VRSK
#There was a little perturbation there in the first quarter.
I think you're going to find that settles out as we go forward.
Yes.
That's a really good question, and that's one that we think about quite a bit actually.
You should think of us as a portfolio.
So the logical place for us to drill down would generally be established economies that tend not to be overly concentrated in terms of market shares of leading players.
For example, on balance ---+ and also, you have to concede that language issues are here little bit also.
UK is a little bit better for us than, say, Germany.
We can pick our spots that way.
Japan is a highly developed economy that also doesn't have an overly concentrated insurance market, so that would be another.
That's your first sort, but the other part of it is, we are interested in emerging situations, as well.
And two I would call out there, you have to consider China still to be an emerging situation, so that's one that we look at.
But it's also interesting that when you look at the sum of Southeast Asia, it turns that Singapore is becoming something of a hub.
And so we're going to have both flavors inside of our portfolio.
More of the energy will go into established economies, but we're going to feature both kinds in what we do.
These are small adjustments in our view, I would say, and it's really just a product of the environment and the rate at which it does or doesn't change.
Conversations with customers are overall very encouraging.
I had the chance, I don't know, month, month and half ago to sit with the Deputy CEO of one of the world's largest energy companies.
And the stories they tell about how they make use of Wood Mack content and their focus upon Wood Mack as a partner, these are very encouraging kinds of stories.
And then we just look into the data in terms of, for example, the number of users of our portal offering and the rate at which they are making use of our content, all of which are going up pretty strongly.
But it's also the case that even now, well into the nosedive in the pricing of the commodity, there are still reactions in terms of our customers trying to get their own cost structures right.
And in the same way that there was a little bit of a lagging effect in terms of the commodity price coming down and then the reaction of the energy companies.
You have to expect that there will be some of that also on the way back up.
There will be some timing effects inside of ---+ I would not expect instantaneous reaction of our customers to what the price of the commodity is doing, because the price of the commodity has to work its way into not only their forward plans, but also the way that they are actually spending their own CapEx dollars, and there just will be time dependencies inside of that.
So just first a comment.
Cat bonds are an interesting category, and it's one that we participate in, and it definitely is there in the mix of risk transfer mechanisms that out there in the world.
But I would encourage all to not overstate the amount of risk that gets managed through that mechanism.
It's interesting to look at it because you can carve it out and identify it.
You are right, it was a good moment for cat bonds, and our AIR business did very well.
The share of the identified cat bonds our Team analyzed was very high.
And as I think everybody knows, we almost always have the vast majority of that market anyway.
So yes, it was helpful.
But there's movement also in the cat bond world.
Don't miss that.
There's the move towards the so-called mini cat bonds, and there are different ways that you can actually analyze cat bonds.
It's a dynamic environment; I will put it that way.
But yes, we feel good about how we did with the most recent issuances.
They are pretty modest in the scheme here.
I don't think we've provided that detail in the past.
They're not substantial.
They are more tuck-in in nature.
The answer is, as reported, it probably could get a little bit better.
It really is, again, to the consulting side of things, it's a bit of a swing factor in this, so we continue to try to remain conservative, although performing well and the underlying usage is up and strong.
The contributions to Argus' growth are very broadly based across not only the traditional consortium model analytic view, but also the specific analytic products that are being provided to customers, to the white labeling of our analytic environment, to the opening up of new markets like media effectiveness, to the opening up of new markets geographically.
All of those cylinders are hitting.
No.
One of the reasons why Argus is such a wonderful business and has such a bright future is that it has many different ways to grow.
This is <UNK>.
I think your observations are correct.
Let me just remind you of two facts.
First of all, Wood Mack has very good margins; however, they have a tough comp in the rest of Verisk, so you are seeing that come into the quarter that does work against us in Decision Analytics.
The other thing you need to look at is, in the first quarter of 2015, we keep talking about that project revenue from Argus, and we also highlighted back a year ago, there were extremely high margins on that project revenue.
And as a result, that creates an artificially high margin in 2015 in that first quarter.
So those are the two things that I think if you normalized out, you would see probably a pretty good story inside of organic DA margins.
I'll highlight the things I made before.
We do have all of our salary increases that take effect in April, and we also give out our equity awards April 1 as well, and those will replace equity awards from four years ago.
So those are some additional cost that are layered into the underlying structure from second quarter on.
But all else being equal, I agree with you.
I think what we tried to describe is that we remain very optimistic on the business, but we do believe that there are probably some market economics that are just difficult for our customers and us right now.
So in both cases, we think that's going to be down slightly.
But still has the opportunity to grow on a reported basis; so I'm trying to give at least get a little bit more color to everyone.
I would describe the environment as relatively unchanged relative to last year, and actually over many years.
One of the hallmarks of the insurance industry is its stability.
The regulatory environment has not really changed that much.
Industry structure has not really changed all that much.
There have been a couple of larger mergers, but industry concentration still remains pretty much the same.
The way that we price our products has not changed.
Probably, our pricing actually gets even a little bit tighter as we continue to grow the subscription-based part of the mix.
So there's really not a lot of change, really, in terms of what the environment yields.
You're welcome.
Yes.
So you've actually got a couple of questions there.
The current status is, we are actually in the rollout phase with our first OEM, who we announced some time ago.
We'll be providing product to the insurance industry right around the crossover from third quarter to fourth quarter.
That will be the first fruits commercially of what we've been doing.
We're very pleased with the discussions we're having with the insurers in terms of their interest in the data and the analytics.
And we are actively cultivating other OEMs, and I think we feel very good about the prospect of this really being the industry standard.
But every OEM is going to think about it in their own light and draw their own conclusions, but we are actively calling on all the name brand OEMs in the United States.
So yes, we feel very good about it.
And the technical work has proceeded very nicely, and we are just all primed.
We're ready to go.
Okay.
Well, thanks everybody for joining us.
We're happy to talk about a quarter that we feel very good about and look forward to being with you again roughly 90 days from now.
And we'll be seeing some of you between now and then who are coming to visit us here in the office.
We look forward to having you.
Thanks very much for your time today.
