About 60% of the company’s revenues are generated from a data center business that helps insurers meet regulatory standards and better price their risks. While revenue growth in this segment is in the low-single digits, it’s very stable and recurring in nature. Moreover, because it’s a subscription-based model, customers pay up front, creating negative working capital and boosting returns on capital. With little reinvestment needs outside of server maintenance and data storage, Verisk is a cash machine.

The other 40% are a more value-added business (Fraud Identification and Detection Tools) that grows +20% YoY (M&A included), but has lower margins and moat.

Ringing any bells yet? This is very similar to IMS Health, both on business model and growth profile, with the advantage of a ‘Buffet stamp’ and the absence of a pharma overhang (though it might be substituted by an insurance overhang). Morningstar estimated the IPO at a 13-36% discount to fair value – the company went public at US$ 22 per share and quickly jumped to US$ 27.33 in the first trading day.

Links:

UPDATE: Verisk acquires retail industry loss-prevention leader (press release, Nov. 17th, 2009)

Link to the definitive prospectus here – and in PDF format.

Video interview with Verisk’s CEO – Nasdaq Marketsite, October 8th 2009. Background on Mr. Coyne from the same story.

Investor Business Daily’s IPO story – October 7th