Lee Shavel
Incoming Chief Executive Officer at Verisk Analytics
Thanks, Scott, and good day, everyone. On behalf of the entire Verisk team, Scott, let me thank you for your dedication and service to Verisk. We wish you all the very best in your well-deserved retirement. It has been a privilege to work with you and learn from you over the past five years, and I'm fortunate to have your ongoing support and counsel. I'm pleased to share that Verisk delivered solid first quarter results.
First quarter organic constant currency revenue grew 5.3% and organic constant currency adjusted EBITDA grew 4.1%. Adjusted for the impact of the suspension of our commercial operations in Russia and higher discrete professional fees, organic constant currency revenue grew 5.7% and organic constant currency adjusted EBITDA grew 6.9%. We delivered solid growth across the Insurance segment, with the fastest growth reported in Marketing Solutions, International Specialty business solutions, life insurance, extreme event solutions and claims analytics. We also had solid contributions from our industry standard solutions in underwriting.
Within Energy, we continue to see improving results across both subscriptions and consulting, with the strongest growth in the energy transition, chemicals and metals and mining. We did experience softness in certain of our transactional businesses, including workers' compensation, which is experiencing continued weakness, as carriers are adjusting to new regulation within the industry. In addition, our property estimating solutions had weaker transactional growth related to a slower storm season versus last year's ice storms in Texas.
Finally, the auto underwriting business continues to deal with a lower level of shopping activity. Our results also included headwinds from the suspension of commercial operations in Russia, increased cloud costs, higher discrete professional fees in the quarter and the partial normalization of travel and entertainment in the post-pandemic environment. We will provide more details on the financial review section of the call.
In preparation for officially stepping into the role as CEO. Over the last 75 days, we have visited our offices in London, Boston, Lehi, Utah and of course, Jersey City, to meet with the employees and leadership teams of all our business units. Many of these individuals are long-time colleagues, and I'm excited to build on these relationships going forward. In addition, I've had the opportunity to meet with more than a dozen of our most significant customers. Some of whom I've interacted with throughout my tenure in Europe. I've long known the valued role we play as a technology partner to our customers, and I'm more energized than ever about the extraordinary opportunity we have to expand the breadth and the depth of those relationships.
Our value proposition is very clear. Verisk strategically invests in data and technology at scale in order to deliver economic value to our customers through operational efficiencies and better decision-making across the industries we serve. In Insurance, our customers look to us to help them better select risks and facilitate the automation of legacy processes to improve efficiencies and underwriting and claims. They also turn to Verisk for support with the digitization of their customer experience, and to enable the use of new data sets and platforms for expanded product lines.
The development of our Touchstone platform and extreme event solutions, the LightSpeed product suite and underwriting and the development of our life business are tangible examples of what we have delivered to clients. And in Energy, understanding the complex impacts of the energy transition and the geopolitical events continuing to unfold in Ukraine on the global energy economy remain a primary customer focus through strong demand for improved data delivery and analytics, and we continue to deliver on that demand for our customers through our Lens platform. In fact, the first quarter was our fourth consecutive quarter of mid- to high single-digit ACV growth, helped by new multiyear contracts, with material upsell for customers that are adopting Lens as they recognize the value of this new platform delivers.
In both Insurance and Energy, we benefit from the growing demand for data analytics from our customers, along with their increased ability to ingest and utilize our rapidly growing data sets and technologies to make better decisions and drive operational efficiency. We create lift from these growth engines through the industry scale at which we can deliver greater value per dollar invested that our clients would be able to, individually.
Growth and returns on invested capital have been and will continue to be the primary driver of value creation for our shareholders over the long term. And my highest priority as CEO will be to continue to deliver on both. We are well-positioned in industries with massive opportunities that will require investment and focus in areas where we can maximize value for our customers. It also requires delivering value for our employees on whom we rely for their talent, commitment and effort. We operate in a highly competitive market for talent and must be sure that Verisk remains a very attractive destination for the best and brightest.
Moving from our long-term value creation strategy to our near-term focus on the activities we described to drive enhanced shareholder value. I wanted to provide an update on both our progress towards being an insurance-focused data analytics solutions provider, and our commitment to achieving margin expansion. We are making steady progress on the separation of the Energy business. We are actively engaged in a detailed planning and modeling exercise of the financial, legal, tax and operational costs associated with separating the business. This analysis will inform valuation and the transaction structure that we intend to pursue, subject to market conditions and shareholder value considerations.
Our timing expectations remain unchanged. On our EBITDA improvement objective, as Mark will describe in greater detail. Though still early, we have identified several areas of organic cost efficiencies at the operating and corporate level to drive margin expansion. These opportunities include the consolidation of certain real estate locations as leases come due or to the extent sublease opportunities are available, the increased usage of our global talent optimization locations for new hires and more efficient technology investment, including the closure of our on-premise data centers. We will also reduce corporate overhead after we complete the transition services agreements associated with the sale of 3E and Verisk Financial Services.
As we previously announced in mid-March, the company continues moving towards the goal of being a global insurance-focused data analytic solutions provider. We expect to deliver 300 to 500 basis points of EBITDA margin expansion in the consolidated remaining insurance-focused business by 2024 against a baseline of 50% to 51% normalized adjusted EBITDA margins.
On the 55% adjusted EBITDA margin that our Insurance segment delivered in 2021. Indeed, 55% does not represent a normalized run rate for the Insurance business as it does not account for a number of offsets, including first, corporate overhead costs allocated to other businesses of approximately 200 basis points; second, the impact of three strategic insurance-related acquisitions made over the last two quarters, approximately 80 basis points; and finally, the normalization for incremental cloud transition and post-pandemic travel and entertainment expenses for a combined approximately 170 basis points.
In addition, investments in new financial and human capital systems will provide greater efficiency opportunities when fully implemented, but will pressure margins in the near term as well inflationary and competitive compensation pressures, but these effects are all embedded in the 300 to 500 basis point target. We should note that 2022 is likely to be quite noisy due to the impact of portfolio changes and implementation costs, as well as the impact of other environmental issues.
As such, we expect the margin expansion to be most visible beginning in 2023 as we move past the timing impacts of the portfolio changes and implementation. Based on our work to-date, we are very confident in our ability to achieve our stated target for EBITDA expansion by 2024, as we originally disclosed.
Before turning it over to Mark, let me provide a quick update on the CFO search. We continue to make progress in our prioritizing public company CFOs with operational efficiency experience. In the meantime, David Grover, Verisk's Controller and Chief Accounting Officer, has been acting as Interim Chief Financial Officer, and is well suited for this job.
I'll now turn it over to Mark for some more color on the Insurance business.