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JERSEY CITY, N.J. - In response to the insurance industry grappling with high underwriting losses, Verisk (NASDAQ:VRSK), a global data analytics provider, has introduced the ISO Experience Index. This new tool aims to modernize the analysis of risk patterns for actuaries, offering a more responsive and timely indicator of underwriting experiences amidst volatile market conditions.
The insurance sector reported an estimated $21.2 billion in underwriting losses for 2023, marking a peak in loss ratios not seen in nearly two decades. Verisk's ISO Experience Index is designed to help insurers assess risk patterns and formulate strategies with increased confidence. The index provides quarterly releases and streamlined data adjustments, a more frequent update cycle than traditional loss cost reviews.
Saurabh Khemka, co-president of underwriting solutions at Verisk, emphasized the importance of the tool in empowering clients to quickly adapt to market changes, enhancing their efficiency and profitability. The ISO Experience Index maintains consistent methodology across different states and offers insights beyond annual review cycles.
The tool has already demonstrated its utility with recent trends in the homeowners' insurance market. The countrywide Experience Index for homeowners rose by 2.5% in the fourth quarter of 2023, showing a reversal from the previous quarter's decline. It remains 3.4% higher than the end of 2022 and 24.4% above the level at the end of 2021.
Moreover, the index revealed a 17.2% increase in pure premiums for the fourth quarter of 2023 compared to the preceding five-year period, highlighting longer-term patterns and the impact of severe weather events on property insurance.
The ISO Experience Index is currently available to eligible subscribers of Verisk's Core Lines Services and is initially focused on loss level metrics for homeowners' insurance by state. Plans are underway to expand the tool to cover other key lines of business.
Verisk is recognized for its strategic data analytics and technology services to the global insurance industry, facilitating improved decision-making on risks, including those related to climate change and extreme events. The company, with teams in over 20 countries, is known for its inclusive culture and has been certified by Great Place to Work.
This article is based on a press release statement.
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InvestingPro Insights
In the wake of Verisk's (NASDAQ:VRSK) launch of the ISO Experience Index, investors and industry professionals might find the company's financial performance and market position key indicators of its ability to support the insurance sector's evolving needs.
Verisk has been a consistent performer in terms of dividend growth, having increased its dividend for the last five consecutive years—an InvestingPro Tip that suggests a stable and shareholder-friendly policy. This is particularly relevant for investors seeking companies with a reliable income stream.
Furthermore, Verisk's impressive gross profit margins stand out, with the last twelve months as of Q1 2024 showing a robust 67.51%. This high margin is indicative of the company's operational efficiency and its ability to maintain profitability even when facing market headwinds. It is also worth noting that Verisk's stock generally trades with low price volatility, an attribute that might appeal to risk-averse investors.
From the perspective of valuation, Verisk's P/E ratio as of the last twelve months is 48.91, which is considered high. Still, when juxtaposed with the PEG ratio of 0.74, it suggests that the company's earnings growth rate could justify this earnings multiple. Investors should note that Verisk's stock is trading near its 52-week high, reflecting strong market confidence.
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