Lee M. Shavel
Chief Executive Officer at Verisk Analytics
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.