Verisk Analytics Inc (NASDAQ:VRSK) Q3 2022 Earnings Call dated Nov. 02, 2022.
Corporate Participants:
Stacey Brodbar — Head of Investor Relations
Lee M. Shavel — Chief Executive Officer
Mark V. Anquillare — President and Chief Operating Officer
Elizabeth Mann — Chief Financial Officer
Analysts:
Ashish Sabadra — RBC — Analyst
Jeffrey Meuler — Baird — Analyst
Alex Kramm — UBS — Analyst
Toni Kaplan — Morgan Stanley — Analyst
Manav Patnaik — Barclays — Analyst
Andrew Steinerman — JPMorgan — Analyst
Gregory Peters — Raymond James — Analyst
George Tong — Goldman Sachs — Analyst
Andrew Jeffrey — Truist — Analyst
Jeffrey Silber — BMO — Analyst
Faiza Alwy — Deutsche Bank — Analyst
Stephanie Moore — Jefferies — Analyst
Andrew Nicholas — William Blair — Analyst
Heather Balsky — Bank of America — Analyst
Presentation:
Operator
Good day everyone and welcome to the Verisk Third Quarter 2022 Earnings Results Conference Call. This call is being recorded [Operator Instructions] For opening remarks and introductions, I would like to turn the call over to Verisk’s Head of Investor Relations, Ms. Stacey Brodbar.
Ms. Brodbar, please go-ahead.
Stacey Brodbar — Head of Investor Relations
Thank you Savannah and good day everyone. We appreciate you joining us today for a discussion of our third quarter 2022 financial results. On the call today are Lee Shavel, Verisk’s Chief Executive Officer; Mark Anquillare President and Chief Operating Officer and Elizabeth Mann, Chief Financial Officer. Our earnings release referenced on this call as well as our traditional quarterly earnings presentation and the associated 10-Q can be found in the Investors section of our website verisk.com.
The earnings release has also been attached to an 8-K that we have furnished to the SEC. A replay of this call will be available for 30 days on our website and by dial-in. As set forth in more detail in today’s earnings release I will remind everyone, today’s call may include forward-looking statements about Verisk’s future performance. Actual performance could differ materially from what is suggested by our comments today.
Information about the factors that could affect future performance is contained in our recent SEC filings. Finally, I’d like to also remind everyone that the financial results for recent dispositions are included in our consolidated and GAAP results, but are excluded from all organic constant-currency growth figures. A reconciliation is provided in our 8-K.
And now, I’d like to turn the call over to our CEO, Lee Shavel.
Lee M. Shavel — Chief Executive Officer
Thanks Stacy and good day everyone. Before I jump into the earnings results I want to officially welcome Elizabeth Mann to Verisk. Elizabeth brings operational and corporate finance experience from her three years at S&P Global, Capital Markets and Strategic Sophistication from her 12 years of investment banking experience at Goldman Sachs and finally an impressive academic foundation and enthusiasm for mathematics that fits perfectly into our analytical culture, she is coming up the curve quickly and is already established herself as a valued part of the team.
I’m pleased to share that we delivered on our stated intention to become a global insurance focused-data analytics and technology company. As we announced on Monday, we have signed a definitive agreement to sell Wood Mackenzie to Veritas Capital for $3.1 billion in cash consideration payable at closing plus future additional contingent consideration of up to $200 million. Our ability to achieve this result in the midst of a deteriorating deal environment speaks to the quality of the asset and the momentum of the business.
Wood MacKenzie is the globally recognized leader in natural resources intelligence with in-depth proprietary datasets and subject matter experts that cover the full energy and natural resource value chain. Since we acquired Wood MacKenzie in 2015, the business has increased revenue and EBITDA, integrated acquisitions, developed new areas of growth in the energy transition, chemicals and metals and mining and most recently upgraded their client platform Lens. This has transformed, Wood MacKenzie from an advisory services business, focused on transactional research and consulting to a data analytics business, bolstered by long-term subscription contracts a leading brand and market position.
We have been honored to work with and support our friends and colleagues at Wood MacKenzie and we wish them well and look-forward to their continued growth and success under the proven leadership of Mark Brinin and Joe Levesque and their respective future owners, Veritas Capital. The future for Wood MacKenzie is very bright and we look-forward to having an ongoing productive relationship with them. This transaction, which is expected to close in the first-quarter of 2023 will best position Wood MacKenzie to fully capitalize on secular industry tailwinds including the energy transition and deliver on the growth opportunity that lies ahead.
The closing of this transaction is subject to customary closing conditions including regulatory approvals. Going-forward, the Wood MacKenzie business will be reported as discontinued operations beginning with Verisk’s fourth quarter earnings report and 10-K filing. We plan to use the approximate $3.1 billion in proceeds primarily for share repurchases and debt pay-down. After accounting for share repurchase and debt pay-down, we expect this transaction to be modestly dilutive to Verisk earnings in the range of 4% to 6%. That said, over the longer-term, we believe the deal will bring Verisk the added benefit of increased focus on our core insurance business, more consistent growth in-line with our long-term targets and improved return on capital, which should drive shareholder value.
Now, let me turn my attention to our third quarter earnings results. Verisk delivered solid third quarter results as we partner with our customers to help them navigate through environmental challenges in the marketplace including inflation and elevated losses in certain lines of insurance. Adjusted for the impact of the suspension of commercial operations in Russia, Verisk delivered mid-single-digit organic constant-currency revenue growth and margin expansion resulting in organic constant currency, adjusted EBITDA growth of 7%. This performance reflects our focus on cost discipline, operational efficiency and the early benefits of initial steps taken in previously-announced margin improvement initiative.
Elizabeth will provide more detail in her financial review. On our EBITDA margin expansion objective, we continue to be confident in our ability to achieve our stated target to deliver 300 basis points to 500 basis points of margin expansion by 2024, an insurance-only baseline of 50% to 51% normalized adjusted EBITDA margins. We have taken actions to enhance operating efficiency, improve productivity and streamline processes. During the quarter, we eliminated certain roles across the organization, sunset legacy products and reduced office square footage. Additionally, we entered into an agreement to sublease our datacenter to a third-party as we move more of our computing infrastructure to the cloud delivering long-term savings for Verisk.
We have also advanced on our future of data collection project where we are improving the efficiency and productivity of our field force, which not only saves money but enhances our solutions. We expect that over the next two years, about half of our identified cost-savings will come from headcount actions, about 25% from reductions in spending from IT infrastructure and about 25% from third-party spending, including real-estate. To date, we have made decisions and taken actions to address more than half of the cost-savings we are targeting.
Turning to our customers, our insurance customers continue to be generally healthy but are dealing with the cross currents of inflation and increasing loss ratios, which are negatively impacting profitability across the industry. This is having a disproportionate impact in personal lines, the insurtech companies and certain geographic markets while insurers are increasing rates to help cover inflation in repair costs, it takes time to get rates approved by the regulators and then implement it across the entire book of business. To-date premium growth has not yet caught up to loss costs, specifically in personal auto, we continue to see pressure on underwriting activity across the industry as insurance providers are holding back on writing new business.
In fact, combined ratios across the industry continue to trend lower and as a result insurers are cutting back on marketing spend as a way to protect profitability. The net result is lower transactional revenues for Verisk across both our personal lines and auto underwriting solutions as well as certain of our marketing solutions. We believe this is a cyclical issue and will abate over-time.
As we noted last quarter, Florida is a trouble spot for the insurance industry and the losses from Hurricane Ian add complication. We are experiencing an increasing level of insolvencies across the market with four companies liquidating just this quarter while other carriers are — exit the market entirely. This has had a negative impact on both our subscription and transactional revenues. To address these issues and drive future growth, our sales teams are engaged with the new entrants into the market as well as expanding our relationship with the state-backed insurer to help price and select risk.
We are also working with our existing customers to help them understand the impact of inflation across their book of business and to help them price the risks accordingly as policies come up for renewal. Apart from the near-term challenges, we continue to believe that the opportunity for Verisk to address the long-term strategic and operating needs of the insurance industry remains substantial. In my many conversations with insurance CEOs, they have consistently encouraged us to develop a more strategic dialog on how we can help the industry address technology, regulatory and operating issues leveraging our unique and legacy position as an effective utility for the industry.
To that objective, we have been coordinating a series of CEO and CIO roundtables to develop solutions that can improve industry operating efficiency and capital efficiency as well as productivity. While these initiatives will take time to develop and implement, they represent a substantial incremental opportunity for Verisk. We are very excited about the opportunity to engage with the industry at the strategic level and broaden our technology partnership with them. In recognition of our commitment to innovate on behalf of clients, Verisk was recognized by Celent as a luminary for developing innovative solutions that help property, casualty and life insurers detect claims fraud.
Our solutions were recognized for highly-advanced functionality and ability to integrate with third-party data, driving faster outcomes and a more accurate claims experience. Similarly, we are committed to creating value for our employees, which includes providing an exceptional workplace and we were awarded the Great Place to Work designation this year in the, US, UK, India, Spain and New York.
We were also recognized as a Great Place to Work for Women in the UK. In today’s rapidly evolving workplace, we are focused on talent attraction, development and retention by supporting our teammates passion and having a purpose-driven culture that allows unlimited success. Finally, as a demonstration of our commitment to ESG priorities, Verisk has been ranked third out of 100 best ESG companies in 2022 by Investor’s Business Daily. The list recognized companies with superior environmental, social and governance ratings, in addition to fundamental and technical stock performance. We are honored to receive this recognition for our commitment to sustainability and the ability of our strong and growing business to meet customer and investor expectations.
As we move forward, I am more confident than ever that with our proprietary datasets talented and dedicated people, deep industry knowledge and technical expertise Verisk is best-positioned to create value for our customers by helping them evolve in a new digital environment, integrate rapidly-growing datasets and achieve new levels of efficiency. This in-turn will create value for our employees and shareholders.
I will now turn the call over to Mark for some more color on the insurance business performance.
Mark V. Anquillare — President and Chief Operating Officer
Thanks Lee. I’m pleased to share that the insurance segment delivered another solid quarter. In insurance we are experiencing strong growth in subscription revenues across both underwriting and claims resulting an OCC subscription growth up 6.1% for the segment overall. We’ve been underwriting — we had strong results from core underwriting, Extreme Event Solutions and our international businesses. We also had healthy contribution with double-digit growth achieved in certain of our newer acquired businesses, including life insurance and specialty business software solutions. Extreme Event Solutions had a strong quarter driven by the addition of new customers to our core Touchstone platform as well as the expansion of multi year deals with existing customers.
In an environment of rising inflation, insurers and reinsurers are challenged to keep up with the growth in their exposures. To help our customers understand their risks of inflation and assess their exposures we recently released our 2022 Global Model Catastrophe losses report detailing global financial loss metrics based on our latest suite of catastrophe events. Additionally, we are supporting insurers with a broad array of property data solutions so that they can ensure they’re keeping up with the impacts inflation and have a more informed view of risk as well as exposures.
Our sustainability country risk business also had a very strong quarter, as demand for our risk indices in both the corporate and investor segments continued to drive strong double-digit growth. We’re also beginning to get traction with the expansion of our sustainability offerings into the insurance segment. Within life insurance, we’re delivering strong double-digit growth with the addition of new customers as well as the expansion of our relationships with existing customers. Our Low-code/No-Code technology is leading the industry’s modernization by helping carriers gain efficiencies and improve profitability at-scale with a simpler technology ecosystem and a faster time for implementation.
We continue to be excited about the growth potential for our life business and our success here serves as a great blueprint, our ability to drive growth and value-creation with the extension into large, addressable and adjacent insurance markets. Insurance transactional revenues grew more modest 1.8%. This quarter’s transactional revenues were negatively impacted by lower level of storm activity versus the prior year when Hurricane Ida made landfall in Louisiana as well as the environmental impact of softer results in our personal auto underwriting and marketing businesses.
We do expect to see some benefit in the fourth quarter from Hurricane Ian claims but we caution that some of this could be offset by more liquidation to insolvencies within the insurance market. Additionally, we expect the environmental headwinds in personal auto and marketing to persist. In our effort to advance the dialog and our work on Ethical AI [Indecipherable] we recently coordinated and sponsored the Insurance Transform [Phonetic] where we presented on social fairness, pricing and underwriting for insurance with a preliminary study focused on personal auto rate-making.
During the conference, we engaged with consumer advocates, insurance regulators as we want to ensure that we’re at the forefront of conversation on this very important topic. The insurance industry is inherently trying to differentiate selecting and pricing risks where our goal is to ensure that, there is no fair unfair discrimination. In our customer conversations we hear that they need help to become more automated, more digitally engaged and more connected. The insurance industry is directing their spending towards these projects and in-turn to Verisk as a key ecosystem partner to drive these initiatives forward, which has been a key driver of growth for us.
The industry continues to look to us to innovate and respond to recent industry events with leading-edge solutions. For example, our Verisk teams responded to Hurricane Ian by helping clients track damage, dispatch adjusters and staff, estimated the cost to repair the damage and speed the claims process to get the properties repaired and safely return families to their homes. Our catastrophe loss estimate is $42 billion to $57 billion was an early and accurate estimate of insured losses related to Hurricane Ian, allowing insurers and reinsurers to understand the impact of their portfolios.
In California, insurers face new regulatory measures to address rating, property coverage, wildfire — areas. Verisk is helping our customers comply with these new regulations. We continue to help our customers select and price risks and rule out fraud with our advanced data analytics. I believe that we are well-positioned to continue to grow as we advance on our mission to become the trusted technology partner for the industry.
Now, let me turn the call over to our new CFO Elizabeth Mann for financial review.
Elizabeth Mann — Chief Financial Officer
Thanks Mark. And good morning to all of you here on the call. I’m so happy to be here at Verisk and speaking to you today. I have admired the company and its phenomenal insurance business for over a decade as I’ve worked in the information services sector, and now is a particularly exciting time to join as we have an opportunity to redefine our strategy as a global insurance-focused data analytics and technology company. We can now focus our capital and all of our industry knowledge to support the needs of our customers as Lee and Mark have already highlighted.
As I’ve joined Verisk over the last six-weeks and I’ve been getting to know the people and digging into the business I’ve been focused on a few priorities. The first is a focus on cost discipline and execution against the margin targets we have committed. Second, Lee has established a framework for capital allocation and ROIC metrics which I intend to continue. The resulting transparency and accountability on our deployment of capital will support our ability to invest with confidence to drive top-line growth and strong returns. Third, I will prioritize investor engagement, gathering feedback and providing transparency into the business, so I look-forward to getting out on the road and meeting all of you.
Let me now turn to our third quarter results. Before I begin I want to remind everyone that all consolidated and GAAP numbers are negatively impacted by the recent dispositions of 3E on Verisk Financial Services. This effect will continue through the first-quarter of 2023 when we will anniversary those transactions. As noted, due to its materiality, Wood MacKenzie will be accounted for as discontinued operations beginning in the fourth quarter of 2022. For the third quarter of 2022, on a consolidated and GAAP basis, revenue was $745 million a modest decline from the prior year, reflecting the impact of recent dispositions and foreign currency exchange rate headwinds which are most pronounced in our Energy segment offset in-part by acquisitions.
Net income attributable to Verisk decreased 6% to $189 billion while diluted GAAP earnings per share attributable to Verisk increased 3% to $1.20. The decline was primarily due to the disposition within the former Energy and Specialized Markets and Verisk’s Financial Services segment including the loss incurred as part of the true-up of the closing adjustments. Moving to our organic constant-currency results, adjusted for non-operating items, as defined in the non-GAAP financial measures section of our press release we are pleased with our operating results, led by continued growth in our subscription revenues.
In the third quarter, OCC revenues grew 4.8% driven by continued strength in our insurance segment and continued sequential improvement in our Energy segment. Our subscription revenues increased 5.6% while our transactional revenues increased a more modest 1.2%. Adjusting for $3.3 million in prior year revenue associated with our energy business in Russia OCC revenue would have grown 5.3% and subscription revenues would have grown 6.2%.
Consolidated OCC adjusted EBITDA growth was 6% in the third-quarter. Normalizing, for the prior year revenue associated with our Energy in Russia and the incremental expenses associated with exiting that business, OCC adjusted EBITDA growth was 7%. Total adjusted EBITDA margin, which includes both organic and inorganic results was 51.5% up 160 basis-points from the year prior reflecting strong cost and operational discipline as well as the benefit from recent dispositions.
This level of margin includes approximately 60 basis-points of headwind from recent acquisitions. 50 basis-points of headwind from our ongoing technological transformation including cloud expenses which we absorbed into our cost structure and 40 basis-points from higher year-over-year T&E expenses. Despite the environment and cyclical headwinds to margin, this quarter’s margin expansion is further demonstration of our commitment to efficiency. On that note, let’s turn to our segment results on an OCC basis. For insurance in the third quarter the Insurance segment revenues increased 5.3%. We saw healthy growth in our industry-standard insurance programs, claims analytics, extreme events, life insurance and specialty business solution.
Subscription revenues increased 6.1% reflecting tougher comparisons versus last year’s 7.9% growth as well as the impact of some of the environmental factors Lee and Mark spoke about earlier. Transactional revenues increased 1.8% in the quarter reflecting a lower level of storm activity in the quarter as well as continued softness from personal auto underwriting and marketing. This was offset in-part by strong recovery growth in international travel insurance solutions. Within workers’ compensation, we have seen a return to modest growth so the business is not yet back to pre pandemic levels.
Adjusted EBITDA grew 6.9% in the third quarter while margins declined 70 basis-points to 55.2%. These margins reflect a heavier burden from the corporate costs that were previously allocated to businesses that have been disposed as well as the impact of recently-acquired businesses, higher cloud expenses and the partial normalization of travel expenses back into the business. This level of margin also includes continued investment in our high-growth areas like life insurance and specialty business solutions and the impact of recently-acquired businesses.
Energy and Specialized Markets; revenue increased 2.5% in the third quarter. Normalizing for the impact of our exit from Russia, energy revenue growth was 5.2%. Our subscription revenues increased 3.5% or 6.8% normalizing for the Russian exit led by double-digit growth in energy transition chemical and metals and mining research coupled with modest growth in our core research subscription. Additionally, we continue to experience strong adoption and contract expansion from our Lens renewals.
Transactional revenue decreased 1.8% as growth was constrained by consulting resources. Adjusted EBITDA decreased 0.2% in the third quarter and margins contracted 210 basis-points to 34.4%. These adjusted EBITDA and adjusted EBITDA margin figures include $0.2 million in incremental expense related to the suspension of operations in Russia normalizing for that impact, adjusted EBITDA growth would have been 7.8%. On taxes our reported effective tax-rate was 22.7% compared to 20.9% in the prior year quarter. This higher year-over-year tax-rate was the result of lower level of stock option activity versus the prior year. Looking ahead to the remainder of 2022, we expect the tax-rate in the fourth quarter to be approximately 24% to 26% reflecting the impact of discontinued operations as well as a lower than originally expected level of stock option activity.
On adjusted net income and diluted adjusted EPS adjusted net income decreased 1.9% to $230 million and diluted adjusted EPS increased 1.4% to $146 million for the third quarter of 2022. These changes reflect organic growth in the business, contribution from acquisitions and a lower average share count offset in-part by the impact of divestitures and the higher interest expense and tax rates. For free-cash flow net cash provided by operating activities was $280 million for the quarter, down 1.8% from the prior year period due to the loss of operating cash flows related to the disposition. Normalizing for the impact of the 3E and Verisk Financial Services disposition, free-cash flow would have been up 7.5%. Capital expenditures were $66 million for the quarter up 7% versus last year reflecting increases in capitalized software development offset in-part by savings on third-party hardware and software as we move to the cloud.
We now expect capital expenditures for the full-year to be within the range of $270 million to $280 million. This range supports our plans to increase our software investment into core underwriting where we believe there is a significant opportunity for our platform enhancements. In addition, we now expect fixed asset depreciation and amortization to be within the range of $195 million to $205 million and intangible amortization should be approximately $145 million for the full-year 2022. Both, depreciation and amortization elements are subject to foreign currency variability, the timing of purchases, the completion of projects and future M&A activity.
On capital returns; during the third quarter we returned $349 million in capital to shareholders through share repurchases and dividends as our strong cash-flow allows us to consistently return capital to shareholders while also investing in the business. Additionally in October of 22, we entered into a new $100 million accelerated share repurchase agreement to be completed in the fourth quarter as is our normal practice. Looking ahead, we plan to optimize the use of proceeds from the sale of Wood MacKenzie while also maintaining our leverage range. We will achieve this through a combination of debt pay-down and share repurchases and may act opportunistically from a timing standpoint.
Before I turn the call back over to Lee, I just want to remind everyone that we will be hosting an Investor Day in March where we will provide more transparency and clarity on our strategic and financial profile and growth drivers, as a global insurance-focused data analytics and technology company.
And now I will turn the call back over to Lee for some closing comments.
Lee M. Shavel — Chief Executive Officer
Thanks Elizabeth. In summary, our business is strong as evidenced by our organic cluster and currency EBITDA — adjusted EBITDA growth of 7% and strong margin performance in the quarter. We are confident that we have the team in-place to execute on our operational efficiency plans over the next two years and deliver on our margin expansion targets. Longer-term, we continue to believe as well that the opportunity to create value for our customers and employees will drive value for our shareholders.
We continue to appreciate the support and interest in Verisk given the large number of analysts we have covering us, we ask that you limit yourself to one question. And with that, I’ll ask the operator to open the line for questions.
Questions and Answers:
Operator
[Operator Instructions] And with that, we will take our first question from Ashish Sabadra from RBC Capital Markets, please go-ahead.
Ashish Sabadra — RBC — Analyst
Congrats Elizabeth and look-forward to working with you. Lee thanks for providing the details on the impact of the divestiture I was just wondering if you could provide some underlying assumptions — any color on tax — if there is any tax leakage. How does the tax increase for the remaining company, standard cost any color on those trends will be helpful. Thank you.
Lee M. Shavel — Chief Executive Officer
Thank you Ashish. First, let me say on the question on tax leakage. The $3.1 billion in proceeds I think if your question is directed towards that we are not expecting any significant tax leakage — there may be some upside for us on that modestly but we think that we will be able to deploy the full amount of that in share repurchases and debt pay-downs. As it relates to the future tax-rate, we have provided some guidance for the fourth quarter but it’s obviously a complex issue that we are working through in terms of the longer-term impact, it depends upon the composition of the business overall and we would intend to provide more clarity for that as we look-ahead.
I think it’s fair to assume of course kind of as implicated in the fourth quarter that our effective tax rate will be higher, but we’ll try to provide more specific guidance as we sort that out and in the timeframe that we typically do with our fourth quarter earnings results.
Ashish Sabadra — RBC — Analyst
That’s very helpful.
Operator
And our question will come from Jeff Meuler with Baird.
Jeffrey Meuler — Baird — Analyst
Yes, thank you. Lee or Mark, maybe if you could just give us a more holistic perspective on what the adjacent market opportunity is for you as you focus your efforts in capital on insurance, you talked about life being a blueprint for extension into adjacent markets and you talked about developing solutions that’s an incremental opportunity for you coming out of the CEO and CIO roundtables, but maybe if you could just more holistically address just how you see addressable market or adjacent opportunities?
Lee M. Shavel — Chief Executive Officer
Sure, thank you Jeff. I’m going to take a first crack at it and then hand it over to Mark for his perspective. But, in one way that we’re looking at this is we’re looking at the totality of the insurance industry spend in aggregate and that’s a very substantial number in terms of hundreds of millions of dollars. And, Jeff I think you were rattling a paper there but we’re looking at that aggregate amount and I think as we’ve talked to investors previously, when we look at the amount of revenue that Verisk generates from the insurance industry relative to their operating costs it is a 40 basis point to 45 basis point amount and we think that there’s a broader opportunity for us to address their marketing spend and finding efficiencies and finding solutions to drive productivity gains, to find efficiencies on technology spend, which are substantially larger opportunities for us relative to the scale of what we’re doing.
So that will give you a sense of why we think that’s a substantial opportunity and we’ve been engaged in addressing a lot of those with current initiatives that we look to expand on and I know Mark can certainly speak to some of the things that we’ve been doing on that front.
Mark V. Anquillare — President and Chief Operating Officer
Super. So, maybe I’ll try to give you three examples, we talked about life but even within life, we have the ability to continue to extend into group life. We are focused today from a life insurance perspective primarily United States, we can go international to the extent you think about other lines of insurance, other lines of business related to life you have disability that’s an opportunity for us. We see opportunities to extend into pet insurance, travel insurance those are some examples of like customer sets that we don’t operate in.
I’ll make the obvious example but I just do want to remind everybody that from a marketing perspective that is a huge customer set. The marketing department makes sure that we just never really dealt with before and now we have access to through some recent acquisitions and it really is forming the foundation of how we kind of go to market with some of our customers really helping them understand the best target markets and where — how to price. Last but not least [Indecipherable] themes here, we think we can do more from a software and technology platform perspective with our customers.
We don’t deal with the CIO as being the Chief Information Officers inside of our major customers and we see ourselves as a technology player and a strong partner to them, so hopefully that helps.
Lee M. Shavel — Chief Executive Officer
And Jeff, I think you see there are dimensions there that we’re talking about, one is a functional orientation and so that’s — Mark’s speaking to the marketing opportunity, we see similar opportunities on the technology side and then operationally there is the business line opportunity or dimension that we’re looking at with travel, pet and other areas and then of course there is the international where we feel as though the opportunity to bring some of that expertise. All of those create I think a broad envelope for us to look to expand on what we’re doing.
Jeffrey Meuler — Baird — Analyst
Thank you both.
Operator
Our next question will come from Alex Kramm with UBS Financial. Please go ahead.
Alex Kramm — UBS — Analyst
Yes good morning everyone. Maybe as a quick follow-up to Ashish’s question, but since you didn’t report this quarter’s discontinued operation but will next, maybe you can give us the apples-to-apples EBITDA margin how it would have been, if it would have been a discontinued operation already? And if you can answer that specifically, maybe outline what the stranded or servicing costs related to Wood Mack will be and how they will fade away over-time?
Lee M. Shavel — Chief Executive Officer
Yeah, Alex thanks for the question. We’re not at the point where we have broken through both the combination of the adjustments that we’re making in the overhead costs or the overhead allocation, so I think that is something that we’ll look to provide more input on as we as we move ahead probably with the fourth quarter earnings, where we’ll have that discontinued operations. Our focus has been on getting the transaction done as, you can imagine that has been I think a pretty solid accomplishment in a difficult market.
Will take time for us to sort through the accounting consequences. Now that we understand that and there are a lot of transitional elements that we need to take into account, so it’s not as simple exercise.
Alex Kramm — UBS — Analyst
Understood. Thanks.
Operator
And our next question will come from Toni Kaplan with Morgan Stanley. Please go-ahead.
Toni Kaplan — Morgan Stanley — Analyst
Thank you. Thanks very much. Wanted to ask about your pricing, how that’s looking for 2023. I know you mentioned the insurers currently trying to put through sizable rate increases to cover inflation. I guess, will you be able to benefit from that by being able to increase your subscription prices? How should we think about the magnitude of price increases next year versus 2022 or versus a normal year, however you want to break that out? Thanks.
Mark V. Anquillare — President and Chief Operating Officer
Yes thank you Toni. I appreciate it, this is Mark. Let me first remind everybody, we do have some connectivity of pricing to premium volumes. The utility of our products are seen and demonstrated through the premiums they write, so to the extent that it’s a harder market or meaning prices going up and there’s more premium we will see that on a little bit of a lag effect.
To your more direct to short-term, I think what we’re trying to do is really balance the opportunity to hopefully — maybe take a little bit more price only because like everybody we’re encouraged and more cost around labor and other inflationary type of expend. But at the same time, more in it for the long-term and what we’re trying to do is make sure that we are able to sell new products, new solutions to customers and not cause any short-term angst or grief with regards to price today.
Toni Kaplan — Morgan Stanley — Analyst
Thanks a lot.
Operator
Our next question will come from Manav Patnaik from Barclays. Please go-ahead.
Manav Patnaik — Barclays — Analyst
Thank you. You just called out broader insurance inflationary pressures I guess and then more specifically the Florida issues as well. Is there any way to quantify how much each of that impacted the growth and how long should this — had been continuing?
Lee M. Shavel — Chief Executive Officer
Thank you Manav. So there are a variety of factors some of which are difficult to just kind of fully separate. I’m going to ask Mark to give his perspective on both impact and sustainability of these of these effects that you’re asking about.
Mark V. Anquillare — President and Chief Operating Officer
So quantifying it is difficult, so I’m going to maybe qualify — quantify it, I apologize. So inside the auto market what we’re seeing is just a general theme of people trying to write less business or quote business. They are waiting for their rate filings to be implemented and in-turn wait for higher prices or high premiums before they write. So that seems like a depression that will occur and be soft, I would guess probably for another six months or so into 2023 that’s our take. But at the same time, it is something that cyclically will come and will go, so we expect it to rebound.
Two, Florida is clearly a challenge. There has been — I’m sure a last resort, basically rates there had been subsidized when people try to get into the market, they’re hurt by large cat and inside of those new customers and those existing customers that are going out of business that does affect us and will be — let me say it this way that’ll be a little bit longer-term, ultimately new emerging insurers will rise, we will hopefully serve them, we are working with them now but that will take time, so that rebound would probably be over the course of a year or more I would say in that regarding.
I think the last comment that you were referring to or at least we were referring to is the workers’ comp space. We did see some growth this quarter, at the same time the market is still depressed. Some of that is regulation, I think I’ve highlighted in the past. Some of it I do believe it’s just the fact that the work-from-home environment leads to fewer claims in the future. So, I think we’ve started to anniversary the challenge. I think, it will rebound a bit — I don’t want to be optimistic, but I would assume that should occur in 2023 at some point. I hope those are the three trends or themes that you were talking about. The other thing that affected us a little timing was storms, obviously Ida last year Ian this year both pretty big storms affected different quarters.
Lee M. Shavel — Chief Executive Officer
And I would add one other dimension Manav, which is I think that what we’ve seen is kind of fairly solid subscription growth. I think that what you saw in 2022 was some weakness on the transactional revenue growth and I think it will probably manifest itself — some of these trends in some sustaining of that weaker growth into 2023 if these dynamics have the impact that we’ve described, but again also subject to variability on storm, but hopefully that’s helpful.
Manav Patnaik — Barclays — Analyst
Yes thank you very much.
Operator
Our next question will come from Andrew Steinerman, JPMorgan.
Andrew Steinerman — JPMorgan — Analyst
Hi, it’s Andrew. I’m going to ask you about Verisk’s ongoing organic revenue growth goal of 7% and my question is how long will it take Verisk insurance to get there and what needs to happen and what your comments about Florida workers’ comp going to hold us back from getting there?
Lee M. Shavel — Chief Executive Officer
Thank you Andrew. So we certainly understand that. What I will first say and to reiterate that our confidence in that long-term target, it remains in-place given what we see as opportunities in front of us. I think when you look at what we even achieved in 2021 in a more challenging environment where we had two quarters of organic revenue growth above 7% clearly demonstrates the ability of our insurance business to achieve that. We had some weakness related to pandemic effects such as lower driving activity, impact on workers’ comp and I think to Mark’s comments we are seeing some weakness as a result of the economic environment, but we’re also seeing recovery in some of the pandemic related effects.
And I think that biases us towards stronger performance ahead from a growth perspective as we come out of some of the stronger elements. Some of the macro economics may persist but I think we’re seeing kind of more momentum towards that target ahead that would be the way I think about it both from a longer-term perspective which we are still confident that we can deliver on that, we have to work our way through I think the conflicting impacts of some recovery from pandemic impacts and then some of the more sustained macroeconomic which I think are of a lower magnitude than what we experienced through the pandemic.
Andrew Steinerman — JPMorgan — Analyst
Got it, thanks Lee.
Operator
Our next question will come from Greg Peters with Raymond James. Please go-ahead.
Gregory Peters — Raymond James — Analyst
Good morning everyone. I guess I’ll step-back and ask a bigger-picture question. I heard in your comments Lee about talking with all your customers and trying to partner with them, to help innovate etc and that’s going to require investment in your business and so I guess what I’m getting at here is just to go back and sort of reset or recast the die in how you’re going to balance the desire to improve margins and you’re setting out some margin targets versus the need really to invest in your business in order to help your customers get the innovation they’re looking for?
Lee M. Shavel — Chief Executive Officer
Great. Thanks for the question and we particularly value your perspective and knowledge around the insurance industry, so you probably — understand better — better than most — the challenges that the insurance industry is facing and so let me kind of break that apart. I think the opportunity to invest in these and these new opportunities have generated both growth and very strong returns for the internal investments that we have made in a variety of areas and I would probably cite our LightSpeed product where we’ve been able to accelerate the delivery of quote to — a bindable quote to the point-of-sale have generated a very strong economic growth for us and a very good return capital. So we’re looking for similar elements to that. We’ve been talking about our investment in the core lines reimagine initiative to migrate a lot of our data and services into that new technology platform, which delivers substantially greater value for our clients on that front, opening up I think new opportunities for growth and certainly a high return that we can generate on that.
So those — and the third point that I would make is that on the margin efficiency target that has been focused on looking not at cutting investment within the business but looking for areas of opportunity from an operational efficiency perspective within the business that I think has been a very healthy exercise for us that we’ve demonstrated progress against, but it hasn’t come at the cost of us pursuing these overall opportunities.
So I think the fundamental concern is, look we’re hearing that there are a lot of opportunities to invest; how does that — does that conflict with the margin objective? I don’t believe so. I think that we can continue to make these investments, we can deliver on the operational efficiencies within the business to drive that margin improvement and continue to generate very solid growth and strong returns on capital.
Gregory Peters — Raymond James — Analyst
I appreciate the additional color
Lee M. Shavel — Chief Executive Officer
Thanks Greg.
Operator
Our next question will come from George Tong with Goldman Sachs.
George Tong — Goldman Sachs — Analyst
All right, thanks good morning. With respect to the Wood MacKenzie sale proceeds, how are you thinking about splitting the $3.1 billion between debt paydown and share repurchases? Do you have a target leverage multiple in mind for the standalone insurance company?
Lee M. Shavel — Chief Executive Officer
Thank you George. I’m going to hand that over to Elizabeth to address.
Elizabeth Mann — Chief Financial Officer
Yeah hey, George thanks for asking. Like Lee said, we’re going to balance it between debt pay-down and share repurchases. We haven’t established a precise number for debt paid out. Other than to say there is no change to our target leverage range of 2 times to 3 times in order to maintain our investment-grade rating. Within that, we’ll look to optimize over time kind of the best balance of interest savings versus share repurchases and either way the majority of it — the significant majority will be on share repurchase. But either way, sort of regardless of where we end-up within that fairly small range will still be within the accretion dilution range that we quoted.
George Tong — Goldman Sachs — Analyst
Very helpful. Thank you.
Elizabeth Mann — Chief Financial Officer
Sure.
Operator
Our next question will come from Andrew Jeffrey with Truist Securities.
Andrew Jeffrey — Truist — Analyst
Hi good morning. I appreciate you taking the question, Mark I’m intrigued but I hear you talk about some of these new markets which really would be true extensions for Verisk, pet being one I think that you mentioned. I’m wondering, if you have — do you think you have the data and the kind of digital customer-facing solutions that you might need to expand into those markets or if you think you’re going to need to add capabilities to be able to penetrate those new markets and drive new revenue streams?
Mark V. Anquillare — President and Chief Operating Officer
So Andrew great question. I appreciate that. I think, when we attack new markets, we typically go at it with the theory that we could build some great models and then as data information starts to flow, we can improve those models. So, pet as an example what we do with travel is not the travel, you would think like boy I missed my flight it’s going to be insured. This is the type of travel that focuses on somebody who has a pre-existing medical condition it’s the extent that they’re traveling, how do they get the right medical. So that is a modeled outcome and that has kind of the data we have around it. We can apply those type of models to pets, dogs, cats more traditional pets in a way that we can understand how health of the pet and existing conditions cause and will affect payout. So, I hope that’s just an example of ways we can kind of adjust our models.
I think the digital engagement and the way we’re going at those things are very best-in class and very digitally engaged. So, I think we’re well-positioned there. We do not hold the same debt advantage that we do with some of the United States to minimize, but that doesn’t cause us to shy away from and actually provides us with an opportunity to find a way to gather some information. I hope that’s responsive.
Andrew Jeffrey — Truist — Analyst
Yeah looking forward to seeing your progress there.
Operator
And our next question will come from Jeff Sibler with BMO Capital Markets. Please go-ahead.
Jeffrey Silber — BMO — Analyst
Thanks so much, that’s close enough. Wanted to go back to Manav’s question where you parsed out some of the environmental impacts affecting the business. I understand the impact on the non-subscription revenue, but I was just curious on the subscription side in terms of the slowdown. I know you’ve got customers that go bankrupt obviously that’s an impact, but why we think the slowdown in subscription revenue is an investment that we should expect to continue? Thanks.
Lee M. Shavel — Chief Executive Officer
Yes, so one of the things I think we tried to do is share that even though you would think of subscriptions as being this wonderfully flat right, from quarter-to-quarter, even inside of our subscription businesses when we bring on new customers or when we have some anniversary of dates, there is a little bit of an up-and-down inside that. So to the extent that you look at this year’s subscription to last year’s I think that’s a good rule of thumb. If you look at it quarter-by-quarter there is some up and downs. I would not read anything into subscription level growth in the quarter — everything is very solid and everything is running as we would expect. So, I will kind of reinforce these earlier comments about the subscription growth being strong and we’re optimistic.
Jeffrey Silber — BMO — Analyst
Okay, thank you.
Operator
And our next question will come from Faiza Alwy with Deutsche Bank. Please go ahead.
Faiza Alwy — Deutsche Bank — Analyst
Hi good morning, thank you. I wanted to focus a little bit more on the insurance specific margins and I think those came in a lot better than what we had talked about because I think previously you had talked about those margins declining in-line with year-to-date that you had seen in the second-quarter? So I’m curious what drove the upside? I think it sounds like you’ve made some progress around your cost-savings initiatives that you had talked about. So, maybe just address how much that contributed to margins and how we should think about it in the fourth quarter and maybe Lee if you can talk about, if your confidence in those targets has improved as you’ve done some work around them?
Elizabeth Mann — Chief Financial Officer
Yeah thanks Faiza, thanks for the question. Let me comment a bit on the insurance only margin for Q3. While it was a slight year-over-year decline I think we reminded you that, that was offsetting some of the headwinds in the baseline that included the reallocation of corporate expenses from the divestitures. It included the impact of recent acquisitions, which are themselves lower margin businesses and it offsets our investment in cloud and the return of T&E expenses. Offsetting those there is the natural kind of operating leverage in the business and business growth, so those things kind of offset each other.
Though another thing I might call-out in the quarter there, it’s also offsetting a slight decrease in the pension credit which happened at the corporate level and so the insurance business had its allocation of that component. That is expected to continue in the fourth quarter. More generally, as we look-ahead to the fourth quarter for insurance, these headwinds will continue. The impact may not be exactly linear quarter-to-quarter, so that could move around.
Lee M. Shavel — Chief Executive Officer
What Elizabeth is describing Faiza is that underneath the overall margin performance when you kind of strip away the reallocations, there is still a very strong operating leverage that is expressing itself in terms of looking at it before we look at kind of the non-operational elements and so that’s the core of the business and that’s how we will drive EBITDA growth ahead of revenue growth. On the second part of your question the confidence that we have on achieving our targets is driven by a very methodical process that we’ve gone through to identify all areas of potential savings that as we indicated on the call that we have identified and taken actions that address over half of that target at this point and we have line-of-sight on additional opportunities that we’ll be pursuing over-time.
Part of these will be influenced by the trends — the transitional demands of the separation of our businesses and so we have transition service obligations for those until those businesses are separated, that’s a factor and we wanted to see how those sorted-out before we worked towards the further or the additional decisions that we need to make to achieve that. But, we feel very confident in our ability to meet those expectations.
Faiza Alwy — Deutsche Bank — Analyst
Great, very helpful thank you both.
Operator
Our next question will come from Stephanie Moore with Jefferies. Please go-ahead.
Stephanie Moore — Jefferies — Analyst
Hi good morning. I was hoping to get a bit more color on just the international business, maybe some update on how it performed during the quarter and kind of your expectations going-forward? Thank you.
Lee M. Shavel — Chief Executive Officer
Sure, thank you Stephanie. So I would start-off by saying that our international businesses and obviously I’m going to presume that the question is directed to our insurance international businesses, Wood MacKenzie of course is a international business but we kind of covered that in the call, but on the insurance side we have a variety of businesses on the claims and underwriting side, probably most significantly our specialty business services or what was formerly known as Sequel that addresses the Lloyd’s non-standard market with a workflow platform and management system for that market that continues to have great success in delivering a very compelling solution both on the front-end business origination pricing and rating and then ultimately kind of the policy management side that has continued to drive double-digit growth and we’ve seen similar performance from a lot of the other international businesses that we’ve had.
I’ll turn it over to Mark for some additional color perhaps on the businesses other than especially business.
Mark V. Anquillare — President and Chief Operating Officer
I think you had it right. I think you’re seeing growth there which is excess of our US business. What I also would like to highlight, although not organic at this point, the acquisition of Opta which is a business intelligence solution up in Canada is a wonderful business, very much aligned with what we do and the synergies that we anticipated are greater than we anticipated. So, I think we’re making great progress there and it’s a really nice addition to the Verisk family.
Stephanie Moore — Jefferies — Analyst
Great thank you so much.
Operator
Our next question will come from Andrew Nicholas with William Blair.
Andrew Nicholas — William Blair — Analyst
Hi good morning thanks for taking my question. I wanted to follow-up on kind of the end-market health and the insurance profitability pressures. I understand that there are some environmental factors here that’s a bit more temporary auto market Florida workers’ comp and the like, but are you seeing that bleed into the more core traditional conversations? Has there been any impact on the sales cycle in your P&C business where the pipeline just trying to understand if some of these issues are truly concentrated in the items that you called out or if there is the risk of this being a bit more pervasive? Thank you.
Mark V. Anquillare — President and Chief Operating Officer
Yeah, good question. I think you’ve read it, you’ve seen it. I mean the insurance industry is like many under a little bit of pressure. Inflationary cost and inflation in general is causing pain to their bottom-line. Being cat and along with some other cats, I mean another big year probably $100 billion of losses so that creates stress and pressure on them to look at cost, look at ways they can be more focused on underwriting and underwriting discipline. So, I would tell you that we have this wonderful business that continues to have a wonderful spot inside of their key decisions and we have not seen anybody trying to move away but there is definitely pressure there, there is definitely people scrutinizing every purchase and scrutinizing when and how they buy.
So, we are seeing some of that and we’ve highlighted some of the areas where it’s been most — more on the transactional side.
Lee M. Shavel — Chief Executive Officer
And Andrew, I want to extend on Mark’s comment because the near-term pressure that you’re asking to specifically is part of what we’re experiencing but it also creates that broader opportunity because that’s focused on how do we address the impact of those inflationary costs, not just on our loss and loss adjustment expenses but also on our operational efficiency and the inflation that we’re experiencing that is driving a more robust dialog around automation, how we can utilize data to better select risk, how we can improve the processes by creating more connections through the ecosystem to handle a lot of the steps that are probably not as efficient as we could be. So, I think that while it is creating some of that near-term pressure, it is also bringing a greater urgency and focus as I’ve described in the strategic orientation of our client CEOs around how do we solve industry problems that can create a lot of value and savings for them.
Andrew Nicholas — William Blair — Analyst
Makes sense, thanks for that color.
Operator
And our final question will come from Heather Balsky with Bank of America.
Heather Balsky — Bank of America — Analyst
Thank you for taking my question. I’d love to get an update from you guys on your cloud transformation and how it’s progressing. And then, just any color you can give on the implementation costs and then when you kind of expect to see some savings and what type of savings. And then just with regards to your margin expansion goals, does that incorporate the cost of implementation rolling-off and those savings flowing through or is that incremental to that target? Thanks.
Lee M. Shavel — Chief Executive Officer
Yeah. Thanks Heather. I would — with regard to cloud transformation, in prior calls, we identified the fact that we’re in kind of the final year of that implementation and we have achieved — this is a very important distinction — we have achieved operating cash savings when you look at our incremental cloud expenses netted against what would have previously been capex expenditure in the business, and so that’s — we believe that it has delivered real cash savings to us. However it’s important to understand that, that from an accounting standpoint, from an EBITDA perspective means that we have added EBITDA expense to our P&L and so that has come on, we’ve been able to address that, but we’re effectively converting depreciation and amortization to EBITDA expense.
That’s why you will hear us talk about the headwinds from the cloud and the cloud implementation. We do think that, that incremental cost is one that we are substantially through and in addition we have been able to take-out the opex expense through some of the outsourcing to that third-party that we described earlier in the call. All of that is included in our overall margin improvement targets, so as we have realized those savings that is factored into the margin element particularly the outsourcing of our legacy datacenters. I think that addresses the two-parts of your question.
Heather Balsky — Bank of America — Analyst
Thank you very much.
Operator
[Operator Closing Remarks]