 3 9 , 4 1 ) 8 3 9 , 8 7 2 ( $ — — — 2 7 6 , 5 4 ) 0 6 1 , 9 8 ( $ — — — 7 2 7 , 5 0 9 0 8 3 , 8 4 3 — — — ) 8 3 9 , 8 7 2 ( — — — 3 5 7 , 4 1 $ ) 6 7 3 , 5 0 6 , 1 ( $ 6 4 7 , 4 4 0 , 1 $ ) a t a d e r a h s r o f t p e c x e , s d n a s u o h t n I ( — — — 7 7 1 ) 3 8 4 ( $ — — — — 7 3 1 $ — — — — 8 3 0 , 3 0 0 , 4 4 5 5 5 4 2 6 6 , 1 7 8 0 , 1 2 — — — — — — — 7 3 9 2 1 8 1 4 3 3 5 , 1 7 8 0 , 1 2 — — — — — — — — — . . . . . . . . . . . . . . . . . . l a t o T d e t a l u m u c c A r e h t O y t i u q E s e s s o L ’ s r e d l o h k c o t S e v i s n e h e r p m o C d e n i a t e R s g n i n r a E y r u s a e r T k c o t S l a n o i t i d d A n i - d i a P l a t i p a C d e n r a e n U P O S K s n o i t u b i r t n o C r a P e u l a V k c o t S n o m m o C d e u s s I . C N I , S C I T Y L A N A K S I R E V Y T I U Q E ’ S R E D L O H K C O T S N I S E G N A H C F O S T N E M E T A T S D E T A D I L O S N O C 3 1 0 2 d n a 4 1 0 2 , 5 1 0 2 , 1 3 r e b m e c e D d e d n E s r a e Y e h T r o F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d l e h h t i w s e r a h s 9 5 1 , 7 2 ( s d r a w a k c o t s d e t c i r t s e r ) k c o t s y r u s a e r t m o r f d e u s s i e r s e r a h s 5 7 9 , 3 ( d l e h h t i w s e r a h s 2 8 8 , 2 3 ( s d r a w a k c o t s d e t c i r t s e r ) k c o t s y r u s a e r t m o r f d e u s s i e r s e r a h s 4 4 8 , 5 ( s e r a h s 7 4 8 , 9 3 7 , 1 ( 2 9 9 , 7 2 $ f o t i f e n e b x a t g n i d u l c n i , d e s i c r e x e s n o i t p o k c o t S s e r a h s 2 5 2 , 7 7 1 ( 8 3 2 , 1 $ f o t i f e n e b x a t g n i d u l c n i , d e s p a l k c o t s d e t c i r t s e R y r u s a e r t m o r f d e u s s i e r s e r a h s 9 9 5 , 5 2 ( n a l p e s a h c r u p k c o t s e e y o l p m E m o r f d e u s s i e r s e r a h s 0 0 0 , 4 0 6 , 0 1 ( g n i r e f f o y t i u q e m o r f d e u s s i s e r a h S ) k c o t s y r u s a e r t m o r f d e u s s i e r s e r a h s 6 8 6 , 7 4 ( d e n r a e s e r a h s P O S K ) s e r a h s 4 7 4 , 8 8 0 , 1 ( d e r i u q c a k c o t s y r u s a e r T . . . . . . . . . . . ) k c o t s y r u s a e r t ) k c o t s y r u s a e r t m o r f d e u s s i e r ) k c o t s y r u s a e r t m o r f d e u s s i e r . . . . . . . . . . . . . . . . . . . . . . . . . . ) k c o t s n o i t a s n e p m o c d e s a b k c o t S m o r f t n e m e l t t e s e r a h s t e N . . . . s e c n a u s s i k c o t s ) t n e m e l t t e s x a t r o f r e h t O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 0 2 , 1 3 r e b m e c e D , e c n a l a B s e r a h s 0 5 7 , 6 7 0 , 4 ( 5 6 0 , 7 5 $ f o t i f e n e b x a t g n i d u l c n i , d e s i c r e x e s n o i t p o k c o t S s e r a h s 8 6 6 , 0 5 1 ( 1 9 9 $ f o t i f e n e b x a t g n i d u l c n i , d e s p a l k c o t s d e t c i r t s e R ) k c o t s y r u s a e r t m o r f d e u s s i e r ) k c o t s y r u s a e r t m o r f d e u s s i e r y r u s a e r t m o r f d e u s s i e r s e r a h s 9 7 8 , 7 2 ( n a l p e s a h c r u p k c o t s e e y o l p m E . . . . . . . . . . . . . . ) k c o t s n o i t a s n e p m o c d e s a b k c o t S m o r f t n e m e l t t e s e r a h s t e N . . . . s e c n a u s s i k c o t s ) t n e m e l t t e s x a t r o f r e h t O . . . . . . . . . . . . e m o c n i t e N s s o l e v i s n e h e r p m o c r e h t O 4 1 0 2 , 1 3 r e b m e c e D , e c n a l a B ) s e r a h s 2 5 5 , 2 3 5 , 4 ( d e r i u q c a k c o t s y r u s a e r T . . . . . . . d e n r a e s e r a h s P O S K e m o c n i e v i s n e h e r p m o c r e h t O . . . . . . . . . . . . . . . . . . . e m o c n i t e N 3 1 0 2 , 1 y r a u n a J , e c n a l a B n o i t a s n e p m o c d e s a b . . . . . . . . . . . . . . ) k c o t s k c o t S r e h t O . . . . . . . . . . . . e m o c n i t e N s s o l e v i s n e h e r p m o c r e h t O 3 1 0 2 , 1 3 r e b m e c e D , e c n a l a B s e r a h s 3 1 7 , 4 3 1 ( 0 5 5 $ f o t i f e n e b x a t g n i d u l c n i , d e s p a l k c o t s d e t c i r t s e R ) k c o t s y r u s a e r t m o r f d e u s s i e r ) k c o t s y r u s a e r t m o r f d e u s s i e r y r u s a e r t m o r f d e u s s i e r s e r a h s 3 5 9 , 6 2 ( n a l p e s a h c r u p k c o t s e e y o l p m E s e r a h s 6 4 7 , 1 9 0 , 1 ( 8 3 4 , 5 1 $ f o t i f e n e b x a t g n i d u l c n i , d e s i c r e x e s n o i t p o k c o t S 64 ) s e r a h s 7 8 0 , 2 0 8 , 0 1 ( d e r i u q c a k c o t s y r u s a e r T . . . . . d e n r a e s e r a h s P O S K ) k c o t s y r u s a e r t m o r f d e u s s i e r s e r a h s 9 0 1 , 8 ( s e c n a u s s i k c o t s . s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a s e t o n g n i y n a p m o c c a e h T VERISK ANALYTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For The Years Ended December 31, 2015, 2014 and 2013 Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by operating $ 507,577 $ 400,042 $ 348,380 2015 2014 (In thousands) 2013 activities: Depreciation and amortization of fixed assets . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of debt issuance costs and original issue discount Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . KSOP compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized loss (gain) on securities, net . . . . . . . . . . . . . . . . . . . . . . . . . Gain on exercise of common stock warrants . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on disposal of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefits from exercised stock options . . . . . . . . . . . . . . . . Loss on extinguishment of convertible note . . . . . . . . . . . . . . . . . . . . Other operating activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension and postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,620 94,864 12,899 1,305 14,076 30,542 (85,187) — 200 (15,602) (4,050) 379 (40,147) 547 — (14,609) 12,000 51,580 (8,832) (43,546) (13,704) 2,775 86,501 56,982 2,638 1,814 15,351 20,253 — (65,410) (257) — 24,491 1,048 (22,566) — — (54,515) (9,625) 13,760 12,675 22,114 (14,802) (1,042) 70,279 64,299 2,713 2,482 14,930 21,087 — — 92 — 44,140 628 (109,946) — 448 2,106 (2,386) 39,661 34,022 26,970 (11,392) (41,593) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 623,687 489,452 506,920 Cash flows from investing activities: Acquisitions, net of cash acquired of $40,803, $304 and $0, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of non-controlling interest in non-public companies . . . . . . Proceeds from sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from extinguishment of convertible note . . . . . . . . . . . . . . . Escrow funding associated with acquisitions . . . . . . . . . . . . . . . . . . . Proceeds from release of acquisition related escrows . . . . . . . . . . . . . Proceeds from the settlement of derivative instruments . . . . . . . . . . . Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . Proceeds from sales and maturities of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash received from the exercise of common stock warrants . . . . . . . Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,858,233) (101) (35,192) (5,000) — 151,170 — 453 — (83,411) — — — 85,187 (146,818) (166,138) (203) (165) (983) — — — — 280 — (145,976) (5,870) 388 15,602 101 513 — — 7,484 — (561) Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . (3,006,317) (35,530) (145,626) 65 VERISK ANALYTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) For The Years Ended December 31, 2015, 2014 and 2013 Cash flows from financing activities: Proceeds from issuance of long-term debt, net of original issue discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of current portion of long-term debt . . . . . . . . . . . . . . . . . . Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of short-term debt with original maturities 2015 2014 (In thousands) 2013 1,243,966 (170,000) (50,000) — — — (180,000) — — greater than three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830,000 — — Repayment of short-term debt with original maturities greater than three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Repayments) proceeds from short-term debt, net . . . . . . . . . . . . . . . . . . Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net share settlement of taxes from restricted stock awards . . . . . . . . . . . Excess tax benefits from exercised stock options . . . . . . . . . . . . . . . . . . Proceeds from stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of stock as part of a public offering . . . . . . . . . . Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,000) (105,000) (23,942) (20,456) (2,350) 40,147 38,831 720,848 (6,031) — 160,000 (465) (778,484) (1,625) 22,566 24,648 — (5,718) — (10,000) (605) (277,411) — 109,946 80,368 — (6,770) Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . 2,481,013 (579,078) (284,472) Effect of exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 (1,286) (840) Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . 98,989 39,359 (126,442) 165,801 75,982 89,819 Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,348 $ 39,359 $ 165,801 Supplemental disclosures: Taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 158,494 $ 205,498 $ 126,846 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106,098 $ 67,231 $ 75,084 Non-cash investing and financing activities: Repurchases of common stock included in accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 3,038 Deferred tax liability established on the date of acquisitions . . . . . . . . . . $ 213,048 Tenant improvement allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditures included in accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ $ $ 2,654 9,134 $ $ 1,187 — 6,044 $ 10,512 1,588 1,720 2,777 $ 76 $ 5,960 The accompanying notes are an integral part of these consolidated financial statements. 66 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except for share and per share data, unless otherwise stated) 1. Organization: Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) enable risk-bearing businesses to better understand and manage their risks. The Company provides its customers proprietary data that, combined with analytic methods, create embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) insurance risks in the United States of America (“U.S.”). The Company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. 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 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 consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“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, 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. As of December 31, 2013, the Company’s mortgage services business qualified as assets held-for-sale. The mortgage services business was sold on March 11, 2014. The results of operations for the Company’s mortgage services business are reported as a discontinued operation for the years ended December 31, 2014 and 2013 (See Note 10). Significant accounting policies include the following: (a) Intercompany Accounts and Transactions The consolidated financial statements include the accounts of Verisk. All intercompany accounts and transactions have been eliminated. (b) Revenue Recognition The following describes the Company’s primary types of revenues and the applicable revenue recognition policies. The Company’s revenues are primarily derived from sales of services and revenue is recognized as services are performed and information is delivered to customers. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, fees and/or price is fixed or determinable, and collectability is reasonably assured. Revenue is recognized net of applicable sales tax withholdings. 67 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Industry-Standard Insurance Programs Industry-standard insurance programs, statistical agent and data services and actuarial services are sold to participating insurance company customers under annual agreements covering a calendar year where the price is determined at the inception of the agreement. In accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition, the Company recognizes revenue ratably over the term of these annual agreements, as services are performed and continuous access to information is provided over the entire term of the agreements. Property-Specific Rating and Underwriting Information The Company provides property-specific rating information through reports issued for specific commercial properties, for which revenue is recognized when the report is delivered to the customer, provided that all other revenue recognition criteria are met. In addition, the Company provides hosting or software solutions that provide continuous access to information about the properties being insured and underwriting information in the form of standard policy forms to be used by customers. As the customer has a contractual right to take possession of the software without significant penalty, revenues from these arrangements are recognized ratably over the contract period from the time when the customer had access to the solution in accordance with ASC 985- 605, Software Revenue Recognition (“ASC 985-605”). The Company recognizes software license revenue when the arrangement does not require significant production, customization or modification of the software and the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred, fees are fixed or determinable, and collections are probable. These software arrangements include post-contract customer support (“PCS”). The Company recognizes software license revenue ratably over the duration of the annual license term as vendor specific objective evidence (“VSOE”) of PCS, the only remaining undelivered element, cannot be established in accordance with ASC 985-605. The PCS associated with these arrangements is coterminous with the duration of the license term. Insurance Insurance services primarily consist of term-based software licenses. These software arrangements include PCS, which includes unspecified upgrades on a when-and-if available basis. The Company recognizes software license revenue ratably over the duration of the annual license term as VSOE of PCS, the only remaining undelivered element, cannot be established in accordance with ASC 985-605. The PCS associated with these arrangements is coterminous with the duration of the license term. In certain instances, the customers are billed for access on a monthly basis for the term-based software licenses and the Company recognizes revenue accordingly. There are also services within insurance, which are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met. Financial Services Financial services include various types of services to customers. The Company primarily recognizes revenue ratably for these services over the term of the agreements, as services are performed and continuous service is provided over the entire term of the agreements. In addition, there are certain services which are comprised of transaction-based fees; in these instances, revenue is recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met. 68 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Healthcare The Company provides software hosting arrangements to customers whereby the customer does not have the right to take possession of the software. As these arrangements include PCS throughout the hosting term, revenues from these multiple element arrangements are recognized in accordance with ASC 605-25, Revenue Recognition — Multiple Element Arrangements (“ASC 605-25”). The Company recognizes revenue ratably over the duration of the license term, which ranges from one to five years, since the contractual elements do not have stand alone value. There are also services within healthcare, which are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met. Energy and Specialized Markets The Company provides hosting solutions that give continuous access to research information such as data analytics and commercial intelligence for the energy, chemicals, metals and mining verticals. For the hosting arrangements, whereby the customer does not have the right to take possession of the software, which include PCS throughout the hosting term, revenues from these multiple element arrangements are recognized in accordance with ASC 605-25. The Company recognizes revenue ratably over the duration of the license term, since the contractual elements do not have stand alone value. Specialized markets consist of term-based software licenses. These software arrangements include PCS, which includes unspecified upgrades on a when-and-if available basis. The Company recognizes software license revenue ratably over the duration of the annual license term as VSOE of PCS, the only remaining undelivered element, cannot be established in accordance with ASC 985-605. The PCS associated with these arrangements is coterminous with the duration of the license term. In certain instances, the customers are billed for access on a monthly basis for the term-based software licenses and the Company recognizes revenue accordingly. In addition, specialized markets are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met. The Company services long-term contract arrangements with certain customers. For these arrangements, revenue is recognized in accordance with ASC 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts (“ASC 605-35”), using the percentage-of-completion method, which requires the use of estimates. In such instances, management is required to estimate the input measures, based on hours incurred to date compared to total estimated hours of the project, with consideration also given to output measures, such as contract milestones, when applicable. Adjustments to estimates are made in the period in which the facts requiring such revisions become known. Accordingly, recognized revenues and profits are subject to revisions as the contract progresses to completion. The Company considers the contract substantially complete when there is compliance with all performance specifications and there are no remaining costs or potential risk. There are also services within energy and specialized markets, which are comprised of transaction-based fees recognized as information is delivered to customers, provided that all other revenue recognition criteria have been met. (c) Deferred Revenues The Company invoices its customers in annual, quarterly, monthly or milestone installments. Amounts billed and collected in advance of earnings are recorded as “Deferred revenues” in the accompanying consolidated balance sheets and are recognized as the services are performed and the applicable revenue recognition criteria are met. 69 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (d) Fixed Assets and Finite-lived Intangible Assets Property and equipment, internal-use software and finite-lived intangibles are stated at cost less accumulated depreciation and amortization, which are computed on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term. The Company’s internal software development costs primarily relate to internal-use software. Such costs are capitalized in the application development stage in accordance with ASC 350-40, Internal- use Software. The Company also capitalizes software development costs upon the establishment of technological feasibility for a product in accordance with ASC 985-20, Software to be Sold, Leased, or Marketed (“ASC 985-20”). Software development costs are amortized on a straight-line basis over a three-year period, which management believes represents the useful life of these capitalized costs. In accordance with ASC 360, Property, Plant & Equipment, whenever events or changes in circumstances indicate that the carrying amount of long-lived assets and finite-lived intangible assets may not be recoverable, the Company reviews its long-lived assets and finite-lived intangible assets for impairment by first comparing the carrying value of the assets to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. If the carrying value exceeds the sum of the assets’ undiscounted cash flows, the Company estimates and recognizes an impairment loss by taking the difference between the carrying value and fair value of the assets. (e) Capital and Operating Leases The Company leases various property, plant and equipment. Leased property is accounted for under ASC 840, Leases (“ASC 840”). Accordingly, leased property that meets certain criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of assets accounted for as capital leases is computed utilizing the straight-line method over the shorter of the remaining lease term or the estimated useful life (principally three to four years for computer equipment and automobiles). All other leases are accounted for as operating leases. Rent expense for operating leases, which may have rent escalation provisions or rent holidays, is recorded on a straight-line basis over the non- cancelable lease period in accordance with ASC 840. The initial lease term generally includes the build- out period, where no rent payments are typically due under the terms of the lease. The difference between rent expensed and rent paid is recorded as deferred rent. Construction allowances received from landlords are recorded as a deferred rent credit and amortized to rent expense over the term of the lease. (f) Investments The Company’s investments at December 31, 2015 and 2014 included registered investment companies and equity investments in non-public companies. The Company accounts for short-term investments in accordance with ASC 320, Investments-Debt and Equity Securities (“ASC 320”). There were no investments classified as trading securities at December 31, 2015 or 2014. All investments with readily determinable market values are classified as available-for-sale. While these investments are not held with the specific intention to sell them, they may be sold to support the Company’s investment strategies. All available-for-sale investments are carried at fair value. The cost of all available-for-sale investments sold is based on the specific identification method, with the exception of mutual fund-based investments, which is based on the weighted average cost method. Dividend income is accrued on the ex-dividend date. 70 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company performs reviews of its investment portfolio when individual holdings have experienced a decline in fair value below their respective cost. The Company considers a number of factors in the evaluation of whether a decline in value is other-than-temporary including: (a) the financial condition and near term prospects of the issuer; (b) the Company’s ability and intent to retain the investment for a period of time sufficient to allow for an anticipated recovery in value; and (c) the period and degree to which the market value has been below cost. Where the decline is deemed to be other-than- temporary, a charge is recorded to “Investment income and others” in the accompanying consolidated statements of operations, and a new cost basis is established for the investment. The Company’s equity investments in non-public companies are included in “Other assets” in the accompanying consolidated balance sheets. Those securities are carried at cost, as the Company owns less than 20% of the stock and does not otherwise have the ability to exercise significant influence. These securities are written down to their estimated realizable value when management considers there is an other-than-temporary decline in value based on financial information received and the business prospects of the entity. (g) Fair Value of Financial and Non-financial Instruments The Company follows the provisions of ASC 820-10, Fair Value Measurements (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value under U.S. GAAP and expands fair value measurement disclosures. The Company follows the provisions of ASC 820-10 for its financial assets and liabilities recognized or disclosed at fair value on a recurring basis. The Company follows the provisions of ASC 820-10 for its non-financial assets and liabilities recognized or disclosed at fair value. (h) Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is generally recorded at the invoiced amount. The allowance for doubtful accounts is estimated based on an analysis of the aging of the accounts receivable, historical write-offs, customer payment patterns, individual customer creditworthiness, current economic trends, and/or establishment of specific reserves for customers in adverse financial condition. The Company assesses the adequacy of the allowance for doubtful accounts on a quarterly basis. (i) Foreign Currency The Company has determined local currencies are the functional currencies of the foreign operations. The assets and liabilities of foreign subsidiaries are translated at the period-end rate of exchange and statement of operations items are translated at the average rates prevailing during the year. The resulting translation adjustment is recorded as a component of “Accumulated other comprehensive losses” in the accompanying consolidated statements of changes in stockholders’ equity. (j) Stock Based Compensation The Company follows ASC 718, Stock Compensation (“ASC 718”). Under ASC 718, stock based compensation cost is measured at the grant date, based on the fair value of the awards granted, and is recognized as expense over the requisite service period. Other equity awards, including restricted stock, are valued at the closing price of the Company’s common stock on the grant date. Restricted stock generally has a service vesting period of four years and the Company recognizes the expense ratably over this service vesting period. 71 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company estimates expected forfeitures of equity awards at the date of grant and recognizes compensation expense only for those awards expected 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, as well as the timing of expense recognized over the requisite service period. (k) Research and Development Costs Research and development costs, which are primarily related to the personnel and related overhead costs incurred in developing new services for customers, are expensed as incurred. Such costs were $22,737, $25,508 and $21,426 for the years ended December 31, 2015, 2014 and 2013, respectively, and were included in the accompanying consolidated statements of operations. (l) Advertising Costs Advertising costs, which are primarily associated with promoting the Company’s brand, names and solutions provided, are expensed as incurred. Such costs were $7,125, $6,360 and $8,457 for the years ended December 31, 2015, 2014 and 2013, respectively. (m) Income Taxes The Company accounts for income taxes under the asset and liability method under ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Deferred tax assets are recorded to the extent these assets are more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Valuation allowances are recognized to reduce deferred tax assets if it is determined to be more likely than not that all or some of the potential deferred tax assets will not be realized. The Company follows ASC 740-10, Income Taxes (“ASC 740-10”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements. ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized based on the technical merits when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. Income tax positions must meet a more likely than not recognition threshold in accordance with ASC 740-10. This standard also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within “Other liabilities” on the accompanying consolidated balance sheets. (n) Earnings Per Share Basic and diluted earnings per share (“EPS”) are determined in accordance with ASC 260, Earnings per Share, which specifies the computation, presentation and disclosure requirements for EPS. 72 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Basic EPS excludes all dilutive common stock equivalents. It is based upon the weighted average number of common shares outstanding during the period. Diluted EPS, as calculated using the treasury stock method, reflects the potential dilution that would occur if the Company’s dilutive outstanding stock options and stock awards were issued. (o) Pension and Postretirement Benefits The Company accounts for its pension and postretirement benefits under ASC 715, Compensation — Retirement Benefits (“ASC 715”). ASC 715 requires the recognition of the funded status of a benefit plan in the balance sheet, the recognition in other comprehensive income (loss) of gains or losses and prior service costs or credits arising during the period, but which are not included as components of periodic benefit cost, and the measurement of defined benefit plan assets and obligations as of the balance sheet date. The Company utilizes a valuation date of December 31. (p) Product Warranty Obligations The Company provides warranty coverage for certain of its solutions. The Company recognizes a product warranty obligation when claims are probable and can be reasonably estimated. As of December 31, 2015 and 2014, product warranty obligations were not material. In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of confidentiality, infringement of intellectual property or gross negligence. Such indemnifications are primarily granted under licensing of computer software. Most agreements contain provisions to limit the maximum potential amount of future payments that the Company could be required to make under these indemnifications; however, the Company is not able to develop an estimate of the maximum potential amount of future payments to be made under these indemnifications as the triggering events are not subject to predictability. (q) Loss Contingencies The Company accrues for costs relating to litigation, claims and other contingent matters when such liabilities become probable and reasonably estimable. Such estimates are based on management’s judgment. Actual amounts paid may differ from amounts estimated, and such differences will be charged to operations in the period in which the final determination of the liability is made. (r) Goodwill Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have finite lives are amortized over their useful lives. 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, 2015, which resulted in no impairment of goodwill in 2015. This test 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 the goodwill. 73 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (s) Recent Accounting Pronouncements In April 2015, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU No. 2015-03”). The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU No. 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The Company has elected not to early adopt. The adoption of ASU No. 2015-03 is not expected to have a material impact on the Company’s consolidated financial statements. In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU No. 2015-05”). This guidance is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement, primarily to determine whether the arrangement includes a sale or license of software. ASU No. 2015-05 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. The Company has elected to adopt ASU No. 2015-05 in 2016. The adoption of ASU No. 2015-05 is not expected to have a material impact on the Company’s consolidated financial statements. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers — Deferral of the Effective Date (“ASU No. 2015-14”). The amendments in this update defer the effective date of ASU No. 2014-09, Revenue from Contracts with Customers (“ASU No. 2015-09”), for all entities by one year. Public business entities will apply the guidance in ASU No. 2015-09 for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating ASU No. 2015-09 and has not determined the impact this standard may have on its financial statements nor decided upon the method of adoption. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU No. 2015-15”). ASU No. 2015-15 clarifies that ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, does not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. As a result, an entity may present debt issuance costs related to line-of-credit arrangements as an asset instead of as a direct deduction from the carrying amount of the debt. The Company has elected not to early adopt ASU No. 2015-15. The adoption of ASU No. 2015-15 is not expected to have a material impact on the Company’s consolidated financial statements. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU No. 2015-16”). ASU No. 2015-16 requires, for business combinations, that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted for reporting periods for which financial statements have not been issued. The Company has elected to early adopt ASU No. 2015-16 on a prospective basis. Adoption of this guidance did not have a material impact on the results of operations or financial position (see Note 9). In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU No. 2015-17”). This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The Company early adopted ASU No. 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of the net current deferred tax asset to the net non-current deferred tax asset in the accompanying consolidated 74 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) balance sheet as of December 31, 2015. No prior periods were retrospectively adjusted. The Company applied this guidance to its current fiscal year ending December 31, 2015. Adoption of this guidance did not have a material impact on the results of operations or financial position (see Note 12). 3. Concentration of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist primarily of cash and cash equivalents, available for sale securities and accounts receivable, which are generally not collateralized. The Company maintains its cash and cash equivalents in higher credit quality financial institutions in order to limit the amount of credit exposure. The total domestic cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) to a maximum amount of $250 per bank at December 31, 2015 and 2014. At December 31, 2015 and 2014, the Company had cash balances on deposit that exceeded the balance insured by the FDIC limit by approximately $85,000 and $16,316 with six banks. At December 31, 2015 and 2014, the Company also had cash on deposit with foreign banks of approximately $52,092 and $21,886, respectively. The Company considers the concentration of credit risk associated with its trade accounts receivable to be commercially reasonable and believes that such concentration does not result in the significant risk of near-term severe adverse impacts. The Company’s top fifty customers represent approximately 36% of revenues for 2015, 41% for 2014 and 38% for 2013 with no individual customer accounting for more than 2% of revenues during the year ended December 31, 2015, and 5% for 2014 and 3% for 2013. No individual customer comprised more than 3% of accounts receivable at December 31, 2015 and 7% at December 31, 2014. 4. Cash and Cash Equivalents: Cash and cash equivalents consist of cash in banks, commercial paper, money-market funds, and other liquid instruments with original maturities of 90 days or less at the time of purchase. 5. Accounts Receivable: Accounts receivable consisted of the following at December 31: Billed receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $283,509 41,660 $203,339 23,324 Total receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 325,169 (5,070) 226,663 (5,995) Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320,099 $220,668 2015 2014 6. Investments: Available-for-sale securities consisted of the following: Adjusted Cost Gross Unrealized Loss Fair Value December 31, 2015 Registered investment companies . . . . . . . . . . . . . . . . . . . . $3,622 $ (46) $3,576 December 31, 2014 Registered investment companies . . . . . . . . . . . . . . . . . . . . $4,045 $(244) $3,801 75 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 ASC 323-10- 25, The Equity Method of Accounting for Investments in Common Stock. At December 31, 2015 and 2014, the carrying value of such securities was $8,487, and has been included in “Other assets” in the accompanying consolidated balance sheets. Realized gain (loss) on securities, net, including write downs related to other-than-temporary impairments of available-for-sale securities and other assets, has been included in “Investment income and others” in the accompanying consolidated statements of operations. Realized gain (loss) on securities, net, was as follows for the years ended December 31: 2015 2014 2013 Gross realized gain on sale of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,718 $285 $ 966 Other-than-temporary impairment of securities . . . . . . . . . . . . . . . . . . . . . . (84) Other-than-temporary impairment of non-controlling interest in (316) (28) non-public companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (974) Realized gain (loss) on securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,402 $257 $ (92) 7. Fair Value Measurements: Certain assets and liabilities of the Company are reported at fair value in the accompanying 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 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 table provides information for such assets and liabilities as of December 31, 2015 and 2014. 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, deferred revenues, Business Combinations (“ASC 805”), short-term debt, and short-term debt expected to be refinanced approximate their carrying amounts because of the short-term nature of these instruments. 76 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total December 31, 2015 Registered investment companies(1) . . . . . . . . . . . . . . . . December 31, 2014 Cash equivalents — money-market funds . . . . . . . . . . . . Registered investment companies(1) . . . . . . . . . . . . . . . . $3,576 $3,576 $3,707 $3,801 $ — $3,801 $ — $3,707 $ — (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 consolidated balance sheets. The following table summarizes the carrying value and estimated fair value of the long-term debt as of December 31, 2015 and 2014 respectively: Financial instrument not carried at fair value: Long-term debt excluding capitalized leases . . . $2,290,862 $2,328,134 $1,265,848 $1,371,213 2015 2014 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value 8. Fixed Assets The following is a summary of fixed assets: December 31, 2015 Furniture and office equipment . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . Purchased software . . . . . . . . . . . . . . . . . . . Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased equipment Total fixed assets . . . . . . . . . . . . . . . . . . . December 31, 2014 Furniture and office equipment . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . Purchased software . . . . . . . . . . . . . . . . . . . Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased equipment Total fixed assets . . . . . . . . . . . . . . . . . . . Useful Life Cost Accumulated Depreciation and Amortization Net $250,673 71,061 130,760 410,872 33,098 $896,464 $199,199 65,212 116,089 266,559 32,776 $679,835 $(167,148) (30,104) (99,820) (152,204) (29,020) $ 83,525 40,957 30,940 258,668 4,078 $(478,296) $418,168 $(131,055) (27,884) (80,794) (111,766) (26,063) $ 68,144 37,328 35,295 154,793 6,713 $(377,562) $302,273 3-10 years Lease term 3years 3years 3-4 years 3-10 years Lease term 3years 3years 3-4 years 77 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Depreciation and amortization of fixed assets for the years ended December 31, 2015, 2014 and 2013 were $120,620, $85,506 and $66,190, of which $34,842, $19,000 and $12,806 related to amortization of internal- use software development costs, respectively. Amortization expense related to development of software for sale in accordance with ASC 985-20 was $9,228, $4,497 and $3,623 for the years ended December 31, 2015, 2014 and 2013, respectively. The Company had unamortized software development costs that had been capitalized in accordance with ASC 985-20 of $94,733, $34,749 and $29,149 as of December 31, 2015, 2014 and 2013, respectively. Leased equipment includes amounts held under capital leases for automobiles, computer software and computer equipment. 9. Acquisitions 2015 Acquisitions On May 19, 2015, the Company acquired 100 percent of the stock of Wood Mackenzie Limited (“Wood Mackenzie”) for a net cash purchase price of $2,889,629, including $78,694 of an indemnity escrow, which the Company financed through a combination of debt and equity offerings, borrowings under the Company’s new credit facility, and cash on hand. Due to the fact that a portion of the purchase price was funded in pounds sterling and the remainder in U.S. dollars, the Company entered into a foreign currency hedging instrument to purchase pounds sterling. The Company recorded a gain on the hedge of $85,187 within “Gain on derivative instruments” in the accompanying consolidated statements of operations. The proceeds from the gain were utilized to partially fund the acquisition of Wood Mackenzie. Wood Mackenzie is a global provider of data analytics and commercial intelligence for the energy, chemicals, metals and mining verticals. This acquisition advances the Company’s strategy to expand internationally and positions the Company in the global energy market. Wood Mackenzie is included in the energy and specialized markets vertical, formerly named the specialized markets vertical, of the Decision Analytics segment. On November 6, 2015, the Company acquired 100 percent of the stock of Infield Systems Limited (“Infield”). Infield is a provider of business intelligence, analysis, and research to the oil, gas, and associated marine industries. Infield has become part of Wood Mackenzie and continues to provide services to enhance Wood Mackenzie’s upstream and supply chain capabilities in the Decision Analytics segment. The Company paid a net cash purchase price of $13,804. The preliminary purchase price allocation of the acquisition is presented as “Others” in the table below. On November 20, 2015, the Company acquired 100 percent of the stock of The PCI Group (“PCI”). PCI is a consortium of five specialist companies that offer integrated data and subscriptions research in the chemicals, fibers, films, and plastics sectors. PCI has become part of Wood Mackenzie, a Verisk Analytics business, and continues to provide services to enhance Wood Mackenzie’s chemicals capabilities in the Decision Analytics segment. The Company paid a net cash purchase price of $37,387. The preliminary purchase price allocation of the acquisition is presented as “Others” in the table below. 78 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The preliminary purchase price allocations of the acquisitions resulted in the following: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wood Mackenzie $ 35,398 80,825 97,505 71,929 1,111,950 1,994,018 2,007 Others Total $ 5,405 1,954 419 267 22,172 36,328 5,022 $ 40,803 82,779 97,924 72,196 1,134,122 2,030,346 7,029 Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . 3,393,632 71,567 3,465,199 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . 110,000 142,457 209,032 7,116 468,605 Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,925,027 Less: Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,398 3,437 2,801 4,016 4,717 14,971 56,596 5,405 113,437 145,258 213,048 11,833 483,576 2,981,623 40,803 Net cash purchase price . . . . . . . . . . . . . . . . . . . . . . $2,889,629 $51,191 $2,940,820 The preliminary allocations of the purchase price above are subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The revisions may have a significant impact on the consolidated financial statements. During the year ended December 31, 2015, the Company revised the preliminary allocation of purchase price and estimated valuation of intangible assets by recording a decrease to intangible assets of $182,994, a decrease in deferred tax liabilities of $49,944, a decrease in other items of $3,871, and an increase to goodwill of $136,921. These adjustments have been reflected in the above preliminary allocations of the purchase price. The impact of all adjustments have been reflected in the consolidated financial statements as of and for the year ended December 31, 2015. The allocations of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to fixed assets and operating leases, income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill. The Company determined the estimated fair values of the assets and liabilities of Wood Mackenzie with the assistance of valuations performed by third party specialists, discounted cash flow analysis and estimates made by management. The preliminary amounts assigned to intangible assets by type for all other acquisitions were based upon the Company’s valuation model and historical experiences with entities with similar business characteristics. The preliminary amounts by type for the Wood Mackenzie acquisition are summarized in the table below: Technology-based . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketing-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Database-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Weighted Average Useful Life 7years 20years 15years 20years Total $ 104,663 232,935 278,106 496,246 $1,111,950 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The goodwill associated with the stock purchases of PCI, Infield and Wood Mackenzie is not deductible for tax purposes. For the year ended December 31, 2015, the Company incurred transaction costs related to these acquisitions of $27,637 included within “Selling, general and administrative” expenses and $13,336 included within “Interest expense” in the accompanying consolidated statements of operations. Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Wood Mackenzie occurred at the beginning of 2014. The pro forma information for the year ended December 31, 2015 and 2014 presented below is based on estimates and assumptions, which the Company believes to be reasonable but not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had this acquisition been completed at the beginning of 2014. The unaudited pro forma information includes intangible asset amortization charges and incremental borrowing costs as a result of the acquisition, net of related tax, estimated using the Company’s effective tax rate for continuing operations for the periods presented. Pro forma revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro forma income from continuing operations . . . . . . . . . . . . . . . . . . Pro forma basic income from continuing operations per share . . . . . . Pro forma diluted income from continuing operations per share . . . . $2,207,724 $ 507,416 3.07 $ 3.01 $ $2,121,241 $ 425,397 2.57 $ 2.52 $ 2015 2014 (unaudited) 2014 Acquisition On December 8, 2014, the Company acquired 100% of the stock of Maplecroft.Net Limited (“Maplecroft”), a provider of global risk analytics and advisory services, for a net cash purchase price of $30,141, which includes $2,725 of indemnity escrows held by the seller. Using a proprietary data aggregation and analytical approach, Maplecroft enables its customers to assess, monitor, and forecast a growing range of worldwide risks, including geopolitical and societal risks. Within the Company’s Decision Analytics segment, this acquisition establishes the Company’s position as a provider of value chain optimization tools, providing comprehensive quantitative risk analytics and platforms by which customers can visualize, quantify, mitigate, and manage risk. The preliminary purchase price allocation of the acquisition resulted in the following: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes, net Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maplecroft $ 1,833 543 98 13,270 21,369 37,113 4,318 2,654 6,972 Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,141 80 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The preliminary amounts assigned to intangible assets by type for the acquisition are summarized in the table below: Technology-based . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketing-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Useful Life 10years 10years 10years Total $ 3,202 458 9,610 Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10years $13,270 The goodwill associated with the stock purchase of Maplecroft is not deductible for tax purposes. For the year ended December 31, 2014, the Company incurred transaction costs related to this acquisition of $349 included within “Selling, general and administrative” expenses in the accompanying consolidated statements of operations. In accordance with ASC 805, the allocation of the purchase price for Maplecroft was revised during the measurement period. Refer to Note 11. Goodwill and Intangible Assets for further discussion. 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. During the year ended December 31, 2015, the Company released $5,144 and $37,005 of indemnity escrows related to the MediConnect Global, Inc. acquisition and the Wood Mackenzie acquisition, respectively. At December 31, 2015 and 2014, the current portion of the escrows amounted to $38,690 and $5,583, and the noncurrent portion of the escrows amounted to $4,591 and $0, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and “Other assets” in the accompanying consolidated balance sheets, respectively. 10. Discontinued Operations: On March 11, 2014, the Company sold 100% of the stock of the Company’s mortgage services business, Interthinx, which was a guarantor subsidiary, in exchange for a purchase price of $151,170. At the completion of the sale, Interthinx ceased being a guarantor. The cash received was adjusted subsequent to close to reflect final balances of certain working capital accounts and other closing adjustments. The Company recognized income from discontinued operations, net of tax, of $29,177 during 2014. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. The mortgage services business met 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 years ended December 31: Revenues from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,512 $109,151 Income from discontinued operations before income taxes (including gain on sale of $65,410 in 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes (including tax on the gain on sale in 2014) . . 54,482 (25,305) 10,819 (4,753) Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . $ 29,177 $ 6,066 2014 2013 81 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 11. Goodwill and Intangible Assets: Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have finite lives are amortized over their useful lives. The Company completed the required annual impairment test as of June 30, 2015, 2014 and 2013, which resulted in no impairment of goodwill. Based on the results of the impairment assessment as of June 30, 2015, the Company determined that the fair value of its reporting units exceeded their respective carrying value. There were no goodwill impairment indicators after the date of the last annual impairment test. The following is a summary of the change in goodwill from December 31, 2013 through December 31, 2015, both in total and as allocated to the Company’s operating segments: Goodwill at December 31, 2013(1) . . . . . . . . . . . . . . . . Current year acquisitions . . . . . . . . . . . . . . . . . . . . . . Acquisition related escrow funding . . . . . . . . . . . . . . Goodwill at December 31, 2014(1) . . . . . . . . . . . . . . . . Current year acquisitions . . . . . . . . . . . . . . . . . . . . . . Purchase accounting reclassifications . . . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . Goodwill at December 31, 2015(1) . . . . . . . . . . . . . . . . Risk Assessment Decision Analytics $55,555 — — 55,555 — — — $55,555 $1,126,126 22,740 2,725 1,151,591 2,030,346 1,589 (104,255) $3,079,271 Total $1,181,681 22,740 2,725 1,207,146 2,030,346 1,589 (104,255) $3,134,826 (1) These balances are net of accumulated impairment charges of $3,244 that occurred prior to December 31, 2013. During the year ended December 31, 2015, the Company finalized the purchase accounting for the acquisition of Maplecroft, which resulted in an increase in goodwill of $1,589, an increase in fixed assets of $355, an increase in current liabilities of $163, an increase in other liabilities of $288, a decrease in intangible assets of $2,494, and a decrease in deferred income taxes, net of $1,001. The impact of the finalization of the purchase accounting for these acquisitions was not material to the consolidated statements of operations for the years ended December 31, 2015 and 2014. The Company’s intangible assets and related accumulated amortization consisted of the following: December 31, 2015 Technology-based . . . . . . . . . . . . . . . . . Marketing-related . . . . . . . . . . . . . . . . . . Contract-based . . . . . . . . . . . . . . . . . . . . Customer-related . . . . . . . . . . . . . . . . . . Database-based . . . . . . . . . . . . . . . . . . . Total intangible assets . . . . . . . . . . . . December 31, 2014 Technology-based . . . . . . . . . . . . . . . . . Marketing-related . . . . . . . . . . . . . . . . . . Contract-based . . . . . . . . . . . . . . . . . . . . Customer-related . . . . . . . . . . . . . . . . . . Total intangible assets . . . . . . . . . . . . Cost Accumulated Amortization Net $ 417,884 292,012 6,555 653,223 470,367 $1,840,041 $ 299,705 71,504 6,555 399,011 $ 776,775 $(219,975) (66,214) (6,555) (155,804) (14,748) $(463,296) $ 197,909 225,798 — 497,419 455,619 $1,376,745 $(195,698) (54,745) (6,555) (113,301) $(370,299) $ 104,007 16,759 — 285,710 $ 406,476 Weighted Average Useful Life 8years 16years 6years 13years 20years 8years 5years 6years 13years 82 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Amortization expense related to intangible assets for the years ended December 31, 2015, 2014 and 2013, was approximately $94,864, $56,870, and $63,741, respectively. Estimated amortization expense in future periods through 2021 and thereafter for intangible assets subject to amortization is as follows: Year 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount $ 120,523 119,616 118,870 117,410 115,955 784,371 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,376,745 12. Income Taxes: Domestic and foreign income from continuing operations before income taxes was as follows: U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $605,777 111,659 $584,658 5,962 $532,933 5,807 Total income from continuing operations . . . . . . . . . . . . . . $717,436 $590,620 $538,740 2015 2014 2013 The components of the provision for income taxes from continuing operations for the years ended December 31 were as follows: Current: 2015 2014 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $181,536 25,565 3,414 $167,683 26,333 1,470 $134,014 18,764 1,201 Total current provision for income taxes . . . . . . . . . . . 210,515 195,486 153,979 Deferred: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred provision for income taxes . . . . . . . . . . 21,969 1,671 (24,296) (656) 27,220 (2,740) (211) 24,269 37,894 4,287 266 42,447 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . $209,859 $219,755 $196,426 The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate is as follows for the years ended December 31: Federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and local taxes, net of federal tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign tax differentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UK legislative change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 2014 2013 35.0% 35.0% 35.0% 2.6% 2.7% 2.6% (6.5)% (0.1)% (0.1)% (2.0)% —% —% 0.2% (0.4)% (1.0)% Effective tax rate for continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.3% 37.2% 36.5% 83 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The decrease in the effective tax rate in 2015 compared to 2014 was due to tax benefits related to the Wood Mackenzie acquisition and a U.K. legislative rate reduction. The tax effects of significant items comprising the Company’s deferred tax assets as of December 31 are as follows: Deferred income tax asset: 2015 2014 Employee wages, pension and other benefits . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating loss carryover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital and other unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,086 — 6,935 2,593 4,334 3,358 11,193 $ 29,756 1,835 5,463 4,292 2,472 3,255 4,956 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,499 (873) 53,626 52,029 (789) 51,240 Deferred income tax liability: Fixed assets and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (443,990) (6,066) (242,857) (6,151) Deferred income tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (450,056) (249,008) Deferred income tax liability, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(396,430) $(197,768) During November 2015, the FASB issued ASU No. 2015-17, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The Company early adopted ASU No. 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of the net current deferred tax asset to the net non-current deferred tax asset in the accompanying consolidated balance sheet as of December 31, 2015. No prior periods were retrospectively adjusted. The Company applied this guidance to its current fiscal year ended December 31, 2015. Adoption of this guidance had no material impact on the results of operations or financial position. The net deferred income liability of $396,430 consists primarily of timing differences involving depreciation and amortization. The ultimate realization of the deferred tax assets depends on the Company’s ability to generate sufficient taxable income in the future. The Company has provided for a valuation allowance against the deferred tax assets associated with the net operating losses of certain subsidiaries. The Company’s net operating loss carryforwards expire as follows: Years 2016-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024-2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2029-2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount $ 3,428 12,418 40,720 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,566 84 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A valuation allowance has been established based on the Company’s evaluation of the likelihood of utilizing these benefits before they expire. The Company has determined that the generation of future taxable income from certain subsidiaries to fully realize the deferred tax assets is uncertain. Other than these items, the Company has determined, based on the Company’s historical operating performance, that taxable income of the Company will more likely than not be sufficient to fully realize the deferred tax assets. It is the practice of the Company to permanently reinvest the undistributed earnings of its foreign subsidiaries in those operations. As of December 31, 2015, the Company has not made a provision for U.S. or additional foreign withholdings taxes on approximately $102,837 of the unremitted earnings. The Company does not rely on these unremitted earnings as a source of funds for its domestic business as it expects to have sufficient cash flow in the U.S. to fund its U.S. operational and strategic needs. Consequently, the Company has not provided for U.S. federal or state income taxes or associated withholding taxes on these undistributed foreign earnings. The Company follows ASC No. 740-10, which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. For each tax position, the Company must determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to recognize within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows: Unrecognized tax benefit at January 1 . . . . . . . . . . . . . . . . . . . . . . . . Gross increase in tax positions in prior period . . . . . . . . . . . . . . Gross decrease in tax positions in prior period . . . . . . . . . . . . . Gross increase in tax positions from stock acquisitions . . . . . .. Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 2014 2013 $10,637 7,137 (2,666) — (285) (348) $ 9,524 2,679 — — — (1,566) $17,883 541 (4,241) — (390) (4,269) Unrecognized tax benefit at December 31 . . . . . . . . . . . . . $14,475 $10,637 $ 9,524 Of the total unrecognized tax benefits at December 31, 2015, 2014 and 2013, $11,444, $5,771 and $4,658, respectively, represent the amounts that, if recognized, would have a favorable effect on the Company’s effective tax rate in any future periods. The total gross amount of accrued interest and penalties at December 31, 2015, 2014 and 2013 was $2,815, $2,818 and $2,619, respectively. The Company’s practice is to recognize interest and penalties associated with income taxes as a component of “Provision for income taxes” in the accompanying consolidated statements of operations. The Company does not expect a significant increase in unrecognized benefits related to federal, foreign, or state tax exposures within the coming year. In addition, the Company believes that it is reasonably possible that approximately $472 of its currently remaining unrecognized tax positions, each of which is individually insignificant, may be recognized by the end of 2016 as a result of a combination of audit settlements and lapses of statute of limitations, net of additional uncertain tax positions. The Company is subject to tax in the U.S. and in various state and foreign jurisdictions. The Company joined by its domestic subsidiaries, files a consolidated income tax return for the Federal income tax purposes. 85 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) With few exceptions, none of which are material to the Company’s consolidated financial statements at December 31, 2015, the Company is no longer subject to U.S. federal, state, and local or non-US income tax examinations by tax authorities for tax years before 2011. The Internal Revenue Service is conducting an audit for Mediconnect for the year ended March 30, 2012, with a statute extension until December 31, 2016. In New Jersey, the Company is being audited for the years ended December 31, 2007 through 2013. The Company is also under audit in New York for the years ended December 31, 2010 through 2012 with a statue extension until July 29, 2016. The Company is also under audit in Illinois for the years ended December 31, 2012 through 2013. The Company does not expect that the results of these examinations will have a material effect on its financial position, results of operations or cash flow. 13. Composition of Certain Financial Statement Captions: The following table presents the components of “Other current assets”, “Accounts payable and accrued liabilities” and “Other liabilities” as of December 31: 2015 2014 Other current assets: Acquisition related escrows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,690 14,262 $ 5,583 13,292 Total other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,952 $ 18,875 Accounts payable and accrued liabilities: Accrued salaries, benefits and other related costs . . . . . . . . . . . . . . . . . . . . . Escrow liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade accounts payable and other accrued expenses . . . . . . . . . . . . . . . . . . $101,259 38,632 105,773 $ 87,729 5,565 87,432 Total accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . $245,664 $180,726 Other liabilities: Unrecognized tax benefits, including interest and penalty . . . . . . . . . . . . . . Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,290 33,093 9,715 $ 13,455 22,386 7,547 Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,098 $ 43,388 86 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 14. Debt: The following table presents short-term and long-term debt by issuance as of December 31: Short-term debt and current portion of long-term debt: Syndicated revolving credit facility . . . . Prudential shelf notes: Issuance Date Maturity Date 2015 2014 Various Various $ 870,000 $ 160,000 5.84% Series H shelf notes . . . . . . . . . 6.28% Series I shelf notes . . . . . . . . . . 10/26/2007 4/29/2008 10/26/2015 4/29/2015 New York Life shelf notes: 5.87% Series A shelf notes . . . . . . . . . 6.35% Series B shelf notes . . . . . . . . . Capital lease obligations . . . . . . . . . . . . . 10/26/2007 4/29/2008 Various 10/26/2015 4/29/2015 Various — — — — 4,811 17,500 85,000 17,500 50,000 6,058 874,811 336,058 Short-term debt and current portion of long-term debt . . . . . . . . . . . . . . . . . Long-term debt: Senior notes: 4.000% senior notes, less unamortized discount of $4,532 and $0, respectively . . . . . . . . . . . . . . . . . . . 5.500% senior notes, less unamortized discount of $1,175 and $0, respectively . . . . . . . . . . . . . . . . . . . 4.125% senior notes, less unamortized discount of $1,860 and $2,137, respectively . . . . . . . . . . . . . . . . . . . 4.875% senior notes, less unamortized discount of $1,023 and $1,361, respectively . . . . . . . . . . . . . . . . . . . 5.80% senior notes, less unamortized discount of $548 and $654, respectively . . . . . . . . . . . . . . . . . . . Prudential shelf notes: 5/15/2015 6/15/2025 895,468 5/15/2015 6/15/2045 348,825 — — 9/12/2012 9/12/2022 348,140 347,863 12/8/2011 1/15/2019 248,977 248,639 4/6/2011 5/1/2021 449,452 449,346 6.85% Series J shelf notes . . . . . . . . . Capital lease obligations . . . . . . . . . . . . . 6/15/2009 Various 6/15/2016 Various — 2,317 50,000 5,026 Long-term debt . . . . . . . . . . . . . . . . . . Total debt . . . . . . . . . . . . . . . . . . . . . . 2,293,179 1,100,874 $3,167,990 $1,436,932 Accrued interest associated with the Company’s outstanding debt obligations was $18,584 and $16,265 as of December 31, 2015 and 2014, respectively, and included in “Accounts payable and accrued liabilities” within the accompanying consolidated balance sheets. Interest expense associated with the Company’s outstanding debt obligations was $121,316, $69,984 and $76,136 for the years ended December 31, 2015, 2014 and 2013, respectively. 87 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Senior Notes On May 15, 2015, the Company completed issuances of senior notes in aggregate principal amounts of $900,000 and $350,000 due on June 15, 2025 and June 15, 2045, respectively, that accrue interest at a rate of 4.000% and 5.500%, respectively. Interest is payable semiannually on both series of senior notes on June 15th and December 15th of each year, beginning on December 15, 2015. The senior notes were issued at a discount of $4,833 and $1,201, respectively, and the Company incurred debt issuance costs on the senior notes of $7,560 and $4,138, respectively. The discount and debt issuance costs were recorded in “Long-term debt” and “Other assets,” respectively, in the accompanying consolidated balance sheets and these costs will be amortized to “Interest expense” in the accompanying consolidated statements of operations over the life of the respective senior note. The net proceeds from the issuance of these notes was utilized to partially fund the acquisition of Wood Mackenzie. The indenture governing the senior notes restricts the Company’s ability to, among other things, create certain liens, enter into sale/leaseback transactions and consolidate with, sell, lease, convey or otherwise transfer all or substantially all of the Company’s assets, or merge with or into, any other person or entity. As of December 31, 2015 and 2014, the Company had senior notes with an aggregate principal amount of $2,300,000 and $1,050,000 outstanding, respectively. On April 22, 2015, the Company signed an agreement to enter into a $1,750,000 committed senior unsecured Syndicated Revolving Credit Facility (the “new Credit Facility”) with Bank of America N.A., JP Morgan Chase, N.A., Sun Trust Bank, Wells Fargo Bank N.A., Citizens Bank, N.A., Morgan Stanley Senior Funding, Inc., HSBC Bank USA, N.A., Royal Bank of Canada, BNP Paribas, TD Bank, N.A., The Northern Trust Company, and Capital One N.A. The new Credit Facility became effective on May 15, 2015. The new Credit Facility has a single borrower, Verisk Analytics, Inc,. and there are no guarantor subsidiaries of the debt. In accordance with the indenture governing our senior notes, the guarantor subsidiaries of the senior notes were automatically released as they were no longer guarantor subsidiaries under the new Credit Facility. On July 24, 2015, the Company entered into the First Amendment to the new Credit Facility which modified the definitions of Consolidated EBIT and Consolidated EBITDA to permit the adding back of certain non-recurring expenses related to the acquisition of Wood Mackenzie. The Company utilized borrowings of $930,000 from the new Credit Facility to partially fund the purchase of Wood Mackenzie. The new Credit Facility may also be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program (the “Repurchase Program”). The new Credit Facility has replaced the previously existing $990,000 Syndicated Revolving Credit Facility (the “old Credit Facility”). The new Credit Facility contains certain financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants also place restrictions on mergers, asset sales, sale/leaseback transactions, payments between the Company and its subsidiaries, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, the Company have a consolidated interest coverage ratio of at least 3.0 to 1.0 and that it maintains, during any period of four fiscal quarters, a consolidated funded debt leverage ratio of 3.75 to 1.0, which ratio steps down to 3.5 to 1.0 at the end of the fourth fiscal quarter ending after the consummation of the acquisition of Wood Mackenzie. The Company was in compliance with all financial covenants under the new Credit Facility as of December 31, 2015. Interest on borrowings under the new Credit Facility is payable at an interest rate of LIBOR plus 1.125% to 1.625%, depending upon the consolidated funded debt leverage ratio. A commitment fee on any unused balance is payable periodically and may range from 12.50 to 25.00 basis points based upon the consolidated funded debt leverage ratio. As of December 31, 2015 and 2014, the Company had outstanding borrowings under the new Credit Facility and old Credit Facility of $870,000 and $160,000, 88 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) respectively. In January and February 2016, the Company repaid a total of $165,000 of the $870,000 outstanding borrowings at December 31, 2015 under the new Credit Facility. As of December 31, 2015, the Company no longer has any outstanding private placement debt. On April 29, 2015, the Company repaid $85,000 and $50,000 of private placement debt with Prudential Capital Group and New York Life, respectively, that came due utilizing $55,000 from cash from on hand and $80,000 from borrowings under the Credit Facility. On May 14, 2015, the Company prepaid the remaining private placement debt with New York Life of $17,500, which had been due on October 26, 2015, and $17,500 and $50,000 of remaining private placement debt with Prudential, which was due on October 26, 2015, and June 15, 2016, respectively. To prepay this debt, the Company utilized $25,000 of cash on hand and borrowings from its old Credit Facility of $60,000. The contractual costs for the prepayment of this debt was $4,786 and was recorded to “Interest expense” in the accompanying consolidated statements of operations for the year ended December 31, 2015. On March 10, 2015, in connection with the Company’s agreement to acquire Wood Mackenzie, the Company entered into a commitment letter for a $2,300,000 364-day bridge financing arrangement with Bank of America N.A. and Morgan Stanley Bank N.A. acting as joint lead arrangers. This financing arrangement was only to be utilized in the event the Company did not complete the debt and equity offerings relating to its acquisition of Wood Mackenzie by a certain date, and was terminated upon the closing of the acquisition. See Note 9. The Company paid fees associated with this financing arrangement of $9,100. Due to the completion of the debt and equity offerings, this arrangement was terminated and the full $9,100 of fees were recorded to “Interest expense” in the accompanying consolidated statements of operations for the year ended December 31, 2015. The Company was in compliance with all financial covenants at December 31, 2015 and 2014. Debt Maturities The following table reflects the Company’s debt maturities: Year 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount $ 874,811 1,411 618 250,210 48 2,050,030 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,177,128 15. Stockholders’ Equity: The Company has 2,000,000,000 and 1,200,000,000 shares of authorized common stock as of December 31, 2015 and 2014, respectively. 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. The Company has 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the common shares with respect to dividends and net distribution upon liquidation. The Company did not issue any preferred shares as of December 31, 2015. 89 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Equity Offering The Company completed an equity offering of its common stock on May 12, 2015 in order to finance the acquisition of Wood Mackenzie. The Company received total proceeds of $721,867, net of underwriting discount of $20,413, from the offering of 10,604,000 treasury shares at a net public offering price of $68.075 per share. In conjunction with the offering, the Company incurred $1,019 of costs related to the issuance of the common stock. The proceeds from the offering, net of underwriting discount and related issuance costs, was recorded as a decrease to treasury shares at the weighted average price of the Company’s treasury shares, with the remainder of the net proceeds recorded as an increase to additional paid in capital in the accompanying condensed consolidated balance sheets and condensed consolidated statements of changes in stockholders’ equity. Share Repurchase Program Since May 2010, the Company has authorized repurchases of up to $2,300,000 of its common stock through its Repurchase Program, including the additional authorization of $300,000 announced on December 1, 2015. 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 $1,830,649. As of December 31, 2015, the Company had $469,351 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 ISO 401(k) Savings and Employee Stock Ownership Plan (“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. Shares that are repurchased under the Repurchase Program will be recorded as treasury stock and will be available for future issuance. In December 2014, the Company entered into an accelerated share repurchase program (“ASR”) to repurchase shares of its common stock for an aggregate purchase price of $500,000. Upon payment of the aggregate purchase price in December 2014, the Company received an initial delivery of 6,372,472 shares of the Company’s common stock. Upon final settlement of the ASR agreement in June 2015, the Company received an additional 809,021 shares of the Company’s common stock. These repurchases of 7,181,493 shares resulted in a reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share (“EPS”). During the years ended December 31, 2015 and 2014, the Company repurchased 279,453 and 10,802,087 shares of common stock as part of the Repurchase Program at a weighted average price of $73.20 and $62.53 per share, respectively. The Company utilized cash from operations and borrowings from its Credit Facility to fund these repurchases. Treasury Stock As of December 31, 2015, the Company’s treasury stock consisted of 374,578,057 shares of common stock. During the years ended December 31, 2015 and 2014, the Company reissued 12,600,228 and 1,257,387 shares of common stock, under the 2013 Incentive Plan, 2009 Incentive Plan and the 1996 Incentive Plan, from the treasury shares at a weighted average price of $6.59 and $5.29 per share, respectively. 90 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Earnings Per Share Basic EPS is computed by dividing income from continuing operations, income from discontinued operations and net income, 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, nonvested restricted stock units, and the impact from the ASR program, had been issued. The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the years ended December 31: Numerator used in basic and diluted EPS: Income from continuing operations . . . . . . Income from discontinued operations . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Denominator: Weighted average number of common 2015 2014 2013 (In thousands, except for share and per share data) $ $ 507,577 — 507,577 $ $ 370,865 29,177 400,042 $ $ 342,314 6,066 348,380 shares used in basic EPS . . . . . . . . . . . . . 165,090,380 165,823,803 168,031,412 Effect of dilutive shares: Potential common stock issuable from stock options and stock awards . . . . . . . . 3,360,963 3,308,620 4,244,948 Weighted average number of common shares and dilutive potential common shares used in diluted EPS . . . . . . . . . 168,451,343 169,132,423 172,276,360 The potential shares of common stock that were excluded from diluted EPS were 1,221,301, 1,633,670 and 656,499 at December 31, 2015, 2014 and 2013, respectively, because the effect of including those potential shares was anti-dilutive. Accumulated Other Comprehensive Losses The following is a summary of accumulated other comprehensive losses as of December 31: . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustment Unrealized gains (losses) on available-for-sale securities, net of tax . . . . Pension and postretirement adjustment, net of tax . . . . . . . . . . . . . . . . . . $(165,828) 3 (76,227) $ (3,086) (110) (77,318) Accumulated other comprehensive losses . . . . . . . . . . . . . . . . . . . . . . $(242,052) $(80,514) 2015 2014 91 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The before tax and after tax amounts of other comprehensive income for the years ended December 31, 2015, 2014 and 2013 are summarized below: Before Tax Tax Benefit (Expense) After Tax December 31, 2015 Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(162,742) $ — $(162,742) Unrealized holding gain on available-for-sale securities before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount reclassified from accumulated other comprehensive losses(1) . . Unrealized holding gain on available-for-sale securities . . . . . . . . . . . . Pension and postretirement adjustment before reclassifications . . . . . . . . . . Amortization of net actuarial loss and prior service benefit reclassified 398 (200) 198 (162) 77 (85) 236 (123) 113 5,197 (2,105) 3,092 from accumulated other comprehensive losses(2) . . . . . . . . . . . . . . . . . (3,242) 1,241 (2,001) Pension and postretirement adjustment . . . . . . . . . . . . . . . . . . . . . . . . . Total other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,955 $(160,589) $ (864) 1,091 (949) $(161,538) December 31, 2014 Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,286) $ — $ (1,286) Unrealized holding loss on available-for-sale securities before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount reclassified from accumulated other comprehensive losses(1) . . Unrealized holding loss on available-for-sale securities . . . . . . . . . . . . Pension and postretirement adjustment before reclassifications . . . . . . . . . . Amortization of net actuarial loss and prior service benefit reclassified (314) 257 (57) 121 (99) 22 (193) 158 (35) (56,635) 21,629 (35,006) from accumulated other comprehensive losses(2) . . . . . . . . . . . . . . . . . (1,134) 435 (699) Pension and postretirement adjustment . . . . . . . . . . . . . . . . . . . . . . . . . (57,769) 22,064 (35,705) Total other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (59,112) $ 22,086 $ (37,026) December 31, 2013 Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (840) $ — $ (840) Unrealized holding loss on available-for-sale securities before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount reclassified from accumulated other comprehensive losses(1) . . Unrealized holding loss on available-for-sale securities . . . . . . . . . . . . Pension and postretirement adjustment before reclassifications . . . . . . . . . . Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses(2) . . . . . . . . . . . . . . . . . Pension and postretirement adjustment . . . . . . . . . . . . . . . . . . . . . . . . . (1,122) 882 (240) 433 (340) 93 (689) 542 (147) 80,773 (30,611) 50,162 (5,699) 75,074 2,196 (28,415) (3,503) 46,659 Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,994 $(28,322) $ 45,672 (1) This accumulated other comprehensive losses component, before tax, is included under “Investment income and others” in the accompanying consolidated statements of operations. (2) This accumulated other comprehensive losses component, before tax, is included under “Cost of revenues” and “Selling, general and administrative” in the accompanying consolidated statements of operations. This component is also included in the computation of net periodic benefit (credit) cost (see Note 17 Pension and Postretirement Benefits for additional details). 92 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 16. Compensation Plans: KSOP The Company has established the KSOP for the benefit of eligible employees in the U.S. and Puerto Rico. The KSOP includes both an employee savings component and an employee stock ownership component. The purpose of the combined plan is to enable the Company’s employees to participate in a tax-deferred savings arrangement under Internal Revenue Service Code Sections 401(a) and 401(k) (the “Code”), and to provide employee equity participation in the Company through the employee stock ownership plan (“ESOP”) accounts. Under the KSOP, eligible employees may make pre-tax and after-tax cash contributions as a percentage of their compensation, subject to certain limitations under the applicable provisions of the Code. The maximum pre-tax contribution that can be made to the 401(k) account as determined under the provisions of Code Section 401(g) is $18, $18 and $18 for 2015, 2014 and 2013, respectively. Certain eligible participants (age 50 and older) may contribute an additional $6 on a pre-tax basis for 2015, 2014 and 2013. After-tax contributions are limited to 10% of a participant’s compensation. The quarterly matching contributions are primarily equal to 75% of the first 6% of the participant’s contribution. The Company established the ESOP component as a funding vehicle for the KSOP. The common shares acquired by the KSOP were pledged as collateral under an intercompany loan agreement (“ESOP loan”) between the KSOP and Company. The Company made quarterly cash contributions to the KSOP equal to the KSOP’s debt service. As the debt was repaid, shares were released from collateral and are used to fund the quarterly 401(k) matching and profit sharing contributions before being allocated to active employees in proportion to their annual salaries in relation to total participant salaries. The Company accounted for its ESOP in accordance with ASC 718-40, Employee Stock Ownership Plans (“ASC 718-40”) and ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”). As shares were committed to be released from collateral, the Company reported compensation expense at the then-current fair value of the shares, and the shares become outstanding for EPS computations. As of December 31, 2015, the KSOP no longer has any outstanding ESOP loan balance with the Company. The Company issued 47,686 shares of common stock at a weighted average per price of $77.51 to fund quarterly matching contributions for the year ended December 31, 2015. In accordance with the ESOP loan, the Company is also required to contribute a total of $17,000, plus interest, of cash or shares to the KSOP by the end of 2016. Earlier contribution is at the Company’s discretion. As of December 31, 2015, the Company had no allocated ESOP shares. For the years ended December 31, 2015, 2014 and 2013, there were no ESOP contributions. In 2005, the Company established the ISO Profit Sharing Plan (the “Profit Sharing Plan”), a defined contribution plan, to replace the qualified pension plan for all eligible employees hired on or after March 1, 2005. The Profit Sharing Plan is a component of the KSOP. Eligible employees participated in the Profit Sharing Plan if they completed 1,000 hours of service each plan year and were employed on December 31 of that year. The Company can make a discretionary contribution to the Profit Sharing Plan based on the annual performance of the Company. Participants vest once they have completed four years and 1,000 hours of service. For the years ended December 31, 2015, 2014 and 2013, there were no profit sharing contributions. At December 31, 2015, 2014 and 2013, the fair value of Verisk common stock was $76.88, $64.05, and $65.72 per share, respectively. KSOP compensation expense for 2015, 2014 and 2013 was approximately $14,076, $15,351 and $14,930, respectively. 93 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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. The number of shares of common stock available for issuance under the 2013 Incentive Plan is 15,700,000 and such amount shall be reduced on a 1-for-1 basis for every share issued that is subject to an option or stock appreciation right and on a 2.5-for-1 basis for every share issued that is subject to an award other than an option or stock appreciation right. Shares that were subject to an award under the 2013 Incentive Plan that become forfeited, expired or otherwise terminated shall again be available for issuance under the 2013 Incentive Plan on a 1-for-1 basis if the shares were subject to options or stock appreciation rights, and on an 2.5-for-1 basis if the shares were subject to awards other than options or stock appreciation rights. As of December 31, 2015, there were 10,351,157 shares of common stock reserved and available for future issuance. Cash received from stock option exercises for the years ended December 31, 2015, 2014 and 2013 was $38,831, $24,648 and $80,368, respectively. The Company has granted equity awards to key employees and directors. 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. The fair value of the restricted stock is determined using the closing price of the Company’s common stock on the grant date. The restricted stock is not assignable or transferable until it becomes vested. The Company recognizes the expense of the equity awards over the vesting period. A summary of the equity awards granted for the year ended December 31, 2015 is presented below. Grant Date Service Vesting Period Stock Options Restricted Stock Common Stock Immediate vesting on grant date Immediate vesting on grant date April 1, 2015 . . . . . . . . . . . . . Four-year graded vesting April 1, 2015 . . . . . . . . . . . . . Notapplicable May 19, 2015 . . . . . . . . . . . . May 19, 2015 . . . . . . . . . . . . Four-year graded vesting May 19, 2015 . . . . . . . . . . . . Four-year cliff vesting July 1, 2015 . . . . . . . . . . . . . July 1, 2015 . . . . . . . . . . . . . One-year cliff vesting July 1, 2015 . . . . . . . . . . . . . Notapplicable July 1, 2015 . . . . . . . . . . . . . Four-year graded vesting July 8, 2015 . . . . . . . . . . . . . Four-year graded vesting July 13, 2015 . . . . . . . . . . . . Four-year graded vesting August 3, 2015 . . . . . . . . . . . Four-year graded vesting August 10, 2015 . . . . . . . . . . Four-year graded vesting August 24, 2015 . . . . . . . . . . Four-year graded vesting November 9, 2015 . . . . . . . . Four-year graded vesting 1,177,191 — 255,473 225,363 127,931 27,047 51,876 — 2,244 3,778 1,304 927 1,776 3,737 5,615 1,884,262 211,756 — 52,960 42,064 28,445 1,131 9,988 — 418 692 244 173 335 691 1,107 350,004 — 840 — — — — — 3,873 — — — — — — — 4,713 94 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The fair value of the stock options granted was estimated on the date of grant using a Black-Scholes option valuation model that uses the weighted-average assumptions noted in the following table during the years ended December 31: Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected term in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average grant date fair value per stock option . . . . . . . 19.51% 1.29% 4.5 —% 20.53% 1.48% 4.4 —% 29.27% 0.70% 4.5 —% $13.58 $11.86 $15.58 2015 2014 2013 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 exists, 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 is calculated using historical daily closing prices over the most recent period that is commensurate with the expected term of the stock option awards. The volatility factor for stock options granted prior to 2014 was based on the average volatility of the Company’s peers as the Company did not have a history of stock price sufficient to cover the expected term of those awards. The volatility factor for stock options granted in 2014 and 2015 was based on the volatility of the Company’s stock. The expected dividend yield was based on the Company’s expected annual dividend rate on the date of grant. A summary of options outstanding under the Incentive Plan and the Option Plan and changes during the three years then ended is presented below: Outstanding at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . Number of Options Weighted Average Exercise Price Per Share Aggregate Intrinsic Value (In thousands, except for share and per share data) $361,653 $22.21 12,573,298 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 888,038 (4,076,750) Cancelled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (149,266) Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . 9,235,320 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,242,428 (1,091,746) Cancelled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (180,312) Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . 9,205,690 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,884,262 (1,739,847) Cancelled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (232,372) Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . 9,117,733 Options exercisable at December 31, 2015 . . . . . . . . . . . . . . . . . 6,541,229 Options exercisable at December 31, 2014 . . . . . . . . . . . . . . . . . 7,159,895 $61.10 $19.79 $43.14 $26.67 $59.83 $22.29 $55.23 $31.11 $72.20 $23.71 $64.05 $40.17 $29.81 $24.00 $168,056 $360,611 $ 43,863 $303,267 $ 87,008 $334,691 $307,924 $286,728 95 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary of the status of the Company’s nonvested options and changes is presented below: Weighted Average Grant-Date Fair Value Per Share Number of Options Nonvested balance at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,776,302 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cancelled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 888,038 (2,448,843) (149,266) Nonvested balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . 2,066,231 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cancelled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,242,428 (1,082,552) (180,312) Nonvested balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . 2,045,795 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cancelled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,884,262 (1,121,181) (232,372) Nonvested balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . 2,576,504 $ 9.43 $15.58 $ 8.81 $12.18 $12.61 $11.86 $11.71 $13.56 $12.55 $13.58 $13.24 $13.05 $12.95 Intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the quoted price of Verisk’s common stock as of the reporting date. The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2015 was $334,691 and $307,924, respectively. In accordance with ASC 718, excess tax benefit from exercised stock options is recorded as an increase to additional-paid-in capital and a corresponding reduction in taxes payable. This tax benefit is calculated as the excess of the intrinsic value of options exercised 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 consolidated statements of cash flows. For the years ended December 31, 2015, 2014 and 2013, the Company recorded excess tax benefit from exercised stock options of $29,230, $15,988 and $58,056, respectively. The Company realized $40,147, $22,566 and $109,946 of tax benefit within the Company’s tax payments through December 31, 2015, 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. Stock based compensation expense for 2015, 2014 and 2013 was $30,542, $20,253 and $21,087, respectively. 96 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary of the status of the restricted stock awarded under the 2013 Incentive Plan and changes is presented below: Weighted Average Grant Date Fair Value Per Share Number of Shares Outstanding at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . 331,013 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,674 (150,668) (25,270) Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . 396,749 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,003 (163,280) (37,162) Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . 442,310 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,004 (211,265) (47,281) Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . 533,768 $42.78 $61.12 $37.82 $53.00 $52.82 $59.86 $49.94 $55.53 $56.84 $72.24 $58.64 $63.10 $66.25 For the year ended December 31, 2015, certain employees had restricted stock vesting and covered the aggregate statutory minimum tax withholding of $2,350 through a net settlement of 32,882 shares. The payment of taxes related to the vesting was recorded as a reduction to additional paid-in-capital. This transaction is reflected within “Net share settlement of restricted stock awards” within cash flows from financing activities in the accompanying consolidated statements of cash flows. As of December 31, 2015, there was $53,536 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2013 Incentive Plan and the 2009 Incentive Plan. That cost is expected to be recognized over a weighted-average period of 2.66 years. As of December 31, 2015, there were 2,576,504 and 531,278 nonvested stock options and restricted stock, respectively, of which 2,125,711 and 441,089 are expected to vest. The total grant date fair value of options vested during the years ended December 31, 2015, 2014 and 2013 was $16,780, $12,780 and $16,468, respectively. The total grant date fair value of restricted stock vested during the year ended December 31, 2015, 2014 and 2013 was $16,316, $9,839 and $7,153, respectively. The Company also offers eligible employees the opportunity to participate in an employee stock purchase plan (“ESPP”). Under the ESPP, participating employees may 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 years ended December 31, 2015, 2014 and 2013, the Company issued 25,599, 26,953 and 27,879 shares of common stock at a weighted average discounted price of $70.27, $57.98 and $59.62, respectively. 97 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 17. Pension and Postretirement Benefits: The Company maintained a 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 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 non-qualified supplemental cash balance plan (“SERP”) for certain employees. The SERP is funded from the general assets of the Company. Effective February 29, 2012, the Company instituted a hard freeze, which eliminated all future compensation and service credits, to all participants in the Pension Plan and SERP. In 2015, the Pension Plan and the SERP had a plan amendment due to the adoption of the updated mortality table. The Pension Plan’s funding policy is to contribute annually at an amount between the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974 and the maximum amount that can be deducted for federal income tax purposes. In April 2012, the Company completed a voluntary prefunding to the Pension Plan of $72,000. Due to the prefunding, the minimum contribution requirement was and is expected to be $0 in 2015 and 2016, respectively. The Company contributed $970 and $1,177 to the SERP in 2015 and 2014, respectively, and expects to contribute $971 in 2016. The Company also provides certain healthcare and life insurance benefits for both 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 Company expects to contribute $879 to the Postretirement Plan in 2016. 98 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table sets forth the changes in the benefit obligations and the plan assets, the (funded) unfunded status of the Pension Plan, SERP and Postretirement Plan, and the amounts recognized in the Company’s consolidated balance sheets at December 31: Pension Plan and SERP Postretirement Plan 2015 2014 2015 2014 Change in benefit obligation: Benefit obligation at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal subsidy on benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit obligation at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $471,259 18,102 (44,159) 3,830 — (29,406) — $419,626 $420,664 19,073 61,804 — — (30,282) — $471,259 $18,773 520 (1,584) — 1,903 (4,464) 739 $15,887 $20,399 593 (411) — 2,635 (4,834) 391 $18,773 Accumulated benefit obligation at December 31 . . . . . . . . . . . . . . . . . . . . . . . $419,626 $471,259 Change in plan assets: Fair value of plan assets at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual return on plan assets, net of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employer contributions, net Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subsidies received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . $475,281 (8,220) 970 — (29,406) — $438,625 $467,912 36,474 1,177 — (30,282) — $475,281 $15,231 14 (396) 1,903 (4,464) 739 $13,027 $16,601 743 (305) 2,635 (4,834) 391 $15,231 (Funded) unfunded status at December 31 . . . . . . . . . . . . . . . . . . . . . . . . $ (18,999) $ (4,022) $ 2,860 $ 3,542 Amounts recognized in the consolidated balance sheets consist of: Pension assets, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension, SERP and postretirement benefits, current . . . . . . . . . . . . . . . . . . . Pension, SERP and postretirement benefits, noncurrent . . . . . . . . . . . . . . . . Total Pension, SERP and Postretirement benefits . . . . . . . . . . . . . . . . . . . $ (32,922) 952 12,971 $ (18,999) $ (18,589) 762 13,805 $ (4,022) $ — $ — 1,132 2,410 $ 3,542 879 1,981 $ 2,860 The pre-tax components included within accumulated other comprehensive losses as of December 31 are summarized below: Prior service benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,830 116,400 $ — $ (854) 6,725 120,735 $(1,000) 8,321 Accumulated other comprehensive losses, pretax . . . . . . . . . $120,230 $120,735 $5,871 $ 7,321 Pension Plan and SERP Postretirement Plan 2015 2014 2015 2014 99 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The pre-tax components of net periodic benefit (credit) cost and the amounts recognized in other comprehensive loss (income) are summarized below for the years ended December 31: Pension Plan and SERP Postretirement Plan 2015 2014 2013 2015 2014 2013 Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . Amortization of prior service benefit . . . . . . . . . . .. Amortization of net actuarial loss . . . . . . . . . . . . . . . $ 18,102 (34,432) $ 19,073 (33,942) $ 17,860 (30,480) $ — 2,828 — 763 — 5,078 520 (563) (146) 560 $ 593 $ 608 (919) (146) 767 (786) (146) 517 Net periodic benefit (credit) cost . . . . . . . . . . . . . . (13,502) (14,106) (7,542) 371 178 310 Amortization of actuarial loss reclassified from accumulated other comprehensive losses . . . . . . . (174) (354) (1,320) — — — Amortization of prior service benefit reclassified from accumulated other comprehensive losses . . . — — — 146 146 146 Net loss recognized reclassified from accumulated other comprehensive losses . . . . . . . . . . . . . . . . . . Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . Total recognized in other comprehensive loss (2,653) 3,830 (1,508) (409) — 59,272 (3,758) — (70,065) — — (1,596) — — (886) — — (77) (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (505) 58,509 (75,143) (1,450) (740) 69 Total recognized in net periodic benefit (credit) cost and other comprehensive loss (income) . . $(14,007) $ 44,403 $(82,685) $(1,079) $(562) $ 379 The estimated amounts in accumulated other comprehensive losses that are expected to be recognized as components of net periodic benefit (credit) cost during 2016 are summarized below: Amortization of prior service benefit . . . . . . . . . . . . . . . . Amortization of net actuarial loss . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension Plan And SERP Postretirement Plan $ 163 3,017 $3,180 $(146) 506 $ 360 Total $ 17 3,523 $3,540 The weighted-average assumptions used to determine benefit obligations as of December 31, 2015 and 2014 and net periodic benefit (credit) cost for the years 2015, 2014 and 2013 are provided below: Pension Plan and SERP Postretirement Plan 2015 2014 2015 2014 Weighted-average assumptions used to determine benefit obligations: Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.73% 3.99% 7.50% 7.50% 3.25% 3.00% 4.00% 4.00% Weighted-average assumptions used to determine net periodic benefit (credit) loss: Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.99% 4.73% 3.98% 3.00% 3.45% 2.75% 7.50% 7.50% 7.50% 4.00% 5.00% 5.00% 2015 2014 2013 2015 2014 2013 100 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table presents the estimated future benefit payments for the respective plans. The future benefit payments for the Postretirement Plan are net of the federal Medicare subsidy. 2016 . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . 2021-2025 . . . . . . . . . . . . . . . . . . . . Pension Plan and SERP Gross Benefit Amount $ 30,037 $ 30,157 $ 29,751 $ 30,046 $ 29,791 $145,032 Postretirement Plan Gross Benefit Amount Medicare Subsidy Payments Net Benefit Amount $2,583 $2,401 $2,207 $2,003 $1,803 $6,276 $(365) $(354) $(344) $(332) $(319) $(963) $2,218 $2,047 $1,863 $1,671 $1,484 $5,313 The healthcare cost trend rate for 2015 was 8.50% gradually decreasing to 5.00% in 2023. Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plan. A 1.00% change in assumed healthcare cost trend rates would have the following effects: Effect of total service and interest cost components of net periodic postretirement healthcare benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13 $ (12) Effect on the healthcare component of the accumulated postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $394 $(366) 1% Increase 1% Decrease The expected subsidy from the Medicare Prescription Drug, Improvement and Modernization Act of 2003 reduced the Company’s accumulated postretirement benefit obligation by approximately $2,453 and $3,182 as of December 31, 2015 and 2014, and the net periodic benefit cost by approximately $7, $10 and $19 in fiscal 2015, 2014 and 2013, respectively. The expected return on the Pension Plan assets for 2015 and 2014 was 7.50%, which was determined by taking into consideration the Company’s analysis of its actual historical investment returns to a broader long- term forecast after adjusting for the target investment allocation and reflecting the current economic environment. The Company’s investment guidelines target investment allocation of 60% equity securities and 40% debt securities. The Pension Plan assets consist primarily of investments in various fixed income and equity funds. Investment guidelines are established with each investment manager. These guidelines provide the parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Investment managers are prohibited from entering into any speculative hedging transactions. The investment objective is to achieve a maximum total return with strong emphasis on preservation of capital in real terms. The domestic equity portion of the total portfolio should range between 40% and 60%. The international equity portion of the total portfolio should range between 10% and 20%. The fixed income portion of the total portfolio should range between 20% and 40%. The asset allocation at December 31, 2015 and 2014, and target allocation for 2016 by asset category are as follows: Asset Category Target Allocation Percentage of Plan Assets 2015 2014 Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total 60.00% 60.00% 56.80% 40.00% 39.60% 41.30% 1.90% 0.40% 100.00% 100.00% 100.00% —% 101 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company has used the target investment allocation to derive the expected return as the Company believes this allocation will be retained on an ongoing basis that will be commensurate with the projected cash flows of the plan. The expected return for each investment category within the target investment allocation is developed using average historical rates of return for each targeted investment category, considering the projected cash flow of the Pension Plan. The difference between this expected return and the actual return on plan assets is generally deferred and recognized over subsequent periods through future net periodic benefit costs. The Company believes that the use of the average historical rates of returns is consistent with the timing and amounts of expected contributions to the plans and benefit payments to plan participants. These considerations provide the basis for reasonable assumptions with respect to the expected long-term rate of return on plan assets. The Company also maintains a voluntary employees beneficiary association plan (the “VEBA Plan”) under Section 501(c)(9) of the Internal Revenue Code to fund the Postretirement Plan. The asset allocation for the VEBA Plan at December 31, 2015 and target allocation for 2016 are 100% in debt securities. 102 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) For the year ended December 31, 2015, the Company reclassified $142,117 of Pension Plan assets from Level 2 to Level 1. These assets, primarily consist of mutual funds used to be in the pooled separate accounts, were reinvested in a managed equity account. For assets that were transferred between Level 1 and Level 2 during the year, fair values are ascribed as if the assets had been transferred as of the beginning of the year. There were no transfers among Levels 1, 2 or 3 for the year ended December 31, 2014. Refer to Note 7. Fair Value Measurements for further discussion with respect to fair value hierarchy. The following table summarizes the fair value measurements by level of the Pension Plan and Postretirement Plan assets: Quoted Prices in Active Markets for Identical Assets (Level 1) Total Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2015 Equity . . . . . . . . . . . . . . . Managed equity accounts(1) Equity — pooled separate account(2) . . . . . . . . Equity — partnerships(3) . . . . . . . . . . . . . . . . . . $215,637 47,314 214 $215,637 — — $ — 47,314 — Debt Fixed income manager — pooled separate account(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,641 — 173,641 Fixed income manager — government securities(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 13,027 13,027 Other Cash — pooled separate account(2) . . . . . . . . . . 1,819 — — 1,819 $ — — 214 — — — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $451,652 $228,664 $222,774 $214 December 31, 2014 Equity . . . . . . . . . . . . . . . Managed equity accounts(1) Equity — pooled separate account(2) . . . . . . . . Equity — partnerships(3) . . . . . . . . . . . . . . . . . . $ 83,690 186,102 240 $ 83,690 — — $ — 186,102 — Debt Fixed income manager — pooled separate account(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,034 — 196,034 Fixed income manager — government securities(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 15,231 15,231 Other Cash — pooled separate account(2) . . . . . . . . . . 9,215 — — 9,215 $ — — 240 — — — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $490,512 $ 98,921 $391,351 $240 (1) Valued at the closing price of shares for domestic stocks within the managed equity accounts, and valued at the net asset value (“NAV”) of shares for mutual funds at either the closing price reported in the active market or based on yields currently available on comparable securities of issuers with similar credit ratings for corporate bonds held by the Pension Plan in these managed accounts. (2) The pooled separate accounts invest in domestic and foreign stocks, bonds and mutual funds. The fair values of these stocks, bonds and mutual funds are publicly quoted and are used in determining the NAV of the pooled separate account, which is not publicly quoted. 103 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (3) Investments for which readily determinable prices do not exist are valued by the General Partner using either the market or income approach. In establishing the estimated fair value of investments, including those without readily determinable values, the General Partner assumes a reasonable period of time for liquidation of the investment, and takes into consideration the financial condition and operating results of the underlying portfolio company, nature of investment, restrictions on marketability, holding period, market conditions, foreign currency exposures, and other factors the General Partner deems appropriate. (4) The fund invested in the U.S. government, its agencies or instrumentalities or securities that are rated AAA by S&P, AAA by Fitch, or Aaa by Moody’s, including but not limited to mortgage securities such as agency and non-agency collateralized mortgage obligations, and other obligations that are secured by mortgages or mortgage backed securities, and valued at the closing price reported in the active market. The following table sets forth a summary of changes in fair value of the Pension Plan’s Level 3 assets for the years ended December 31: Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized and unrealized loss on plan assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity-partnerships 2015 $240 (26) $214 2014 $ 635 (395) $ 240 18. Segment Reporting 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 reports 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 CEO 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 key processes in managing risk. 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 further leverages predictive models and proprietary data to advise customers to make asset investment and portfolio allocation decisions in the global energy market. On March 11, 2014, the Company sold the Company’s mortgage services business, Interthinx. Results of operations for the mortgage services business are reported as a discontinued operation for the year ended December 31, 2014 and for all prior periods presented. Refer to Note 10 for more information. 104 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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. 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. 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 or geographical locations. On a geographic basis, no individual country outside of the U.S. accounted for 10.0% or more of the Company’s consolidated revenues for the years ended December 31, 2015, 2014 and 2013. 105 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table provides the Company’s revenue and EBITDA by reportable segment for the years ended December 31, as well as a reconciliation to operating income for all periods presented in the accompanying consolidated statements of operations: 2015 2014 2013 Decision Analytics Risk Assessment Total Decision Analytics Risk Assessment Total Decision Analytics Risk Assessment Total Revenues . . . . . . . . . . . . . . $1,379,819 $ 688,191 $2,068,010 $1,096,074 $ 650,652 $1,746,726 $ 977,427 $ 618,276 $1,595,703 Expenses: (603,309) (199,965) (803,274) (508,411) (208,187) (716,598) (427,978) (194,545) (622,523) (230,844) (81,846) (312,690) (153,453) (73,853) (227,306) (151,557) (77,425) (228,982) 16,885 118 17,003 — 158 158 (16) 625 609 instruments . . . . . . . . . 85,187 — — — 55,588 85,187 — — — 55,588 15,466 — — — — 15,466 — EBITDA . . . . . . . . . . . 647,738 406,498 1,054,236 489,798 368,770 858,568 413,342 346,931 760,273 (94,834) (25,786) (120,620) (64,826) (20,680) (85,506) (51,739) (14,451) (66,190) (94,511) (353) (94,864) (56,517) (353) (56,870) (63,388) (353) (63,741) (16,885) (118) (17,003) — (158) (158) 16 (625) (609) Cost of revenues (exclusive of items shown separately below) . . . . . . . . . . . . . Selling, general and administrative . . . . . . . Investment income and others, net . . . . . . . . . . EBITDA from discontinued operations . . . . . . . . . . Gain on derivative Depreciation and amortization of fixed assets . . . . . . . . . . . . . Amortization of intangible assets . . . . . Investment income and others, net . . . . . . . . . . EBITDA from discontinued operations . . . . . . . . . . Gain on derivative — — instruments . . . . . . . . . (85,187) — — — (55,588) (85,187) — — — (55,588) (15,466) — — — — (15,466) — Operating income . . . . . . . . $ 356,321 $ 380,241 736,562 $ 312,867 $ 347,579 660,446 $ 282,765 $ 331,502 614,267 Investment income and others, net . . . . . . . . . . . . Gain on derivative instruments . . . . . . . . . . . Interest expense . . . . . . . . . Income from continuing operations before income taxes . . . . . . . . . . . . . . . . 17,003 85,187 (121,316) 158 — (69,984) 609 — (76,136) $ 717,436 $ 590,620 $ 538,740 106 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Operating segment revenue by type of service is provided below for the years ended December 31: 2015 2014 2013 Decision Analytics Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy and specialized markets . . . . . . . . . . . . . . . $ 647,161 116,556 307,291 308,811 $ 598,757 96,763 315,628 84,926 $ 539,150 81,113 271,538 85,626 Total Decision Analytics . . . . . . . . . . . . . . . . . . . . . 1,379,819 1,096,074 977,427 Risk Assessment Industry-standard insurance programs . . . . . . . . . . Property-specific rating and underwriting information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Risk Assessment . . . . . . . . . . . . . . . . . . . . 524,606 495,065 471,130 163,585 688,191 155,587 650,652 147,146 618,276 Total consolidated revenues . . . . . . . . . . . . . . . . $2,068,010 $1,746,726 $1,595,703 Long-lived assets by country are provided below: 2015 2014 Long-lived assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,200,417 2,799,392 11,549 $1,893,660 37,219 29,968 Total long-lived assets . . . . . . . . . . . . . . . . . . . . . $5,011,358 $1,960,847 19. Related Parties: The Company considers its stockholders that own more than 5% of the outstanding stock within the class to be related parties as defined within ASC 850, Related Party Disclosures. The Company had no related parties owning more than 5% of the entire class of stock as of December 31, 2015 and 2014. In addition, the Company had no revenues from related parties for the years ended December 31, 2015, 2014 and 2013. 107 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 20. Commitments and Contingencies: The Company’s operations are conducted on leased premises. Approximate minimum rentals under long- term noncancelable leases for all leased premises, computer equipment and automobiles are as follows: Years Ending 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Leases $ 46,245 45,466 37,398 37,714 40,276 239,465 Capital Leases $4,976 1,457 641 220 53 31 Net minimum lease payments . . . . . . . . . . . . . . . . . . . . . . $446,564 7,378 Less amount representing interest . . . . . . . . . . . . . . . . . . . Present value of net minimum lease capital payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 $7,128 Most of the leases require payment of property taxes and utilities and, in certain cases, contain renewal options. Operating leases consist of office space. Capital leases consist of computer equipment, office equipment, and leased automobiles. Rent expense on operating leases approximated $45,423, $35,149 and $32,186 in 2015, 2014 and 2013, respectively. In addition, 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 On September 9, 2015, the Company was served with a nationwide putative class action complaint filed in the Court of Common Pleas, Cuyahoga County in Ohio naming the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp.”) titled Sherri Legrand v. Intellicorp Records, Inc. and The Cato Corporation et al. Defendants removed the case to the United States District Court for the Northern District of Ohio on October 8, 2015. Plaintiffs filed their First Amended Class Action Complaint on November 5, 2015 (“Amended Complaint”), which like the prior complaint claims violations of the Fair Credit Reporting Act and alleges two putative class claims against Intellicorp, namely (i) a section 1681k(a) claim on behalf of all individuals who were the subjects of consumer reports furnished by Intellicorp which contained public record information in the “Government Sanctions” section of the report on or after September 4, 2013 and continuing through the date the class list is prepared and (ii) a section 1681e(b) claim on behalf of all individuals who were the subjects of consumer reports furnished by Intellicorp which contained public record information in the “Government Sanctions” section of the report where the address or social security number of the subject of the report do not match the social security number or address contained in the government database on or after September 4, 2013 and continuing through 108 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) the date the class list is prepared. Count I of the Amended Complaint alleges that defendant Cato violated the FCRA by procuring consumer reports on the plaintiff and other class members without making the stand-alone disclosure required by FCRA section 1681b(b)(2)(A)(i). Counts II and III allege that Intellicorp violated the FCRA section 1681e (b) by failing to follow reasonable procedures to assure maximum accuracy of the adverse information included in its consumer reports and FCRA section 1681k (a) by failing to maintain strict procedures to assure that the public record information reported which was likely to have an adverse effect on the consumer was complete and up to date, respectively. The Amended Complaint alleges that defendants acted willfully and seeks statutory damages for the classes in an amount not less than one hundred dollars and not more than one thousand dollars per violation, punitive damages, equitable relief, 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 February 1, 2016, the Company was served with a nationwide putative class action complaint filed in the United States District Court for the Eastern District of North Carolina naming the Company’s subsidiary Intellicorp Records, Inc. (“Intellicorp.”) The complaint titled Frank DiSalvo v. Intellicorp Records, Inc. claims violations of the Fair Credit Reporting Act and alleges a section 1681b(b)(1) claim on behalf of all individuals residing in the United States who were the subjects of consumer reports furnished by Intellicorp for employment purposes within the period prescribed by the FCRA, 15 U.S.C. Section 1681p without first obtaining from the user of the report a certification that such user had complied with the obligations under Section 1681b(b)(2) as to the subject of the consumer report. The class complaint alleges that Intellicorp violated the FCRA section 1681b(b)(1) by failing to obtain the required specific certification from its customers to whom Intellicorp furnished consumer reports as to each consumer report provided before providing the specific consumer report that was the subject of the certification. The complaint alleges that the violations were willful or in the alternative negligent and 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, equitable relief, 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. Xactware Solutions, Inc. Patent Litigation On October 8, 2015, the Company was served with a summons and complaint in an action titled Eagle View Technologies, Inc. and Pictometry International Group, Inc. v. Xactware Solutions, Inc. and Verisk Analytics, Inc. filed in the United States District Court for the District of New Jersey. The complaint alleges that the Company’s Roof InSight, Property InSight and Aerial Sketch products infringe seven patents owned by Eagle View and Pictometry namely, Patent Nos. 436, 840, 152, 880, 770, 732 and 454 (collectively the “Patents-in- Suit.”) On November 30, 2015, plaintiffs filed a First Amended Complaint (“Amended Complaint”) adding Patent Nos. 376 and 737 to the Patents in Suit. The Amended Complaint seeks an entry of judgment by the Court that defendants have and continue to directly infringe and/or indirectly infringe, by way of inducement the Patents in Suit, permanent injunctive relief, damages, 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. Interthinx, Inc. Litigation On April 20, 2015, the Company was served with a putative class action titled John Weber v. Interthinx, Inc. and Verisk Analytics, Inc. The plaintiff, a former employee of the Company’s former subsidiary Interthinx, Inc. in Missouri, filed the class action complaint in the United States District Court for the Eastern District of 109 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Missouri on behalf of all review appraisers and individuals holding comparable positions with different titles who were employed by Interthinx for the last three years nationwide and who were not paid overtime wages. The class complaint claims that the review appraiser 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 a Collective Action under section 216(b) of the Fair Labor Standards Act for unpaid overtime and seeks overtime wages, liquidated damages, declaratory relief, interest, costs and attorneys’ fees. On March 11, 2014, the Company sold 100 percent of the stock of Interthinx, Inc. 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., arises from MediConnect’s buyout of Naveen Trehan and his family members’ shares on October 15, 2010. Plaintiff claims that the sale of the shares was based on MediConnect’s representations concerning third parties that had expressed interest in an acquisition, merger or investment in MediConnect at that time. Plaintiff claims that MediConnect did not disclose the Company, which purchased MediConnect on March 23, 2012, as a possible suitor. The complaint 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 recoveries 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. On November 2, 2015, the court issued a judgement in favor of the defendants and dismissed all claims with prejudice. Plaintiff filed a Notice of Appeal on November 30, 2015. 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 On August 1, 2014, the Company was served with an Amended Complaint filed in the United States District Court for the District of Colorado titled Snyder, et. al. v. ACORD Corp., et al. The action is brought by nineteen individual plaintiffs, on their own behalf and on behalf of a putative class, against more than 120 defendants, including the Company and its subsidiary, Insurance Services Office, Inc. (“ISO”). Except for the Company, ISO and the defendant Acord Corporation, which provides standard forms to assist in insurance transactions, most of the other defendants are property and casualty insurance companies that plaintiffs claim conspired to underpay property damage claims. Plaintiffs claim that the Company and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law. On September 8, 2014, the Court entered an Order striking the Amended Complaint and granting leave to the 110 VERISK ANALYTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) plaintiffs to file a new complaint. On October 13, 2014, plaintiffs filed their Second Amended Complaint, which was re-filed by plaintiffs to correct errors as the Third Amended Complaint. The Third Amended Complaint similarly alleges that the defendants conspired to underpay property damage claims, but does not specifically allege what role the Company or ISO played in the alleged conspiracy. It claims that the Company and ISO, along with all of the other defendants, violated state and federal antitrust and racketeering laws as well as state common law, and seeks all available relief including, injunctive, statutory, actual and punitive damages as well as attorneys’ fees. On January 15, 2016, the court granted defendants’ motions to dismiss all claims asserted in the Third Amended Complaint and plaintiffs filed a Motion for Reconsideration on February 16, 2016. At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter. On February 19, 2016, the Company was served with a notice of a summons and complaint filed on January 29, 2016 against the Company’s subsidiary Insurance Services Office, Inc. (“ISO”) in the U.S. District Court for the District of Connecticut titled Halloran et al. v. Harleysville Preferred Insurance Co. et al. The putative class action is brought on behalf of four policyholders and similarly situated policyholders in eastern Connecticut who complain that their homeowner’s insurance carriers denied their claims for the deterioration and collapse of their foundations caused by defective concrete. The lawsuit alleges a breach of contract claim against insurers Harleysville, Nationwide and Kemper and an anticipatory breach of contract claim against insurer MetLife. It also alleges that ISO as the drafter of the standardized policy language at issue participated with over 100 insurance companies to deny claims for defective concrete and collapsed foundations and violated the Connecticut Unfair Trade Practices (CUTPA) and the Connecticut Unfair Insurance Practices Act (CUIPA). The plaintiffs ask that the Court certify a class of persons similarly situated and seek recovery from over 100 insurance carriers equal to the cost for the replacement of their concrete foundations, injunctive relief, attorneys’ fees, costs and interest. At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to this matter. 21. Subsequent Events: The Company continues to explore strategic alternatives for the Healthcare business within the Decision Analytics operating segment as it initially announced in October 2015. There is no assurance that the exploration of strategic alternatives will result in any transaction. ************** 111 Schedule II Valuation and Qualifying Accounts and Reserves For the Years Ended December 31, 2015, 2014 and 2013 (In thousands) Description Year ended December 31, 2015 Balance at Beginning of Year Charged to Expenses(1) Deductions— Write-offs(2) Adjustment(3) Balance at End of Year Allowance for doubtful accounts . . . . . . . . . . $5,995 $1,305 $(2,230) Valuation allowance for income taxes . . . . . $ 789 $ 175 $ (92) Year ended December 31, 2014 Allowance for doubtful accounts . . . . . . . . . . $4,415 $1,814 $ (161) Valuation allowance for income taxes . . . . . $ 741 $ 48 $ — Year Ended December 31, 2013 Allowance for doubtful accounts . . . . . . . . . . $4,753 $2,468 $(2,284) Valuation allowance for income taxes . . . . . $ 595 $ 673 $ (527) $ — $ — $ (73) $ — $(522) $ — $5,070 $ 872 $5,995 $ 789 $4,415 $ 741 (1) Primarily additional reserves for bad debts (2) Primarily accounts receivable balances written off, net of recoveries, and the expiration of loss carryforwards (3) Related to discontinued operations 112 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 23, 2016. VERISK ANALYTICS, INC. (Registrant) /S/ SCOTT G. STEPHENSON Scott G. Stephenson President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 23, 2016. Signature Capacity /S/ SCOTT G. STEPHENSON Scott G. Stephenson /S/ MARK V. ANQUILLARE Mark V. Anquillare /S/ FRANK J. COYNE Frank J. Coyne /S/ J. HYATT BROWN J. Hyatt Brown /S/ BRUCE E. HANSEN Bruce E. Hansen /S/ CHRISTOPHER M. FOSKETT Christopher M. Foskett /S/ CONSTANTINE P. IORDANOU Constantine P. Iordanou /S/ JOHN F. LEHMAN, JR. John F. Lehman, Jr. /S/ SAMUEL G. LISS Samuel G. Liss /S/ ANDREW G. MILLS Andrew G. Mills /S/ THOMAS F. MOTAMED Thomas F. Motamed /S/ THERESE M. VAUGHAN Therese M. Vaughan /S/ DAVID B. WRIGHT David B. Wright President and Chief Executive Officer (principal executive officer and director) Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) Non- Executive Chairman of the Board of Directors Director Director Director Director Director Director Director Director Director Director 113 Exhibit Number EXHIBIT INDEX Description 2.1 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 10.1 10.2 10.3 10.4 10.5 10.6 Deed, dated as of March 10, 2015, among Verisk Analytics, Inc. and the sellers named therein, incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, dated March 11, 2015. Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated May 29, 2015. Amended and Restated By-Laws, incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated May 29, 2015. Form of Common Stock Certificate, incorporated herein by reference to Exhibit 4.1 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009. Senior Notes Indenture, dated as of April 6, 2011, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated April 6, 2011. First Supplemental Indenture, dated as of April 6, 2011, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated April 6, 2011. Second Supplemental Indenture, dated as of December 8, 2011, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated December 8, 2011. Third Supplemental Indenture, dated as of September 12, 2012, among Verisk Analytics, Inc., the guarantors named therein and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated September 12, 2012. Fifth Supplemental Indenture, dated as of May 15, 2015, between Verisk Analytics, Inc. and Wells Fargo Bank, National Association, as Trustee, incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, dated May 15, 2015. 401(k) Savings Plan and Employee Stock Ownership Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1, dated August 12, 2008. Verisk Analytics, Inc. 2009 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.2 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009. Form of Letter Agreement, incorporated herein by reference to Exhibit 10.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, dated October 7, 2008. Form of Master License Agreement and Participation Supplement, incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, dated October 7, 2008. Schedule of Master License Agreements Substantially Identical in All Material Respects to the Form of Master License Agreement and Participation Supplement, incorporated herein by reference to Exhibit 10.5 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, dated November 20, 2008. Form of Change of Control Severance Agreement, incorporated herein by reference to Exhibit 10.8 to Amendment No. 6 to the Company’s Registration Statement on Form S-1, dated September 21, 2009. 114 Exhibit Number 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 21.1 23.1 31.1 31.2 32.1 Description Insurance Services Office, Inc. 1996 Incentive Plan and Form of Stock Option Agreement thereunder, incorporated herein by reference to Exhibit 10.9 to Amendment No. 7 to the Company’s Registration Statement on Form S-1, dated September 29, 2009. Form of Stock Option Award Agreement under the Verisk Analytics, Inc. 2009 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, dated November 16, 2009. Insurance Services Office, Inc. Supplemental Cash Balance Plan dated January 1, 2009 as amended by the Amendment to the Insurance Services Office, Inc. Supplemental Cash Balance Plan dated February 10, 2012 incorporated by reference to Exhibit 10.13 to the Company’s annual report on Form 10-K dated February 25, 2014. Insurance Services Office, Inc. Supplemental Executive Retirement Savings Plan dated January 1, 2009 incorporated by reference to Exhibit 10.14 to the Company’s annual report on Form 10-K dated February 25, 2014. Verisk Analytics, Inc. 2013 Equity Incentive Plan, incorporated herein by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A, dated April 1, 2013. Form of Stock Option Award Agreement under Verisk Analytics, Inc. 2013 Equity Incentive Plan, incorporated herein by reference to Exhibit 99.2 to Company’s Registration Statement on Form S-8 dated May 15, 2013. Form of Restricted Stock Award Agreement under Verisk Analytics, Inc. 2013 Equity Incentive Plan, incorporated herein by reference to Exhibit 99.3 to Company’s Registration Statement on Form S-8 dated May 15, 2013. Second Amended and Restated Credit Agreement dated April 22, 2015 among Verisk Analytics, Inc., as borrower, and the lenders and agents party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 24, 2015. First Amendment to Second Amended and Restated Credit Agreement dated July 24, 2015 among Verisk Analytics, Inc., as borrower, and the lenders and agents party thereto, incorporated herein by reference to Exhibit 10.2 to the Company’s quarterly report on Form 10-Q dated July 28, 2015. Subsidiaries of the Registrant.* Consent of Deloitte & Touche LLP.* Certification of the Chief Executive Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.* Certification of the Chief Financial Officer of Verisk Analytics, Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.* Certification of the Chief Executive Officer and Chief Financial Officer of Verisk Analytics, Inc. pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 101.INS XBRL Instance Document.* 101.SCH XBRL Taxonomy Extension Schema.* 101.CAL XBRL Taxonomy Extension Calculation Linkbase.* 101.DEF XBRL Taxonomy Definition Linkbase.* 101.LAB XBRL Taxonomy Extension Label Linkbase.* 101.PRE XBRL Taxonomy Extension Presentation Linkbase.* * Filed herewith. 115 [THIS PAGE INTENTIONALLY LEFT BLANK] LIST OF SUBSIDIARIES OF THE REGISTRANT NAME OF SUBSIDIARY Exhibit 21.1 JURISDICTION Insurance Services Office, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ISO Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wood Mackenzie Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom Xactware Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware Delaware Delaware CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement No. 333-194874 on Form S-3 and Nos. 333-188629, 333-183476, and 333-165912 on Form S-8 of our reports dated February 23, 2016, relating to the consolidated financial statements and financial statement schedule of Verisk Analytics, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2015. Exhibit 23.1 /s/ Deloitte & Touche LLP Parsippany, New Jersey February 23, 2016 Exhibit 31.1 CERTIFICATION I, Scott G. Stephenson, certify that: 1. I have reviewed this annual report on Form 10-K of Verisk Analytics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 23, 2016 /s/ Scott G. Stephenson Scott G. Stephenson President and Chief Executive Officer Exhibit 31.2 CERTIFICATION I, Mark V. Anquillare, certify that: 1. I have reviewed this annual report on Form 10-K of Verisk Analytics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ Mark V. Anquillare Mark V. Anquillare Executive Vice President and Chief Financial Officer Date: February 23, 2016 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The certification set forth below is being submitted in connection with the annual report on Form 10-K of Verisk Analytics, Inc. (the “Company”) for the year ending December 31, 2015, as filed with the Securities and Exchange Commission (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code. Scott G. Stephenson, the Chief Executive Officer of the Company, and Mark V. Anquillare, the Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 23, 2016 /s/ Scott G. Stephenson Scott G. Stephenson President and Chief Executive Officer /s/ Mark V. Anquillare Mark V. Anquillare Executive Vice President and Chief Financial Officer [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] Company Profile Verisk Analytics (Nasdaq:VRSK) is a leading data analytics provider serving customers in insurance, natural resources, healthcare, financial services, government, and risk manage- ment. Headquartered in Jersey City, New Jersey, the com- pany operates in 23 countries and is a member of Standard & Poor’s (S&P) 500® Index. Verisk Analytics is also part of the NASDAQ-100 Index, which includes the 100 largest nonfinancial securities listed on the NASDAQ stock market. Its common stock is traded on NASDAQ under the symbol VRSK. In 2015, the company was ranked 18th on the Forbes World’s 100 Most Innovative Companies list. Using advanced technologies to collect and analyze billions of records, Verisk Analytics draws on unique data assets and deep domain expertise to provide first-to-market innova- tions that are integrated into customer workflows. The company offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. To meet the needs of diverse clients, Verisk Analytics employs an experienced staff of business and technical specialists, analysts, and certified professionals. In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, please visit www.verisk.com. Financial Highlights Revenues $ Millions 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 C A G R = 1 4 . 8 % 2011 2012 2013 2014 2015 2015 Revenue Types Transactional: 25% Subscriptions and Long-Term Contracts: 75% Adjusted EBITDA from Continuing Operations 2015 Revenues by Vertical End Market $ Millions 1000 900 800 700 600 500 400 300 200 100 0 C A G R = 1 5 . 7 % 2011 2012 2013 2014 2015 Decision Analytics: 67% Insurance: 31% Financial Services: 6% Risk Assessment: 33% Healthcare: 15% Energy and Specialized Markets: 15% Corporate Headquarters 545 Washington Boulevard Jersey City, NJ 07310-1686 201-469-3000 www.verisk.com Investor Relations E-mail: ir@verisk.com 201-469-2142 http://investor.verisk.com Stock Transfer Agent Wells Fargo Shareowner Services P.O. Box 64874 St. Paul, MN 55164 1-800-468-9716 Outside Legal Counsel Davis Polk & Wardwell LLP Independent Registered Public Accounting Firm Deloitte & Touche LLP The following is a reconciliation of net income to adjusted net income: Net income Amortization of intangibles Income tax effect on amortization of intangibles Discontinued operations, net of tax Nonrecurring items related to the Wood Mackenzie acquisition Income tax effect on one-time items related to the Wood Mackenzie acquisition Adjusted net income 2015 2014 2013 $ 507,577 $ 400,042 $ 348,380 94,864 (26,363 ) — (45,234 ) (10,690 ) 56,870 (21,611 ) (29,177 ) — — 63,741 (24,222 ) (6,066 ) — — $ 520,154 $ 406,124 $ 381,833 The following is a reconciliation of net income to Adjusted EBITDA from continuing operations: Net income Depreciation and amortization Interest expense Provision for income taxes Discontinued operations, net of tax $ 507,577 215,484 121,316 209,859 — Nonrecurring items related to the Wood Mackenzie acquisition (58,569 ) $ 400,042 142,376 69,984 219,755 (29,177 ) — $ 348,380 129,931 76,136 196,426 (6,066 ) — Adjusted EBITDA from continuing operations $ 995,667 $ 802,980 $ 744,807 Note regarding the use of non-GAAP financial measures The company has provided certain non-GAAP financial information as supplemental information regarding its operating results. These measures are not in accordance with—or an alternative for—GAAP and may be different from non-GAAP measures reported by other companies. The company believes that its presentation of non-GAAP measures—such as adjusted net income, EBITDA, and Adjusted EBITDA—provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. In addition, the company’s management uses these measures for reviewing the financial results of the company and for budgeting and planning purposes. This annual report is printed on paper certified by the Forest Stewardship Council® (FSC®). The FSC promotes environmentally sound, socially beneficial, and economically prosperous forest management. Annual Report cover concept winners: Anne Benkovitz and Robert Lester, Verisk Analytics © 2016 Verisk Analytics, Inc. Verisk Analytics, the Verisk Analytics logo, ISO, ISO ClaimSearch, ISO Risk Analyzer, and ProMetrix are registered trademarks and Verisk, Verisk Maplecroft, GarageConfirm, ISO ClaimSearch DNA, ISO RiskElements, OdometerConfirm, Safety Scoring, 360InspectHub, and Verisk Telematics Data Exchange are trade- marks of Insurance Services Office, Inc. Claims Outcome Advisor is a registered trademark of ISO Claims Services, Inc. Property Claim Services and PCS are registered trade- marks of ISO Services, Inc. AER is a trademark of Atmospheric and Environmental Research, Inc. AIR Worldwide and Touchstone are registered trademarks of AIR Worldwide Corporation. Argus is a trademark of Argus Information and Advisory Services, LLC. Ariel, MSDgen, 3E Online, and 3ESC are registered trademarks of 3E Company. Verisk Health and DxCG are registered trademarks of Verisk Health, Inc. Xactimate and Xactware are registered trademarks and ClaimXperience and Property InSight are trademarks of Xactware Solutions, Inc. All other product or corporate names are trademarks or registered trademarks of their respective companies. 94562 Cover va16024 VeriskAnnual-2015.indd 4-6 3/15/16 9:13 PM Verisk Analytics, Inc. 545 Washington Boulevard Jersey City, NJ 07310-1686 201-469-3000 www.verisk.com V e r i s k A n a y t i c s l 2 0 1 5 A n n u a l R e p o r t Distinctives Verisk Analytics 2015 Annual Report 94562 Cover va16024 VeriskAnnual-2015.indd 1-3 3/15/16 9:13 PM