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deshaw.com

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Investments

84

Portfolio Exits

22

Funds

2

Partners & Customers

2

Service Providers

2

About The D. E. Shaw Group

D.E. Shaw Group is a global investment and technology development firm with more than $36 billion in investment capital as of April 1, 2015, and offices in North America, Europe, and Asia. The firm has earned an international reputation for successful investing based on innovation, careful risk management, and the quality and depth of our staff. D.E. Shaw has a significant presence in the world's capital markets, investing in a wide range of companies and financial instruments in both developed and developing economies.

The D. E. Shaw Group Headquarter Location

1166 Avenue of the Americas Ninth Floor

New York, New York, 10036,

United States

212-478-0000

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Latest The D. E. Shaw Group News

The D. E. Shaw Group Calls for Further Change at Verisk and Sends Letter to Board of Directors

Mar 17, 2022

09:01a 03/17/2022 | 10:21am EDT Message : Says Verisk Should Position Itself as a Pure Play Insurance Data Business Verisk Can Double Earnings Per Share By 2025 With The D. E. Shaw Group's Value Creation Plan Recommended Actions Are Necessary To Realize Significant Value Creation Opportunity NEW YORK, March 17, 2022 /PRNewswire/ -- The D. E. Shaw Group ("D. E. Shaw") today sent a letter to the Board of Directors at Verisk Analytics, Inc. (the "Company," "Verisk Analytics" or Verisk") (Nasdaq: VRSK) calling for changes required for the Company to realize its opportunity to drive superior returns for shareholders. Funds advised by D. E. Shaw & Co., L.P. are shareholders in Verisk with a significant economic position. The full text of the letter follows: March 17, 2022 Dear Members of the Board: We are writing to you on behalf of certain investment funds advised by D. E. Shaw & Co., L.P., a member of the D. E. Shaw group. The D. E. Shaw group is a global investment and technology development firm with more than $60 billion in investment and committed capital and a history of working with companies to create long-term, fundamental value. Funds advised by D. E. Shaw & Co., L.P. are shareholders of Verisk Analytics, Inc. (the "Company" or "Verisk") and currently hold a significant economic position in the Company. We are seriously concerned about the long-term underperformance of the Company's share price and have been privately engaging with you for nearly five months in an effort to help the Company focus its business, improve its operations, and enhance its Board and governance. While we welcome the recent actions the Company has taken to implement some of the steps we have been recommending, including selling Verisk Financial Services, declassifying the Board, and separating the role of Chairman and CEO, we believe these belated changes are reactive in nature and do not go nearly far enough in reversing a longstanding pattern of underperformance. If Verisk is to reach its full potential and generate significant value for all of its shareholders, further change is necessary. We believe that with the right set of changes, including an unequivocal commitment to positioning the Company as a standalone insurance-focused business, a commitment to organic growth acceleration and profit margin expansion within that business, and credible Board oversight, Verisk's stock price could appreciate by over 70%, which would equate to more than $20 billion of value creation for shareholders. Verisk Has Underperformed Its Potential With a market-leading position and a strong competitive advantage, Verisk should be able to achieve significant organic revenue growth, margin expansion, and a premium valuation. However, Verisk has failed to deliver on its promise. Verisk's organic revenue growth has consistently disappointed relative to the Company's own expectations, missing the 7%-8% benchmark in each of the last six years, in some cases by a material amount. Over the same period, shareholders have endured surprising profit margin declines while information services peers with similar, scalable business models expanded margins by well over 100 basis points annually. Shareholders have sustained disappointing organic revenue growth and surprising margin contraction Compounding this operational underperformance, the Board permitted Verisk to allocate its capital to acquire several non-core businesses, which have served as a distraction to management, diluting the quality of Verisk's insurance assets and ultimately reducing the premium valuation historically enjoyed by the Company. For example, Verisk's Wood Mackenzie acquisition has meaningfully reduced overall company returns on capital, generating only a 4% return on invested capital during Verisk's ownership,1 well below both Verisk's stated hurdle rates and its cost of capital. Investors have grown skeptical of how each incremental dollar of capital at Verisk will be allocated As a result of the Company's operational underperformance, misguided capital allocation, and suboptimal business configuration, shareholders have endured persistent share price underperformance for a decade. Verisk has underperformed its proxy peer set by nearly 400% during the last 10 years and its stock has underperformed in the immediate aftermath of 11 out of the last 13 quarterly reports, including after its most recent results and announcements. Verisk's stock price would need to nearly double from current levels just to match the average returns of the Company's self-selected peer set. Information Services companies have consistently generated better financial returns than Verisk The D. E. Shaw Group's Efforts to Drive Change at Verisk When we approached you nearly five months ago with a letter and a detailed presentation outlining our concerns, you agreed with us that despite past operational, capital allocation, and governance missteps, Verisk had a unique opportunity to deliver significant and lasting value to shareholders. Therefore, we decided to work with you privately, collaboratively, and in good faith to reach a constructive resolution for the benefit of all Verisk shareholders. We proposed a number of changes that we believed could help Verisk restore its position as a best-in-class data business and command the premium valuation it deserves. This set of recommendations included that Verisk commit to becoming a pure-play insurance business through separation of all non-insurance assets; renew its focus on organic revenue growth initiatives and profit margin expansion within the insurance franchise; undertake several governance changes; and appoint new, independent directors whom shareholders would trust to help oversee the change that is required. You agreed that many of these steps were appropriate, and we committed to working with you to implement them. However, as part of our ongoing discussions, we found it strange that in a draft cooperation agreement you provided us that you insisted on a number of non-standard provisions, including that we publicly and privately support the Company on virtually all matters in addition to signing up to a multi-year "standstill". These requests are inconsistent with directors who are focused on accountability, and we view this as an attempt by the Board to insulate itself from criticism and stave off further action from us or other shareholders. While we are pleased that Verisk has undertaken some of the reforms for which we have been advocating for months, and are hopeful that these changes will be the start of a performance and valuation improvement that shareholders deserve, we remain concerned that the Board is seeking to do the bare minimum required to preserve its position and prevent more shareholder action. As a result, the changes that we believe are the most important and have the most value creation potential have not been enacted. Rather than focus on maximizing shareholder value, the Board appears to be striving to prevent itself from being held accountable for a multi-year record of underperformance and has failed to commit to the most significant reforms we have recommended. Further Change Is Required We continue to believe that Verisk has an opportunity to generate substantial value for its shareholders, but the Board's reactive response to our concerns simply is not enough. The Company's inability to fully commit to important potential reforms—becoming a pure-play insurance-focused business and articulating specific cost-reduction targets for which it would be held accountable—during its recent earnings call left shareholders wondering about both portfolio composition and the profit outlook for the Company and cast doubt upon the Board's commitment to substantive change. If the Board is serious about addressing the performance gap to peers, it must act urgently to transform Verisk into a new and improved standalone insurance data business with enhanced financial performance and credible governance and oversight. We believe that all of the common-sense reforms we have advocated for privately over the last several months put Verisk on track to getting there—and that the board should immediately take steps to implement them. We believe this set of actions, if implemented correctly with the appropriate oversight, can result in over 70% appreciation in Verisk's stock price, which would equate to more than $20 billion of value creation for shareholders. In forming our views regarding the opportunity before Verisk, we undertook extensive research, including retaining a leading consulting firm to perform a detailed assessment of the Company's operating cost structure and organic growth opportunities; working with experienced former executives in the information services and data analytics industries; and interviewing numerous Verisk customers and others who are deeply familiar with the Company. We believe Verisk should immediately: Commit publicly to becoming a pure-play insurance data company: Verisk has a best-in-class insurance business that benefits from strong barriers to entry, high customer switching costs, a mission critical service offering, and limited competition. We believe that an unequivocal commitment to becoming an insurance data pure-play could help to restore Verisk's premium valuation versus its information services peers and result in a more than 25% increase in its valuation multiple. [2] In addition to the higher multiples we have seen placed on the earnings of standalone insurance data businesses,[3] a move to standalone insurance would enhance Verisk's financial profile, leading to high-single-digit organic growth and EBITDA margins well above 50%. Furthermore, a clear commitment by the Board to create a standalone insurance asset would reduce complexity for investors, streamline capital allocation, best align capital structure with the needs of the business, and substantially reduce senior management distraction. While the Company has promised to evaluate options for the remainder of its energy business, it needs to articulate a clear and unequivocal intent to streamline its portfolio by separating energy. Form an Operations Review Committee of the Board to pursue a "no stone unturned" review of Verisk's insurance business. We believe that there are significant cost optimization and organic revenue growth initiatives that could more than double Verisk's earnings per share to more than $10 per share by 2025, more than 30% higher than current analyst estimates even after accounting for potential dilution from sale of non-insurance assets. We estimate that Verisk can save approximately $120 million to $240 million within the insurance business, driving margins higher by 500 to 1,000 basis points. We have provided you with detailed recommendations for cost savings, including real estate footprint rationalization, reduction of duplicative G&A functions, better utilization of low-cost country resources, and improving management spans of control across the organization. We further believe that following the rightsizing of Verisk's current cost structure, Verisk should be able to commit to expanding margins by 100 to 150 basis points per year, thus ensuring that shareholders benefit from the natural economies of scale that exist within a data analytics business. Verisk also has the opportunity to meaningfully accelerate organic top-line growth through better leveraging of cross-sell and upsell opportunities across the organization and further optimizing pricing along customer tiers. Finally, Verisk should endeavor to provide detailed annual organic growth and margin guidance in keeping with industry best practice and consistent with the above-average visibility its subscription-based business provides. Enhance the Board with shareholder input. While we understand, and appreciate, that you are planning to announce the addition of two directors that you recruited after we approached you, Kim Stevenson and Jeff Dailey, we do not believe self-refreshment is enough to build confidence among your shareholders given the Company's long track record of underperformance. In addition to Kim and Jeff, whom we interviewed at your request, we believe you should seek truly outside and independent candidates for the Board who have substantial insurance, information services and turnaround experience and who will have the endorsement and explicit support of shareholders. We note that four of your eleven sitting directors have been on the Board for more than 17 years, more than double the average tenure of directors on the Boards of your self-selected proxy peers. Divestitures Combined With Operational Improvements Creates Premium Insurance Business, "New Verisk"  We welcome the modest reforms implemented by the Board following our engagement, but the Board has not gone far enough. The Company has underperformed for a decade because of operational missteps, poor capital allocation, a misguided diversification strategy, and lack of sufficient oversight and the Board should fully embrace the value creation plan outlined in this letter to maximize value for all of Verisk's shareholders. Best Regards,

The D. E. Shaw Group Investments

84 Investments

The D. E. Shaw Group has made 84 investments. Their latest investment was in Casavo as part of their Unattributed on November 11, 2021.

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The D. E. Shaw Group Investments Activity

investments chart

Date

Round

Company

Amount

New?

Co-Investors

Sources

11/8/2021

Unattributed

Casavo

$44.81M

Yes

1

7/6/2018

Series A

QC Ware

$6.5M

No

4

3/28/2018

Series A

Atidot

$5M

Yes

4

9/14/2016

Series A

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$99M

Subscribe to see more

10

8/31/2016

Seed VC

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10

Date

11/8/2021

7/6/2018

3/28/2018

9/14/2016

8/31/2016

Round

Unattributed

Series A

Series A

Series A

Seed VC

Company

Casavo

QC Ware

Atidot

Subscribe to see more

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Amount

$44.81M

$6.5M

$5M

$99M

New?

Yes

No

Yes

Subscribe to see more

Subscribe to see more

Co-Investors

Sources

1

4

4

10

10

The D. E. Shaw Group Portfolio Exits

22 Portfolio Exits

The D. E. Shaw Group has 22 portfolio exits. Their latest portfolio exit was UserTesting on November 17, 2021.

Date

Exit

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Acquirer

Sources

11/17/2021

IPO

$99M

Public

4

10/14/2021

Acquired

$99M

2

7/16/2020

IPO

$99M

Public

8

4/3/2018

IPO

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$99M

Subscribe to see more

10

9/8/2017

Acq - Fin - II

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$99M

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10

Date

11/17/2021

10/14/2021

7/16/2020

4/3/2018

9/8/2017

Exit

IPO

Acquired

IPO

IPO

Acq - Fin - II

Companies

Subscribe to see more

Subscribe to see more

Valuation

$99M

$99M

$99M

$99M

$99M

Acquirer

Public

Public

Subscribe to see more

Subscribe to see more

Sources

4

2

8

10

10

The D. E. Shaw Group Acquisitions

3 Acquisitions

The D. E. Shaw Group acquired 3 companies. Their latest acquisition was Chroma Oil & Gas on May 28, 2008.

Date

Investment Stage

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Total Funding

Note

Sources

5/28/2008

$99M

Leveraged Buyout

1

12/17/2007

Other Venture Capital

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$99M

$99M

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0

8/12/2004

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$99M

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10

Date

5/28/2008

12/17/2007

8/12/2004

Investment Stage

Other Venture Capital

Companies

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Valuation

$99M

$99M

$99M

Total Funding

$99M

Note

Leveraged Buyout

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Sources

1

0

10

The D. E. Shaw Group Fund History

2 Fund Histories

The D. E. Shaw Group has 2 funds, including D. E. Shaw Alkali Fund V.

Closing Date

Fund

Fund Type

Status

Amount

Sources

4/6/2021

D. E. Shaw Alkali Fund V

$1,000M

1

The D.E. Shaw Voltaic Fund

10

Closing Date

4/6/2021

Fund

D. E. Shaw Alkali Fund V

The D.E. Shaw Voltaic Fund

Fund Type

Status

Amount

$1,000M

Sources

1

10

The D. E. Shaw Group Partners & Customers

2 Partners and customers

The D. E. Shaw Group has 2 strategic partners and customers. The D. E. Shaw Group recently partnered with First Solar on December 12, 2017.

Date

Type

Business Partner

Country

News Snippet

Sources

12/6/2017

Vendor

United States

First Solar to supply 200MW of solar modules for D. E. Shaw Renewable Investments

`` D. E. Shaw Renewable Investments is thrilled to continue growing its partnership with First Solar , '' said Bryan Martin , CEO of D. E. Shaw Renewable Investments .

2

Partner

United States

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10

Date

12/6/2017

Type

Vendor

Partner

Business Partner

Country

United States

United States

News Snippet

First Solar to supply 200MW of solar modules for D. E. Shaw Renewable Investments

`` D. E. Shaw Renewable Investments is thrilled to continue growing its partnership with First Solar , '' said Bryan Martin , CEO of D. E. Shaw Renewable Investments .

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Sources

2

10

The D. E. Shaw Group Service Providers

2 Service Providers

The D. E. Shaw Group has 2 service provider relationships

Service Provider

Associated Rounds

Provider Type

Service Type

Counsel

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Service Provider

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Associated Rounds

Provider Type

Counsel

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Service Type

Partnership data by VentureSource

The D. E. Shaw Group Team

23 Team Members

The D. E. Shaw Group has 23 team members, including current Chief Operating Officer, Chris Clevenger.

Name

Work History

Title

Status

Chris Clevenger

Republic Financial

Chief Operating Officer

Current

Kevin Krist

MKM Longboat Capital Advisors, and Shearman & Sterling

Chief Compliance Officer

Current

Nathan Thomas

Chief Compliance Officer, Managing Director

Current

Dowlutrao Jossy Shivjee

Chief Administrative Officer

Current

Jean-Marc Arsan

MoneyGoat, Bridgewater Associates, PwC, and BearingPoint

Senior Vice President

Current

Name

Chris Clevenger

Kevin Krist

Nathan Thomas

Dowlutrao Jossy Shivjee

Jean-Marc Arsan

Work History

Republic Financial

MKM Longboat Capital Advisors, and Shearman & Sterling

MoneyGoat, Bridgewater Associates, PwC, and BearingPoint

Title

Chief Operating Officer

Chief Compliance Officer

Chief Compliance Officer, Managing Director

Chief Administrative Officer

Senior Vice President

Status

Current

Current

Current

Current

Current

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