Verisk Analytics Inc. (VRSK) said its $425 million deal to buy a credit-card data firm is another bet on a business that will gain from scale as clients increasingly rely on billions of records to improve underwriting.
The insurance-data firm said yesterday that it would buy Argus Information & Advisory Services LLC, which has records on more than 1.3 billion card accounts and logs about 4.5 billion transactions a month. The closely held company gathers data from 19 of the 20 largest U.S. credit-card issuers and balance information from retail banks holding about 30 percent of the nation’s deposits.
Insurers turn to Verisk for industrywide claims trends to help price their products and improve profit. The Argus transaction adds to Jersey City, New Jersey-based Verisk’s ability to serve bank clients through a business model that relies on being a central depository for credit-card data.
“Philosophically and culturally, this business is very consistent with the way we think about value,” Scott Stephenson, Verisk’s chief operating officer, said on a conference call today. “Build it once. Sell it many times.”
Verisk already serves banks by providing mortgage records, and said it expects to benefit through Argus from growth in the payments market as consumers switch to debit and credit cards from cash and checks. Card issuers such as JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) are seeking to limit defaults after suffering losses stemming from the U.S. recession.
Verisk climbed 3.9 percent to $48.96 at 4 p.m. in New York. The data provider has more than doubled since its 2009 initial public offering and counts Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) as an investor. The company was co-owned by insurers including Berkshire, Travelers Cos. and American International Group Inc. (AIG) before it was publicly traded.
“Given management’s strong track record and what we understand to be Argus’ large and growing market opportunity, we are cautiously optimistic that the transaction will enhance Verisk’s growth profile and return potential,” Credit Suisse Group AG analysts led by Kelly Flynn said in a note to clients.
Verisk plans to tap its bank line and use cash on hand to fund the deal for White Plains, New York-based Argus, according to a statement yesterday. The firm will “moderate or pause” share repurchases this year as the company weighs other opportunities for its cash, including possible acquisitions, Chief Financial Officer Mark Anquillare said on the call.
The data provider bought back $68.1 million in stock in the three months ended June 30 and had about $200 million remaining under its existing repurchase authorization, according to a statement last month.
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