UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o		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)		26-2994223 (I.R.S. Employer Identification No.)
545 Washington Boulevard Jersey City, NJ (Address of principal executive offices)		07310-1686 (Zip Code)

(201) 469-2000
(Registrant’s telephone number, including area code)

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 to such filing requirements for the past 90 days. Yes o No þ

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 for such shorter period that the registrant was required to submit and post such files). Yes o No o

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.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(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 Exchange Act). Yes o No þ

As of November 13, 2009, there was the following number of shares outstanding of each of the issuer’s classes of common stock:

Class		Shares Outstanding
Class A common stock $.001 par value		125,805,300
Class B (Series 1) common stock $.001 par value		27,118,975
Class B (Series 2) common stock $.001 par value		27,118,975

 

 

Verisk Analytics, Inc.
Index to Form 10-Q

Table of Contents

		Page Number
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Verisk Analytics, Inc. Financial Statement as of September 30, 2009 (unaudited)
Balance Sheet as of September 30, 2009			2
Notes to Financial Statement			3
Insurance Services Office, Inc. Condensed Consolidated Financial Statements as of September 30, 2009 and for the three and nine months ended September 30, 2009 and 2008 (unaudited)
Condensed Consolidated Balance Sheets			5
Condensed Consolidated Statements of Operations			6
Condensed Consolidated Statements of Changes in Stockholders’ Deficit			7
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			10
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3 - Quantitative and Qualitative Disclosures About Market Risk			44
Item 4 - Controls and Procedures			44
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings			45
Item 1A - Risk Factors			45
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 3 - Defaults Upon Senior Securities			45
Item 4 - Submission of Matters to a Vote of Security Holders			45
Item 5 - Other Information			45
Item 6 - Exhibits			45
SIGNATURES			46
Exhibit 10.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

VERISK ANALYTICS, INC.

BALANCE SHEET (Unaudited)

ASSETS
Cash		$	1,000
Total assets		$	1,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total liabilities		$	—
Commitments and contingencies
Stockholders’ equity:
Common Stock, $.01 par value; 1,000 shares authorized; 100 shares issued		$	1
Additional paid-in capital			999
Total stockholders’ equity		$	1,000
Total liabilities and stockholders’ equity		$	1,000

The accompanying notes are an integral part of this financial statement.

VERISK ANALYTICS, INC.

NOTES TO FINANCIAL STATEMENT

1. Organization:

Verisk Analytics, Inc (“Verisk”) was established on May 23, 2008 to serve as the parent holding company of Insurance Services Office, Inc (“ISO”) upon completion of the proposed initial public offering (“IPO”). On June 27, 2008, ISO’s stockholders approved certain corporate governance changes necessary to allow Verisk to proceed with a proposed IPO. On October 6, 2009, Verisk effected a corporate reorganization whereby the Class A and Class B common stock of ISO was exchanged for the common stock of Verisk on a one-for-one basis. Verisk immediately thereafter effected a fifty-for-one stock split of Class A and Class B common stock. On October 9, 2009, Verisk completed its IPO. Upon completion of the IPO, the selling stockholders sold 97,995,750 shares of Class A common stock of Verisk, which included the 12,745,750 over-allotment option, at the IPO price of $22.00 per share. Verisk did not receive any proceeds from the sales of common stock in the offering. Verisk trades on the NASDAQ Global Select Market under the ticker symbol “VRSK.” As the accompanying financial statement as of September 30, 2009 is prior to the reorganization and IPO, this statement reflects the financial position of Verisk as a wholly owned subsidiary of ISO. Verisk had no operating activity from its formation on May 23, 2008 through September 30, 2009.

All stock options granted under the Insurance Services Office, Inc. 1996 Incentive Plan were transferred to Verisk, without modification to the terms of the options other than such options will be exercisable for Class A common stock of Verisk and the strike price of each outstanding option has been adjusted for the impact of the fifty-to-one stock split.

Upon consummation of the reorganization, two new series of Class B common stock, Class B (Series 1) common stock (“Class B-1”) and Class B (Series 2) common stock (“Class B-2”) were formed and 50 percent of each Class B stockholder’s existing Class B common stock was converted into shares of the new Class B-1 common stock and the remaining 50 percent of each Class B stockholder’s existing Class B common stock was converted into shares of the new Class B-2 common stock. Each share of Class B-1 common stock shall convert automatically, without any action by the stockholders, into one share of Class A common stock 18 months after the date of the IPO. Each share of Class B-2 common stock shall convert automatically, without any action by the stockholders, into one share of Class A common stock 24 months after the date of the IPO.

2. Basis of Presentation:

The accompanying financial statement has been prepared on the basis of accounting principles generally accepted in the United States of America.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 105, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“ASC 105”). ASC 105 will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the SEC, under the authority of federal securities laws, are also sources of authoritative U.S. GAAP for SEC registrants. On the effective date of this statement, the codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual reporting periods ending after September 15, 2009. Verisk’s adoption of ASC 105, effective September 30, 2009, impacted the consolidated financial statement and related disclosures as all references to authoritative accounting literature reflect the newly adopted codification.

In May 2009, the FASB issued ASC 855-10-20, Subsequent Events (“ASC 855-10-20”). ASC 855-10-20 establishes principles and requirements for subsequent events in the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. ASC 855-10-20 is effective for interim and annual reporting periods ending after June 15, 2009. In accordance with the adoption of ASC 855-10-20, effective June 30, 2009, Verisk discloses in Note 4 the date through which the subsequent events have been evaluated. The adoption of ASC 855-10-20 did not have any other impact on Verisk’s consolidated financial statement.

3. Commitments and Contingencies:

Verisk does not have any commitments and contingencies.

4. Subsequent Events:

Verisk has evaluated subsequent events through November 16, 2009, which is the date the financial statement was issued.

INSURANCE SERVICES OFFICE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

		2009
		unaudited				2008
		(In thousands, except for share and per share data)
ASSETS
Current assets:
Cash and cash equivalents		$	60,560			$	33,185
Available-for-sale securities			5,352				5,114
Accounts receivable, net (including amounts from related parties of $2,992 and $3,421, respectively)			104,083				83,941
Prepaid expenses			16,729				13,010
Deferred income taxes			4,490				4,490
Federal and foreign income taxes receivable			2,935				12,311
State and local income taxes receivable			3,984				689
Other current assets			22,630				16,187
Total current assets			220,763				168,927
Noncurrent assets:
Fixed assets, net			87,229				82,587
Intangible assets, net			118,338				112,713
Goodwill			489,245				447,372
Deferred income taxes			83,629				100,256
State income taxes receivable			7,793				8,112
Other assets			12,379				8,910
Total assets		$	1,019,376			$	928,877
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	100,979			$	83,381
Acquisition related liabilities			—				82,700
Short-term debt and current portion of long-term debt			131,528				219,398
Pension and postretirement benefits, current			5,397				5,397
Fees received in advance (including amounts from related parties of $6,711 and $3,699, respectively)			153,415				114,023
Total current liabilities			391,319				504,899
Noncurrent liabilities:
Long-term debt			527,894				450,356
Pension benefits			137,417				133,914
Postretirement benefits			21,936				23,798
Other liabilities			77,258				76,194
Total liabilities			1,155,824				1,189,161
Redeemable common stock:
Class A redeemable common stock, stated at redemption value, $.0002 par value; 335,000,000 shares authorized; 150,882,000 and 150,388,050 shares issued and 34,768,750 and 37,306,950 outstanding as of September 30, 2009 and December 31, 2008, respectively, and vested options at intrinsic value (1)			1,064,896				752,912
Class A unearned common stock KSOP shares			(2,827	)			(3,373	)
Total redeemable common stock			1,062,069				749,539
Commitments and contingencies
Stockholders’ deficit:
Class B common stock, $.0002 par value; 1,000,000,000 shares authorized; 500,225,000 shares issued and 143,187,100 outstanding as of September 30, 2009 and December 31, 2008 (1)			100				100
Accumulated other comprehensive loss			(75,561	)			(82,434	)
Accumulated deficit			(439,062	)			(243,495	)
Class B common stock, treasury stock, 357,037,900 shares as of September 30, 2009 and December 31, 2008 (1)			(683,994	)			(683,994	)
Total stockholders’ deficit			(1,198,517	)			(1,009,823	)
Total liabilities, redeemable common stock and stockholders’ deficit		$	1,019,376			$	928,877

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INSURANCE SERVICES OFFICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(In thousands, except for share and per share data)
Revenues (include revenues from related parties of $25,120 and $22,228 for the three months ended September 30, 2009 and 2008 and $73,263 and $65,417 for the nine months ended September 30, 2009 and 2008, respectively)		$	258,311			$	224,391			$	761,978			$	662,081
Expenses:
Cost of revenues (exclusive of items shown separately below)			117,383				98,307				337,884				288,985
Selling, general and administrative			38,500				32,265				110,725				91,293
Depreciation and amortization of fixed assets			9,621				9,054				28,534				25,478
Amortization of intangible assets			8,012				7,041				24,986				21,978
Total expenses			173,516				146,667				502,129				427,734
Operating income			84,795				77,724				259,849				234,347
Other income/(expense):
Investment income			29				381				121				1,984
Realized gains/(losses) on securities, net			24				(379	)			(341	)			(1,665	)
Interest expense			(9,449	)			(8,393	)			(26,126	)			(22,566	)
Total other expense, net			(9,396	)			(8,391	)			(26,346	)			(22,247	)
Income before income taxes			75,399				69,333				233,503				212,100
Provision for income taxes			(33,194	)			(28,493	)			(100,444	)			(90,311	)
Net income		$	42,205			$	40,840			$	133,059			$	121,789
Basic net income per share of Class A and Class B (1)		$	0.24			$	0.22			$	0.77			$	0.66
Diluted net income per share of Class A and Class B (1)		$	0.23			$	0.22			$	0.74			$	0.63
Weighted average shares outstanding:
Basic (1)			172,796,400				182,267,667				173,216,650				184,925,950
Diluted (1)			179,850,850				189,667,514				180,117,150				192,493,650

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INSURANCE SERVICES OFFICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED)

						Accumulated
						Other				Class B Common Stock												Total
		Accumulated				Comprehensive				Shares								Treasury				Stockholders’
		Deficit				Loss				Issued (1)				Par Value				Stock				Deficit
		(In thousands, except for share data)
Balance, January 1, 2008		$	(515,756	)		$	(8,699	)			500,225,000			$	100			$	(678,993	)		$	(1,203,348	)
Comprehensive income:
Net income			158,228				—				—				—				—				158,228
Other comprehensive losses			—				(73,735	)			—				—				—				(73,735	)
Comprehensive income			—				—				—				—				—				84,493
Treasury stock acquired — Class B common stock			—				—				—				—				(5,001	)			(5,001	)
Decrease in redemption value of Class A common stock			114,033				—				—				—				—				114,033
Balance, December 31, 2008		$	(243,495	)		$	(82,434	)			500,225,000			$	100			$	(683,994	)		$	(1,009,823	)
Comprehensive income:
Net income			133,059								—				—				—				133,059
Other comprehensive income			—				6,873				—				—				—				6,873
Comprehensive income			—				—				—				—				—				139,932
Increase in redemption value of Class A common stock			(328,626	)			—				—				—				—				(328,626	)
Balance, September 30, 2009		$	(439,062	)		$	(75,561	)			500,225,000			$	100			$	(683,994	)		$	(1,198,517	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INSURANCE SERVICES OFFICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		2009				2008
		(In thousands)
Cash flows from operating activities:
Net income		$	133,059			$	121,789
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets			28,534				25,478
Amortization of intangible assets			24,986				21,978
Allowance for doubtful accounts			692				266
KSOP compensation expense			17,620				17,353
Acquisition related compensation expense			—				550
Stock-based compensation			8,526				7,522
Non-cash charges associated with performance based appreciation awards			2,649				2,618
Interest income on notes receivable from stockholders			—				(1,142	)
Realized losses on securities, net			341				1,665
Deferred income taxes			4,990				—
Other operating			207				282
Loss on disposal of assets			342				31
Non-cash charges associated with lease termination			196				—
Excess tax benefits from exercised stock options			(1,723	)			(17,101	)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable			(16,946	)			4,145
Prepaid expenses and other assets			(2,241	)			(3,479	)
Federal and foreign income taxes			10,460				(13,292	)
State and local income taxes			(2,082	)			17,669
Accounts payable and accrued liabilities			1,359				(9,082	)
Acquisition related liabilities			(300	)			(2,200	)
Fees received in advance			38,414				22,830
Other liabilities			6,493				(3,834	)
Net cash provided by operating activities			255,576				194,046

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INSURANCE SERVICES OFFICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED)
For The Nine Months Ended September 30, 2009 and 2008

		2009				2008
		(In thousands)
Cash flows from investing activities:
Acquisitions, net of cash acquired of $9,477 in 2009			(58,831	)			(41	)
Purchase of cost-based investments			—				(3,822	)
Earnout payments			(78,100	)			(98,100	)
Proceeds from release of contingent escrows			24				549
Escrow funding associated with acquisitions			(7,400	)			(3,320	)
Purchases of available-for-sale securities			(450	)			(156	)
Proceeds from sales and maturities of available-for-sale securities			772				21,609
Purchases of fixed assets			(24,319	)			(22,323	)
Proceeds from repayment of notes receivable from stockholders			—				6,181
Issuance of notes receivable from stockholders			—				(1,247	)
Net cash used in investing activities			(168,304	)			(100,670	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			80,000				150,000
Proceeds from issuance of short-term debt, net			6,808				40,000
Redemption of Class A common stock			(46,740	)			(263,744	)
Repurchase of Class B common stock			—				(5,001	)
Repayment of current portion of long-term debt			(100,000	)			—
Repayment of short-term debt, net			—				(35,219	)
Debt issuance cost			(4,510	)			—
Excess tax benefits from exercised stock options			1,723				17,101
Proceeds from repayment of exercise price loans classified as a component of redeemable common stock			—				29,482
Proceeds from stock options exercised			2,612				892
Net cash used in financing activities			(60,107	)			(66,489	)
Effect of exchange rate changes			210				88
Increase in cash and cash equivalents			27,375				26,975
Cash and cash equivalents, beginning of period			33,185				24,049
Cash and cash equivalents, end of period		$	60,560			$	51,024
Supplemental disclosures:
Taxes paid		$	90,917			$	85,498
Interest paid		$	25,824			$	20,896
Non-cash investing and financing activities:
Loans made to directors and officers in connection with the exercise of stock options		$	—			$	20,148
Redemption of Class A common stock used to repay maturities of notes receivable from stockholders		$	—			$	41,970
Redemption of Class A common stock used to fund the exercise of stock options		$	2,326			$	3,838
Deferred tax liability established on date of acquisition		$	(8,907	)		$	—
Capital lease obligations		$	2,860			$	2,485
Capital expenditures included in accounts payable and accrued liabilities		$	4,165			$	—
Decrease in goodwill due to finalization of acquisition related liabilities		$	(4,300	)		$	—
Accrual of acquisition related liabilities		$	—			$	15,200

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INSURANCE SERVICES OFFICE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization:

Insurance Services Office, Inc. and its consolidated subsidiaries (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, creates embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) or P&C insurance risks in the United States of America (“U.S.”). The Company offers solutions for detecting fraud in the U.S. P&C insurance, mortgage and healthcare industries and sophisticated methods to predict and quantify loss in diverse contexts ranging from natural catastrophes to health insurance. The Company provides solutions, including data, statistical models or tailored analytics, all designed to allow clients to make more logical decisions.

The Company 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. Over the past decade, the Company has broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions.

Verisk was established on May 23, 2008 to serve as the parent holding company of the Company upon completion of the proposed IPO. On June 27, 2008, the Company’s stockholders approved certain corporate governance changes necessary to allow the Company to proceed with a proposed IPO. On October 6, 2009, the Company effected a corporate reorganization whereby the Class A and Class B common stock of the Company was exchanged by the current stockholders for the common stock of Verisk on a one-for-one basis. Verisk immediately thereafter effected a fifty-for-one stock split of Class A and Class B common stock. On October 9, 2009, the Company completed its IPO. Upon completion of the IPO, the selling stockholders sold 97,995,750 shares of Class A common stock of Verisk, which included the 12,745,750 over-allotment option, at the IPO price of $22.00 per share. The Company did not receive any proceeds from the sales of common stock in the offering. Verisk trades on the NASDAQ Global Select Market under the ticker symbol “VRSK.” Except as the context otherwise requires, all share and per share information in the condensed consolidated financial statements gives effect to the fifty-for-one stock split that occurred immediately after the reorganization.

All stock options granted under the Insurance Services Office, Inc. 1996 Incentive Plan was transferred to Verisk, without modification to the terms of the options other than that such options will be exercisable for Class A common stock of Verisk and the strike price of each outstanding option has been adjusted for the impact of the fifty-to-one stock split.

Upon consummation of the reorganization, two new series of Class B common stock, the Class B-1 and the Class B-2, were formed and 50 percent of each Class B stockholder’s existing Class B common stock was converted into shares of the new Class B-1 common stock and the remaining 50 percent of each Class B stockholder’s existing Class B common stock was converted into shares of the new Class B-2 common stock. Each share of Class B-1 common stock shall convert automatically, without any action by the stockholders, into one share of Class A common stock 18 months after the date of the IPO. Each share of Class B-2 common stock shall convert automatically, without any action by the stockholders, into one share of Class A common stock 24 months after the date of the IPO.

2. Basis of Presentation and Summary of Significant Accounting Policies:

The accompanying unaudited condensed 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, liabilities for pension and postretirement benefits, fair value of the Company’s common stock, and the estimate for the allowance for doubtful accounts. Actual results may ultimately differ from those estimates. Certain reclassifications within the consolidated statement of cash flows have been made in 2008 to conform to the 2009 presentation in order to provide additional information regarding the changes in state and local income taxes and federal and foreign income taxes.

The condensed consolidated financial statements as of September 30, 2009 and for the three and nine month periods ended September 30, 2009 and 2008, in the opinion of management, include all adjustments, consisting only of normal recurring accruals, to present fairly the Company’s financial position, results of operations and cash flows. The operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements and related notes for the three and nine month periods ended September 30, 2009 have been prepared on the same basis as and should be read in conjunction with the consolidated financial statements as of December 31, 2008 and 2007 and for each of the three years ended December 31, 2008, 2007 and 2006. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The Company believes the disclosures made are adequate to keep the information presented from being misleading.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 105, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“ASC 105”). ASC 105 will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the SEC, under the authority of federal securities laws, are also sources of authoritative U.S. GAAP for SEC registrants. On the effective date of this statement, the codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual reporting periods ending after September 15, 2009. The Company’s adoption of ASC 105, effective September 30, 2009, impacted the consolidated financial statements and related disclosures as all references to authoritative accounting literature reflect the newly adopted codification.

In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU No. 2009-13”). ASU No. 2009-13 establishes the accounting and reporting guidance for arrangements under which the vendor will perform multiple revenue-generating activities. Specifically, ASU No. 2009-13 addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2009-13 on its consolidated financial statements.

In June 2009, the FASB issued ASC 860-10-50, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140 (“ASC 860-10-50”). ASC 860-10-50 was issued to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in the transferred financial assets. ASC 860-10-50 is effective for an entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is currently evaluating the impact of ASC 860-10-50 on its consolidated financial statements.

In June 2009, the FASB issued ASC 810-10-50, Amendments to FASB Interpretation No. 46(R) (“ASC 810-10-50”). ASC 810-10-50 was issued to address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN No. 46(R)”), as a result of the elimination of the qualifying special-purpose entity concept in ASC 860-10-50 and constituent concerns about the application of certain key provisions of FIN No. 46(R), including those in which the accounting and disclosures under the interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. ASC 810-10-50 is effective for an entity’s first annual reporting period that begins after November 15, 2009. The Company is currently evaluating the impact of ASC 810-10-50 on its consolidated financial statements.

In May 2009, the FASB issued ASC 855-10-20, Subsequent Events (“ASC 855-10-20”). ASC 855-10-20 establishes principles and requirements for subsequent events in the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. ASC 855-10-20 is effective for interim and annual reporting periods ending after June 15, 2009. In accordance with the adoption of ASC 855-10-20, effective June 30, 2009, the Company discloses in Note 16 the date through which the subsequent events have been evaluated. The adoption of ASC 855-10-20 did not have any other impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued ASC 805-20-25, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“ASC 805-20-25”), to provide further guidance on assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of ASC 450, Accounting for Contingencies (“ASC 450”) if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in ASC 805, Business Combinations. ASC 805-20-25 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of ASC 805-20-25 did not have any impact on the acquisitions of D2 Hawkeye, Inc. (“D2”) and TierMed Systems. The majority of the impact of adopting ASC 805-20-25 will be dependent on the business combinations that the Company may pursue and complete after its effective date.

In December 2008, the FASB released ASC 715-20-65, Employer’s Disclosure about Postretirement Benefit Plan Assets (“ASC 715-20-65”). ASC 715-20-65 amends FAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. ASC 715-20-65 is effective for financial statements issued for fiscal years ending after December 15, 2009. The Company is currently evaluating the impact of ASC 715-20-65 on its consolidated financial statements.

In October 2008, the FASB issued ASC 820-10-35, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active (“ASC 820-10-35”). ASC 820-10-35 clarifies the application of ASC 820-10, Fair Value Measurements and Disclosure (“ASC 820-10”), in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. ASC 820-10-35 was effective upon issuance, including prior periods for which financial statements had not been issued. Effective January 1, 2009, the Company has adopted the disclosure provisions of ASC 820-10-35 for its non-recurring non-financial assets and liabilities, except those recognized or disclosed at fair value on a recurring basis.

In February 2008, the FASB issued ASC 820-10-15, Effective Date of FASB Statement No. 157 (“ASC 820-10-15”), which delays the effective date of FAS No. 157, Fair Value Instruments, for non-recurring non-financial assets and liabilities, except those recognized or disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008. Non-financial assets and liabilities include, among others: intangible assets acquired through business combinations; long-lived assets when assessing potential impairment; and liabilities associated with restructuring activities. Effective January 1, 2009, the Company has adopted the disclosure provisions of ASC 820-10-15 for its non-recurring non-financial assets and liabilities.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued ASC 805, Business Combinations (“ASC 805”). ASC 805 primarily requires an acquirer to recognize the assets acquired and the liabilities assumed, measured at their fair values as of that date. This replaces FAS No. 141, Business Combination’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. Generally, ASC 805 will become effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for tax provisions which apply to business combinations regardless of acquisition date. As the Company had expensed all in-process acquisition related costs incurred during the year ended December 31, 2008, the adoption of ASC 805 on January 1, 2009 had no impact on the Company’s consolidated financial statements. The Company made two acquisitions during the nine months ended September 30, 2009 and accounted for the acquisition under ASC 805.

3. Investments:

The following is a summary of available-for-sale securities:

						Gross				Gross
		Adjusted				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
September 30, 2009
Registered investment companies		$	4,499			$	840			$	—			$	5,339
Equity securities			14				—				(1	)			13
Total available-for-sale securities		$	4,513			$	840			$	(1	)		$	5,352
December 31, 2008
Registered investment companies		$	5,162			$	—			$	(48	)		$	5,114

Realized gains/(losses), including write downs related to other-than-temporary impairments of available-for-sale securities and other assets, were as follows for the three and nine month periods ended September 30, 2009 and 2008:

		For the Three Months Ended								For the Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Gross realized gains/(losses) on sale of registered investment securities		$	24			$	(11	)		$	45			$	(1,297	)
Other than temporary impairment of registered investment securities			—				(368	)			(386	)			(368	)
Realized gains/(losses) on investments, net		$	24			$	(379	)		$	(341	)		$	(1,665	)

Investment income during the three months ended September 30, 2009 includes interest and other income and dividend income from investments of $25 and $4, respectively. Investment income during the three months ended September 30, 2008 includes interest and other income, interest income from notes receivable from stockholders and dividend income from investments of $201, $162 and $18, respectively. Investment income during the nine months ended September 30, 2009 includes interest and other income and dividend income from investments of $103 and $18, respectively. Investment income during the nine months ended September 30, 2008 includes interest and other income, interest income from notes receivable from stockholders and dividend income from investments of $681, $1,142 and $161, respectively.

The Company has investments in private equity securities in which the Company acquired non-controlling interests and no readily determinable market value exists. These securities were accounted for under the cost method in accordance with ASC 232-10-25, The Equity Method of Accounting for Investments in Common Stock. At September 30, 2009 and December 31, 2008, the carrying values of such securities were approximately $5,853 for both periods and has been included in “Other assets” in the accompanying condensed consolidated financial statements.

4. Fair Value Measurements

Effective January 1, 2008, the Company adopted the provisions of ASC 820-10, which defines fair value, establishes a framework for measuring fair value under U.S. GAAP and expands fair value measurement disclosures. In February 2008, the FASB delayed the effective date of ASC 820-10 until fiscal years beginning after November 15, 2008 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at least annually. Effective January 1, 2008, the Company has adopted the provisions of ASC 820-10 for its financial assets and liabilities recognized or disclosed at fair value on a recurring basis. Effective January 1, 2009, the Company has adopted the provisions of ASC 820-10 for its non-financial assets and liabilities recognized or disclosed at fair value.

To increase consistency and comparability in fair value measures, ASC 820-10 establishes a three-level fair value hierarchy to prioritize the inputs used in valuation techniques between observable inputs that reflect quoted prices in active markets, inputs other than quoted prices with observable market data, and unobservable data (e.g., a company’s own data). 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 summarizes fair value measurements by level at September 30, 2009 and December 31, 2008 for assets and other balances measured at fair value on a recurring basis:

						Quoted Prices
						in Active Markets				Significant Other				Significant
						for Identical				Observable				Unobservable
		Total				Assets (Level 1)				Inputs (Level 2)				Inputs (Level 3)
September 30, 2009
Registered investment companies (1)		$	5,339			$	5,339			$	—			$	—
Equity securities (1)		$	13			$	13			$	—			$	—
Class A redeemable common stock (2)		$	1,064,896			$	—			$	1,064,896			$	—
Contingent consideration under ASC 805 (3)		$	3,344			$	—			$	—			$	3,344
December 31, 2008
Registered investment companies (1)		$	5,114			$	5,114			$	—			$	—
Class A redeemable common stock (2)		$	752,912			$	—			$	—			$	752,912

The table below includes a roll-forward of the Company’s Class A redeemable common stock for the three and nine months ended September 30, 2009:

		For The Three				For The Nine
		Months Ended				Months Ended
		September 30, 2009				September 30, 2009
Beginning balance		$	845,126			$	752,912
Redemptions and exercise of stock, net			(6,808	)			(43,965	)
Increase in fair value (1)			226,578				355,949
Reclass to significant other observable inputs (Level 2) (2)			(1,064,896	)			(1,064,896	)
Balance, September 30, 2009		$	—			$	—

The table below includes a roll-forward of the Company’s contingent considerations under ASC 805 for the three and nine months ended September 30, 2009:

		For The Three				For The Nine
		Months Ended				Months Ended
		September 30, 2009				September 30, 2009
Beginning balance		$	2,800			$	—
Acquisition of D2 (1)			—				2,800
Acquisition of TierMed (1)			544				544
Balance, September 30, 2009		$	3,344			$	3,344

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, acquisition related liabilities and short-term debt are approximately equal to their carrying amounts because of the short-term maturity of these instruments. The fair value of the long-term debt was estimated at $577,103 and $569,699 and is based on 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 as of September 30, 2009 and December 31, 2008, respectively.

5. Goodwill and Intangible Assets:

The following is a summary of the change in goodwill from December 31, 2008 through September 30, 2009, both in total and as allocated to the Company’s operating segments:

		Risk				Decision
		Assessment				Analytics				Total
Goodwill at December 31, 2008		$	27,908			$	419,464			$	447,372
Current year acquisitions			—				48,773				48,773
Finalization of acquisition related liabilities			—				(4,300	)			(4,300	)
Purchase accounting reclassifications			—				(2,600	)			(2,600	)
Goodwill at September 30, 2009		$	27,908			$	461,337			$	489,245

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, 2009, which resulted in no impairment of goodwill. This testing 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, than an impairment loss is recorded for the difference between the carrying amount and the implied fair value of goodwill. There were no goodwill impairment indicators after the date of the last annual impairment test.

The Company recorded an acquisition related liability of $67,200 for the Xactware acquisition as of December 31, 2008. The Company recorded a reduction of $4,300 to goodwill and acquisition related liabilities as of March 31, 2009. In May 2009, the Company finalized the Xactware acquisition contingent liability and made a payment of $62,900. In May 2009, the Company also paid the NIA acquisition contingent liability of $15,200, which was also included in acquisition related liabilities as of December 31, 2008.

The finalization of the purchase accounting for the acquisition of Atmospheric and Environmental Research, Inc. (“AER”) resulted in an increase in intangible assets of $3,203, an increase in deferred tax liabilities of $885, a decrease in accounts payable and accrued expenses of $282, and a corresponding decrease to goodwill of $2,600.

The Company’s intangible assets and related accumulated amortization consisted of the following:

		Weighted
		Average						Accumulated
		Useful Life		Cost				Amortization				Net
September 30, 2009
Technology-based		6 years		$	177,872			$	(113,550	)		$	64,322
Marketing-related		4 years			41,331				(23,594	)			17,737
Contract-based		6 years			6,555				(6,043	)			512
Customer-related		11 years			60,585				(24,818	)			35,767
Total intangible assets				$	286,343			$	(168,005	)		$	118,338

		Weighted
		Average						Accumulated
		Useful Life		Cost				Amortization				Net
December 31, 2008
Technology-based		5 years		$	164,127			$	(98,810	)		$	65,317
Marketing-related		4 years			31,733				(18,363	)			13,370
Contract-based		6 years			6,555				(5,940	)			615
Customer-related		12 years			53,317				(19,906	)			33,411
Total intangible assets				$	255,732			$	(143,019	)		$	112,713

Consolidated amortization expense related to intangible assets for the three months ended September 30, 2009 and 2008, was approximately $8,012 and $7,041, respectively. Consolidated amortization expense related to intangible assets for the nine months ended September 30, 2009 and 2008, was approximately $24,986 and $21,978, respectively. Estimated amortization expense in future periods through 2013 and thereafter for intangible assets subject to amortization is as follows:

Year		Amount
2009		$	8,185
2010		$	28,638
2011		$	22,268
2012		$	18,587
2013		$	12,474
Thereafter		$	28,186

6. Acquisitions:

2009 Acquisitions

On July 24, 2009, the Company acquired the net assets of TierMed Systems, LLC (“TierMed”), a privately owned provider of Healthcare Effectiveness Data and Information Set (“HEDIS”) solutions to healthcare organizations that have HEDIS or quality-reporting needs, for a net cash purchase price of $7,213 and the Company funded $400 of indemnity escrows. The Company believes this acquisition will enhance the Company’s ability to provide solutions for customers to measure and improve healthcare quality and financial performance through the use of software and software services.

On January 14, 2009, the Company acquired 100% of the stock of D2, a privately-owned provider of data mining, decision support, clinical quality analysis, and risk analysis tools for the healthcare industry, for a net cash purchase price of $51,618 and the Company funded $7,000 of indemnity escrows. The Company believes this acquisition will enhance the Company’s position in the healthcare analytics and predictive modeling market by providing new market, cross-sell, and diversification opportunities for the Company’s expanding healthcare solutions.

The total net cash purchase price of these two acquisitions was $58,831, and the Company funded $7,400 of indemnity escrows of which $7,000 and $400 is currently included in “Other current assets” and “Other assets,” respectively, in the accompanying condensed consolidated balance sheet. The preliminary allocation of purchase price, including working capital adjustments, resulted in accounts receivable of $3,902, current assets of $351, fixed assets of $2,370, finite lived intangible assets with no residual value of $27,408, goodwill of $48,773, current liabilities of $4,322, other liabilities of $10,744, and deferred tax liabilities of $8,907. Other liabilities consist of a $7,400 payment due to the sellers in April 2010, assuming no pre-acquisition indemnity claims arise subsequent to the acquisition date, and $3,344 of contingent consideration, which was estimated as of the acquisition date by averaging the probability of achieving each of the specific predetermined EBITDA and revenue targets, which could result in a payment ranging from $0 to $65,700 for the fiscal year ending December 31, 2011 for D2 and a payment ranging from $0 to $6,000 for the fiscal year ending December 31, 2010 for TierMed. Under ASC 805, contingent consideration is recognized at fair value at the end of each reporting period. Subsequent changes in the fair value of contingent consideration is recorded in the statement of operations. For the three and nine months ended September 30, 2009, the Company incurred legal expenses related to these acquisitions of $250 and $616, respectively, included within “Selling, general, and administrative” expenses in the accompanying condensed consolidated statements of operations.

The amounts assigned to intangible assets by type for current year acquisitions are summarized in the table below:

		Weighted Average
		Useful Life		Total
Technology-based		10 years		$	12,146
Marketing-related		5 years			6,881
Customer-related		5 years			8,381
Total intangible assets				$	27,408

The preliminary allocation of the purchase price to intangible assets, goodwill, accrued liabilities, and the determination of an ASC 740-10-25, Accounting for Uncertainty in Income Taxes (“ASC 740-10-25”), liability is subject to revisions, which may have a material impact on the consolidated financial statements. As the values of such assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. In accordance with ASC 805, the allocation of the purchase price will be finalized once all information is obtained, not to exceed one year from the acquisition date. The value of goodwill associated with these acquisitions is currently included within the Decision Analytics segment. The goodwill for the D2 acquisition is not deductible for tax purposes. The goodwill for the TierMed acquisition is expected to be deductible for tax purposes over fifteen years. Included within the condensed consolidated statements of operations for the three and nine months ending September 30, 2009 are revenues of $4,681 and $13,652 and operating loss of $2,437 and $2,045, respectively, associated with these acquisitions.

2008 Acquisitions

In 2008, the Company acquired two entities for an aggregate cash purchase price of approximately $19,270 and funded indemnity escrows totaling $1,500. At September 30, 2009, these escrows have been included in other assets in the condensed consolidated balance sheet of the accompanying financial statements. These acquisitions were accounted for under the purchase method. Accordingly, the purchase price, excluding indemnification escrows, was allocated to assets acquired based on their estimated fair values as of the acquisition dates. Each entity’s operating results have been included in the Company’s consolidated results from the respective dates of acquisition. A description of the two entities purchased in 2008 is as follows:

On November 20, 2008, the Company acquired 100% of the stock of AER. The purchase includes a contingent payment provision subject to the achievement of certain predetermined financial results for the years ended 2010 and 2011. The acquisition of AER further enhances the Company’s environmental and scientific research and predictive modeling. As of September 30, 2009, the Company finalized the purchase accounting for AER, which resulted in an increase in intangible assets of $3,203, an increase in deferred tax liabilities of $885, a decrease in accounts payable and accrued expenses of $282, and a corresponding decrease to goodwill of $2,600.

On November 14, 2008, the Company acquired the net assets of ZAIO’s two divisions, United Systems Software Company and Day One Technology. The assets associated with this acquisition further enhance the capability of the Company’s appraisal software offerings. The purchase allocation related to this acquisition was finalized as of December 31, 2008.

7. Income Taxes:

The Company’s effective tax rate for the nine months ended September 30, 2009 was 43.0% compared to the effective tax rate for the nine months ended September 30, 2008 of 42.6%. The company’s effective tax rate for the three months ended September 30, 2009 was 44.0% compared to the effective tax rate for the three months ended September 30, 2008 of 41.1%. The 2009 effective tax rates for the nine month and three month periods were higher than the comparable 2008 effective tax rates due to a revision of estimated state tax liabilities resulting from the impact of legislative changes. The difference between statutory tax rates and the company’s effective tax rate are primarily attributable to state taxes and nondeductible ESOP share appreciation.

8. Debt:

The following table presents short-term and long-term debt by issuance:

		Issuance		Maturity		September 30,				December 31,
		Date		Date		2009				2008
Short-term debt and current portion of long-term debt:
Bank of America		12/15/2008		1/15/2009		$	—			$	5,000
Bank of America		12/17/2008		1/17/2009			—				30,000
Bank of America		12/22/2008		1/22/2009			—				15,000
Bank of America		12/24/2008		1/24/2009			—				5,000
JPMorgan Chase		12/1/2008		1/2/2009			—				10,000
JPMorgan Chase		12/12/2008		1/12/2009			—				4,000
JPMorgan Chase		12/18/2008		1/20/2009			—				20,000
JPMorgan Chase		12/24/2008		1/24/2009			—				20,000
JPMorgan Chase		12/29/2008		1/29/2009			—				5,000
Syndicated Revolving Credit Facility		9/14/2009		10/14/2009			15,000				—
Syndicated Revolving Credit Facility		9/21/2009		10/21/2009			110,000				—
Prudential senior notes:
4.46% Series D senior notes		6/14/2005		6/13/2009			—				100,000
Capital lease obligations		Various		Various			5,360				5,058
Other		Various		Various			1,168				340
Short-term debt and current portion of long-term debt						$	131,528			$	219,398
Long-term debt:
Prudential senior notes:
4.60% Series E senior notes		6/14/2005		6/13/2011		$	50,000			$	50,000
6.00% Series F senior notes		8/8/2006		8/8/2011			25,000				25,000
6.13% Series G senior notes		8/8/2006		8/8/2013			75,000				75,000
5.84% Series H senior notes		10/26/2007		10/26/2013			17,500				17,500
5.84% Series H senior notes		10/26/2007		10/26/2015			17,500				17,500
6.28% Series I senior notes		4/29/2008		4/29/2013			15,000				15,000
6.28% Series I senior notes		4/29/2008		4/29/2015			85,000				85,000
6.85% Series J senior notes		6/15/2009		6/15/2016			50,000				—
Principal senior notes:
6.03% Series A senior notes		8/8/2006		8/8/2011			50,000				50,000
6.16% Series B senior notes		8/8/2006		8/8/2013			25,000				25,000
New York Life senior notes:
5.87% Series A senior notes		10/26/2007		10/26/2013			17,500				17,500
5.87% Series A senior notes		10/26/2007		10/26/2015			17,500				17,500
6.35% Series B senior notes		4/29/2008		4/29/2015			50,000				50,000
Aviva Investors North America:
6.46% Series A senior notes		4/27/2009		4/27/2013			30,000				—
Other obligations:
Capital lease obligations		Various		Various			2,530				4,723
Other		Various		Various			364				633
Long-term debt						$	527,894			$	450,356

Accrued interest associated with the Company’s outstanding debt obligations was $4,394 and $4,092 as of September 30, 2009 and December 31, 2008, respectively. Consolidated interest expense associated with the Company’s outstanding debt obligations was $9,391 and $8,285 for the three months ended September 30, 2009 and 2008, respectively. Consolidated interest expense associated with the Company’s outstanding debt obligations was $25,929 and $22,213 for the nine months ended September 30, 2009 and 2008, respectively.

On July 2, 2009, the Company entered into a $300,000 syndicated revolving credit facility with Bank of America, N.A., JPMorgan Chase, N.A., Morgan Stanley Bank, N.A., and Wells Fargo Bank, N.A., which matures on July 2, 2012. Interest is payable at maturity at a rate to be determined at the time of borrowing. The syndicated revolving credit facility replaces the Company’s previous revolving credit facilities with Bank of America, N.A., JPMorgan Chase, N.A., Morgan Stanley Bank, N.A., and Wachovia Bank, N.A. On August 21, 2009, PNC Bank, N.A., Sovereign Bank, RBS Citizens, N.A., and SunTrust Bank joined the syndicated revolving credit facility increasing the availability to $420,000. This facility is committed with a one-time fee of $4,510, which will be amortized over a three year period, and ongoing unused facility fees of 0.375%. As of September 30, 2009, the interest on the outstanding borrowings under the syndicated revolving credit facility is payable at a weighted average interest rate of 2.74%.

On June 15, 2009, the Company settled its $100,000 Prudential Series D senior notes by issuing Series J senior notes under the uncommitted master shelf agreement with Prudential Capital Group in the aggregate principal amount of $50,000 due June 15, 2016 and borrowing $50,000 from its revolving credit facility with Bank of America, N.A. Interest on the Series J senior notes is payable quarterly at a fixed rate of 6.85%.

On April 27, 2009, the Company issued Series A senior promissory notes under an uncommitted master shelf agreement with Aviva Investors North America, Inc. in the aggregate principal amount of $30,000 due April 27, 2013. Interest is payable quarterly at a fixed rate of 6.46%.

9. Redeemable Common Stock:

On November 18, 1996, the Company authorized 335,000,000 shares of Class A redeemable common stock. Prior to the IPO, the Class A stock was reserved for the use in incentive plans for key employees and directors under the Insurance Services Office, Inc. 1996 Incentive Plan (“Option Plan”) and for issuance to the ISO 401(k) Savings and Employee Stock Ownership Plan (the “KSOP”). The Class A stock has voting rights to elect nine of the twelve members of the board of directors. Prior to the reorganization, the Company’s certificate of incorporation limited those who may own Class A stock to current and former employees or directors, the KSOP and trusts by or for the benefit of immediate family members of employees and former employees.

Under the terms of the Option Plan, Class A stock resulting from exercised options that are held by the employee for more than six months and one day may be put to the Company and redeemed at the then current fair value at the date of the redemption request of the Class A stock. For options granted in 2002 through 2004, the Company has the ability to defer the cash settlement of the redemption up to one year. For options granted after 2004, the Company has the ability to defer the cash settlement of the redemption for up to two years. Under the terms of the KSOP, eligible participants may elect to diversify 100% of their 401(k) and up to 35% of their ESOP contributions that were made in the form of Class A stock. In addition, upon retirement or termination, participants in the KSOP are required to liquidate their ownership in Class A common stock. Since the Class A stock distributed under the Option Plan and KSOP is subject to the restrictions above, up until the reorganization on October 6, 2009 the participant has the right to require the Company to repurchase stock based on the then current fair value of the Class A stock.

Prior to September 30, 2009, fair value of the Company’s Class A redeemable common stock is established for purposes of the KSOP, generally on the final day of the quarter, and such price was utilized for all share transactions in the subsequent quarter. In addition, the current valuation in effect for the KSOP is also considered fair value for Class A redeemable common stock and related transactions within the Option Plan. As of September 30, 2009, the fair value of the Company’s Class A redeemable common stock was determined based on the IPO price of $22.00 per share. Based on the short period of time between the balance sheet date and the date of the IPO, management believes the use of the IPO price for September 30, 2009 is reasonable. There were no transactions between the Company and the redeemable common stockholders between September 30, 2009 and completion of the IPO on October 9, 2009.

Prior to September 30, 2009, the valuation methodology was based on a variety of qualitative and quantitative factors including the nature of the business and history of the enterprise, the economic outlook in general and the condition of the specific industries in which the Company operates, the financial condition of the business, the Company’s ability to generate free cash flow, and goodwill or other intangible asset value. This determination of the fair market value employs both a comparable public company analysis, which examines the valuation multiples of companies deemed comparable, in whole or in part, to the Company, and a discounted cash flow analysis that determines a present value of the projected future cash flows of the business. The Company regularly assesses the underlying assumptions used in the valuation methodologies. As a result, the Company has utilized this quarterly fair value for all its Class A redeemable common stock transactions, as required by terms of the KSOP and the Option Plan.

The Company follows ASC 480-10-S99-1, Presentation in Financial Statements of Preferred Redeemable Stock (“ASC 480-10-S99-1”). ASC 480-10-S99-1 requires the Company to record Class A stock and vested stock options at full redemption value at each balance sheet date as the redemption of these securities is not solely within the control of the Company. Redemption value for the Class A stock is determined quarterly on or about the final day of the quarter for purposes of the KSOP. The fourth quarter 2008 valuation was finalized on December 31, 2008, which resulted in a fair value per share of $15.56. The fair value calculated for the second quarter 2009 was $17.78 per share, and was used for all Class A stock transactions for the three months ended September 30, 2009. The fair value of the Company’s Class A common stock at September 30, 2009 was determined based on the IPO price of $22.00 per share. The redemption value of the Class A redeemable common stock and vested options at intrinsic value at September 30, 2009 and December 31, 2008 totaled $1,064,896 and $752,912, which includes $299,983 and $172,408, respectively, of aggregate intrinsic value of outstanding unexercised vested stock options.

During the nine months ended September 30, 2009 and 2008, 3,032,850 and 17,799,700 Class A shares were redeemed by the Company at a weighted average price of $16.18 and $17.39 per share, respectively. Included in Class A repurchased shares were $805 and $17,862 for shares primarily utilized to satisfy minimum tax withholdings on options exercised during the nine months ended September 30, 2009 and 2008, respectively.

Subsequent changes to the redemption value of the securities is charged first to retained earnings; once retained earnings is depleted, then to additional paid-in-capital, and if additional paid-in-capital is also depleted, then to accumulated deficit. During the nine months ended September 30, 2009, the redemption value of the Class A redeemable common stock increased by $311,984. Additional information regarding the changes in redeemable common stock for the nine months ended September 30, 2009 is provided in the table below.

																		Total
		Class A Common Stock																Redeemable
						Redemption				Unearned				Additional				Common
		Shares				Value				KSOP				Paid-in-Capital				Stock
Balance, December 31, 2008			37,306,950			$	752,912			$	(3,373	)		$	—			$	749,539
Redemption of Class A common stock			(3,032,850	)			(49,066	)			—				—				(49,066	)
KSOP shares earned			—				—				546				17,074				17,620
Stock based compensation			—				—				—				8,526				8,526
Stock options exercised (including tax benefit of $1,723)			485,550				4,939				—				1,723				6,662
Other stock transactions			9,100				162				—				—				162
Increase in redemption value of Class A common stock			—				355,949				—				(27,323	)			328,626
Balance, September 30, 2009			34,768,750			$	1,064,896			$	(2,827	)		$	—			$	1,062,069

Subsequent to the consummation of the IPO, the Company will no longer be obligated to redeem Class A shares and therefore will not be required to follow ASC 480-10-S99-1. The redeemable common stock balance will be reversed against accumulated deficit; once accumulated deficit is depleted, then to additional paid-in-capital up to the amount equal to the additional paid-in-capital of the Company as if ASC 480-10-S99-1 was not required to be adopted by the Company. Any remaining balance would be credited to retained earnings.

10. Stockholders’ Deficit:

On November 18, 1996, the Company authorized 1,000,000,000 Class B shares. The Class B shares have the same rights as Class A shares with respect to dividends and economic ownership, but have voting rights to elect three of the twelve directors. The twelfth seat on the board of directors is held by the CEO of the Company. The Company did not repurchase any Class B shares during the nine months ended September 30, 2009. The Company repurchased 483,500 Class B shares during the nine months ended September 30, 2008 at an average price of $10.34.

Earnings Per Share

As disclosed in Note 1 — Organization, Verisk became the new parent holding company for Insurance Services Office, Inc. In connection with the IPO, the stock of Insurance Services Office, Inc. was exchanged for the stock of Verisk and Verisk effected a fifty-for-one stock split of its common stock. Net income per share is adjusted to reflect this fifty-for-one stock split.

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period, less the weighted average ESOP shares of common stock that have not been committed to be released. The computation of diluted earnings per share is similar to the computation of basic earnings per share 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, such as stock awards and stock options, had been issued.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share (“EPS”) computations for the three and nine month periods ended September 30, 2009 and 2008:

		For the Three Months Ended								For the Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Numerator used in basic and diluted EPS:
Net income		$	42,205			$	40,840			$	133,059			$	121,789
Denominator:
Weighted average number of common shares used in basic EPS			172,796,400				182,267,667				173,216,650				184,925,950
Effect of dilutive shares:
Potential Class A redeemable common stock issuable upon the exercise of stock options			7,054,450				7,399,847				6,900,500				7,567,700
Weighted average number of common shares and dilutive potential common shares used in diluted EPS			179,850,850				189,667,514				180,117,150				192,493,650
Basic EPS of Class A and Class B		$	0.24			$	0.22			$	0.77			$	0.66
Diluted EPS of Class A and Class B		$	0.23			$	0.22			$	0.74			$	0.63

The potential shares of common stock that were excluded from diluted earnings per share were 8,255,550 and 5,324,300 for the nine months ended September 30, 2009 and 2008, respectively, because the effect of including these potential shares was antidilutive.

Accumulated Other Comprehensive Loss

The following is a summary of accumulated other comprehensive loss:

		September 30,				December 31,
		2009				2008
Unrealized gains/(losses) on investments		$	488			$	(31	)
Unrealized foreign currency losses			(563	)			(773	)
Pension and postretirement unfunded liability adjustment			(75,486	)			(81,630	)
Accumulated other comprehensive loss		$	(75,561	)		$	(82,434	)

The before tax and after tax amounts for these categories, and the related tax benefit/(expense) included in other comprehensive gain/(loss) are summarized below:

						Tax Benefit/
		Before Tax				(Expense)				After Tax
September 30, 2009
Unrealized holding gains on investments arising during the year		$	501			$	(208	)		$	293
Reclassification adjustment for amounts included in net income			386				(160	)			226
Unrealized foreign currency gains			210				—				210
Pension and postretirement unfunded liability adjustment			7,621				(1,477	)			6,144
Total other comprehensive gain		$	8,718			$	(1,845	)		$	6,873
September 30, 2008
Unrealized holding losses on investments arising during the year		$	(819	)		$	325			$	(494	)
Reclassification adjustment for amounts included in net income			1,488				(593	)			895
Unrealized foreign currency gains			88				—				88
Pension and postretirement unfunded liability adjustment			(80,552	)			31,591				(48,961	)
Total other comprehensive loss		$	(79,795	)		$	31,323			$	(48,472	)

11. Stock Option Plan:

During 1998, the Company adopted the Option Plan. The Option Plan provides for the granting of options to key employees and directors of the Company. Options granted have varying vesting dates within four years after the grant date and expires ten years from the grant date. Stock obtained through the exercise of options that are held by the employee for more than six months and one day may be put to the Company and redeemed at the then current fair value of the Class A common stock. For options granted in 2002 through 2004, the Company has the ability to defer the redemption for one year. For options granted after 2004, the Company has the ability to defer the redemption for up to two years. During the nine months ended September 30, 2009 and the year ended December 31, 2008, stock options granted had an exercise price equal to fair value of the Class A common stock on date of grant. There are 102,787,100 shares of Class A common stock approved for issuance under the plan, of which up to 174,350 options to purchase shares were authorized for future grants at September 30, 2009. Cash received from stock option exercises for the nine months ended September 30, 2009 and 2008 was $2,612 and $892, respectively.

In connection with the IPO, Verisk adopted the Verisk Analytics, Inc. 2009 Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan replaces the Option Plan. Awards under the 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 Incentive Plan. There are an aggregate of 13,750,000 shares of Class A common stock reserved for future issuances. On October 6, 2009, Verisk granted options to purchase 2,875,871 shares of our Verisk Class A common stock to its directors, officers and key employees. These options have an exercise price equal to the IPO price of $22.00, a ten year contractual term and vesting term over a four year period.

A summary of options outstanding under the Option Plan as of September 30, 2009 and changes during the nine months then ended are presented below:

						Weighted				Aggregate
		Number				Average				Intrinsic
		of Options				Exercise Price				Value
Outstanding at December 31, 2008			23,157,250			$	7.79			$	179,981
Granted			3,575,650			$	16.22
Exercised			(485,550	)		$	10.17			$	(3,413	)
Cancelled or expired			(264,300	)		$	15.79
Outstanding at September 30, 2009			25,983,050			$	8.82			$	342,383
Options exercisable at September 30, 2009			18,931,200			$	6.15			$	299,983