Verisk Analytics (VRSK) Q2 2026 earnings call transcript

For opening remarks and introductions, I would like to turn the call over to Verisk's senior vice president of finance and investor relations, Ms. Stacey Broadbar. Ms. Broadbar, please go ahead.

Thank you, operator, and good day, everyone. We appreciate you joining us today for a discussion of our 2nd Quarter 2026 financial results. On the call today are Lee Shable, their president and chief executive officer, and Elizabeth Mann, chief financial officer. The earnings release referenced on this call, as well as our traditional quarterly earnings presentation, and the associated 10Q can be found in the investor section of our website there. com. The earnings release has also been attached to an 8K that we have furnished to the SEC.

A replay of this call will be available for 30 days on our website and by dial-in. As that fourth and more detail in today's earnings release, I will remind everyone that today's call may include forward-looking statements about Verisk's future performance, including those related to our financial guidance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance is contained in our recent SEC filings. A reconciliation of reported and historic non-gap financial measures discussed on this call is provided in our 8K, and today's earnings presentation posted on the investor section of our website, Verisk. com. However, we are not able to provide a reconciliation of projected adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS to the most directly comparable expected gap result because of the unreasonable effort and high unpredictability of estimating certain items that are excluded from projected non-gap adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS.

Including, for example, tax consequences, acquisition-related costs, gains in loss from dispositions, and other non-recurring expenses, the effect of which may be significant. And now I'd like to turn the call over to Lee Shable.

Thanks, Stacy. Good morning, everyone, and thank you for joining us. Today, I will provide a broad overview of our second-quarter financial results. It will also offer perspective on our industry engagement, including client discussions focused on the use of advanced technologies, including the evolution of AI and the current operating environment.

Finally, I will wrap up with some updates on recent groundbreaking innovations we have introduced into the market, including the release of Verisk's energy studio for the catastrophe risk market. I will then hand the call over to Elizabeth for more detail in her financial review.

Turning to our second-quarter results, Verisk delivered organic constant currency revenue growth of 5.8% with balanced growth across underwriting and claims, and demonstrating the sequential acceleration that we previously anticipated. Revenue growth was underpinned by an 8% increase in subscription revenues, demonstrating the stability and value of the solutions we provide to the insurance industry, helping them make better decisions. These are supported by our broad connectivity and deep client relationships we have within the industry. Our focus on efficiency and cost discipline drove organic constant currency adjusted EBITDA growth of 7.4%, delivering another quarter of very healthy margins. Growth was modestly ahead of our expectations and reflected the short-term factors we previously described, namely the carryover impact of the very low weather activity, plus compares from strong renewals last year, and a work stoppage in a federal government contract.

We continue to have confidence that the resolution of these short-term factors and core growth momentum will result in continued sequential improvement in revenue growth as we move through the second half of the year. Moreover, we expect 2026 to be another year of performance in line with our investor day targets and reaffirmed our 2026 financial guidance.

Throughout the quarter, our client engagement was very active. We held several executive sessions across underwriting with top national and regional carriers discussing how we can support clients in the current operating environment, as well as our broader strategic plans, including our AI strategy. Additionally, we hosted client-specific emerging issues workshops within underwriting, focusing on topics including data centers, AI risks, and regulations, and quantum computing, where we discussed company-specific exposures. For one top 20 carrier, we hosted three different sessions on artificial intelligence that were attended by almost 400 underwriting professionals across their enterprise. These engagements are a further demonstration of the critical role we play in the industry through our deep industry expertise, data analytics, and thought leadership.

That same combination is why we continue to win new data contributions. So far this year, we have onboarded eight new core lines contributors and 10 contributors to our new access and surplus data set. And with those access and surplus contributors now online, our data set covers over 18 billion in historical and current premium. Specific to the operating environment, the first half of 2026 has continued on the trends experienced in 2025. Namely, improved combined ratios and robust industry profitability helped by unusually low catastrophe losses. In fact, 2026 is currently tracking for global catastrophe losses to be below the 100 billion mark for the first time since 2020. With profitability improvements and rate adequacy satisfied across many lines, carriers have turned their attention to driving growth, resulting in price competition and softening markets.

As we mentioned last quarter, this dynamic is most pronounced in property and commercial property in particular, where pricing is soft and volumes are lighter. We continue to watch how these dynamics shape client activity, particularly as it relates to transactional usage. It is in these types of markets that carriers are increasingly focused on underwriting discipline and risk selection, rather than relying on broad based rate increases. Our comprehensive data sets and analytic insights underpinned by our continued investments in data currency and data coverage can best help segment and understand risk, hoping our clients navigate through these dynamic times. In our conversations with clients, AI remains one of the most important topics, and Verisk has partnered with the industry to help them move from experimentation into production deployments and ultimately to scaled adoption when the industry is ready.

As carriers expand their use of AI, they continue to turn to Verisk as the trusted source of data in the industry. Currently, those conversations are increasingly centered on accuracy, efficiency, and repeatability, as well as driving return on investment from their investments.

To meet these needs, we are investing in techniques such as retrieval augmented generation, and broader context engineering capabilities that help improve the quality of AI driven outputs by better managing how large language models access, interpret, and apply information. This is all further enhanced by our highly cleansed and structured data sets and deep industry expertise, which is leveraged through the semantic layer of AI processes, where we provide data structure, context, and rules that make large language models work more effectively to deliver consistent and predictable outcomes. More importantly, our goal is not simply to adopt the latest AI tools, but to apply them in ways that deliver measurable return on investment and value for clients by combining advanced AI capabilities with Verisk's high quality and proprietary data assets, deep industry expertise, and established industry standard workflows, while also creating connections across the broader ecosystem.

We believe this positions us well to help clients navigate the next phase of AI adoption, while strengthening Verisk's role as a trusted strategic partner across the insurance ecosystem. As a specific example, in May, we announced our first collaboration with anthropic launching two Verisk MCP connectors for CLOD, which bring our trusted regulatory great data and analytics directly into conversational AI workflows in an underwriting and claims use case. These connectors enable clients to interact with Verisk's proprietary underwriting intelligence and claims solutions using natural language, helping them access insights when, where, and how they need them. These connectors were developed in partnership with anthropic on an expedited timeline from initial discussion to production and public launch. And we are the first insurance data provider with MCPs available with CLOD.

This was made possible by the earlier foundational investments we made in data organization and infrastructure, making our data entirely AI ready, as well as experimentation and development of independent large language model applications. Importantly, the architecture is designed to maintain the governance, security, and trust our clients expect, with data retrieved only within the client's CLOD session and not used for model training.

Interest levels across our client engagement are building along with usage, with a top 10 carrier already using the MCP. We're excited by the early client feedback we've received, and we are actively developing additional connectors, both with end-profit and with other frontier model companies that can deliver value to our clients. Additionally, we are excited by the opportunities to develop agentic capabilities in coordination with and on behalf of our clients. Last quarter, we disclosed one of those initiatives to develop a next generation digitally native agentic underwriting platform with a global insurance firm. And we are excited with the progress that we are making. We are also in the development stage of agentic capabilities in our life solutions that will build on our conversational Ask Max feature to embed autonomous capabilities within the platform.

We're also encouraged by the early traction we're seeing with our generative AI solutions that have had skilled engagement, and premium audit AI is a good example. Premium audit AI brings natural language access to our premium audit rules and classification content directly into our clients' underwriting and audit workflows. It's still early as we are now in the first renewal cycle post to launch, but we're beginning to see it show up commercially.

The incremental value we have added is supporting stronger renewal growth. It's a proof point for how we're embedding AI into our proprietary content to make our offerings more valuable to clients. In our claims business, we continue to see strong momentum in exact AI, which we launched in the fourth quarter of 2025, and has continued to enhance with new capabilities.

Exact AI embeds AI directly into the workflows of insurers, adjusters, and restoration professionals, hoping clients automate time-consuming tasks such as summarizing claim information, labeling photos, extracting key data from documents, and generating estimating recommendations. The result is faster claims handling, improved productivity, and more consistent outcomes for policy workers. Adoption has accelerated significantly. Since March, the number of exact AI users has increased nearly 10 times, and we now have almost 7,000 licensees on the platform.

The feedback from clients has been overwhelmingly positive with strong demand for additional functionality. As a result, we are continuing to invest in our innovation roadmap and expand exact AI capabilities across the broader, exact worst suite, helping clients realize even greater efficiency and value from their claims operations. The rapid adoption we are seeing reinforces our conviction that AI will become an increasingly important driver of efficiency, consistency, and better outcomes across the property claims lifecycle. During the quarter, we also reached an important milestone in our catastrophe and risk solutions business.

With the on-time and on-budget launch of our re-engineered U. S. tropical cyclone model and various synergy studio, our new cloud native platform for integrated catastrophe modeling and risk analytics. Our updated U. S. tropical cyclone model redefines a U. S. hurricane risk modeling by integrating significant advances in climate science, hazard modeling, and vulnerability analytics to provide a more accurate, transparent, and realistic view of individual risk and portfolio exposure across insurance, reinsurance, and capital markets. Specifically, the model includes key scientific advancements which provide a more physically realistic view of how tropical cyclones evolve, including the impacts of wind, storm surge, and inland flooding. Additionally, as catastrophe models are used to increasingly inform decisions in industries outside of insurance, including housing, infrastructure, capital markets, and climate risk disclosure, this new updated model is designed to support risk evaluations with results that can be used across all segments.

Various synergy studio, our cloud native platform, is designed to help clients make better decisions in an increasingly complex risk environment. The platform brings together advanced analytics, high performance computing, and modern workflows in a single environment, allowing clients to analyze larger and more complex portfolios, generate insights faster, and better understand the drivers of risk and loss across their exposures. The first release of various synergy studio includes our complete global model suite in our latest next generation modeling framework, giving our clients immediate access to our latest views of catastrophe risk for every model around the world. This allows clients to run more sophisticated analyses, evaluate risk more efficiently, and make more informed underwriting and capital allocation decisions without having to navigate a patchwork of model vintages.

By combining leading science with modern technology, we are helping clients gain deeper insights into risk while improving the speed, scale, and transparency of their workflows. We have already onboarded our first clients onto the system, and the initial feedback on performance, scalability, and keeping our commitment to deliver on the schedule we promised has been incredibly positive. We have a robust pipeline of additional clients scheduled to migrate to the platform through the remainder of the year. As a further enhancement to our catastrophe risk solutions business, we closed this week on the strategic tuck-in acquisition of McKinsey Intelligence Services, a geospatial intelligence and event response company specializing in global real-time catastrophe and conflict event analysis. MIS will become part of various catastrophe and risk solutions.

We believe that the strategic combination of MIS's real-time geospatial intelligence together with various catastrophe models, risk analytics, weather analytics, and claims solutions will give clients a more complete view of unfolding events so they can assess impacts, prioritize response, and support stakeholders more effectively.

Before I close, I want to announce that Nick Dafon, our Chief Information Officer, is leaving Barrisque after two decades. I want to thank Nick for his partnership and key contributions to Barrisque, which include leading the modernization of our computing platform, successfully migrating from the mainframe to the cloud, strengthening the infrastructure supporting reliable delivery of client solutions, and helping position the company well for this next phase of AI innovation.

With Nick's departure, Jeff McGread, our CTO, will step into the role of interim Chief Information Officer. We are confident in the bench strength we have in place within our corporate IS&T organization and will commence a search for a permanent replacement. I'll now turn the call over to Elizabeth.

Thanks, Lee, and good day to everyone on the call. On a consolidated and gap basis, second quarter revenue was $806 million, up 4% versus the prior year, reflecting contribution from both underwriting and claim. Net income was $229 million, a 10% decrease versus the prior year, while diluted gap earnings per share were $1.75, down 3% versus the prior year.

The decrease in net income and diluted gap EPS was driven by a divestiture at the end of 2025, as well as a higher year-over-year tax rate, increased interest expense, and higher legal fees incurred in connection with ongoing litigation. This was all set in part by higher operating results and a lower average share count.

Moving to our organic constant currency results adjusted for non-operating items, as defined in the non-gap financial measures section of our press release, our operating results demonstrate continued solid growth across both underwriting and claims.

In the second quarter, OCC revenues grew 5.8%, compounding on the 7.9% OCC revenue growth in the prior year period. This was a sequential improvement from the first quarter in both underwriting and with reported OCC growth of 5.6% in underwriting and 6.1% in claims.

The quarter's performance was modestly better than our expectations, primarily due to stronger than expected insurance link to the curitization activity. The reported results continue to be impacted by the continued carryover effect of a lower level of weather related events last year, as well as the work stoppage in a federal government contract. Subscription revenues, which comprise 83% of total revenue in the quarter, grew 8% on an OCC basis, compounding the 9.3% growth in the prior year period. The growth in subscription revenue was driven by strength across our largest subscription-based businesses, including forms, rules, and loss costs, catastrophe and risk solutions, and anti-fraud analytics.

And reflects strong price realization in renewals, expanded relationships with existing clients, and the addition of new logos. The resilience of our subscription revenue underscores the strength of our business model and the critical value our solutions deliver to clients. Informed rules and loss costs, our investment in quarter lines reimagined continues to drive strong price realization through subscription renewals. As clients experience the additional value we can provide through the transformation of the platform. During the quarter, we released another seven new client-facing modules and remain on track for 25 releases in 2026, delivering even further platform functionality and value to our clients. Within catastrophe and risk solution, we delivered another quarter of strong growth, driven by the addition of new clients and some notable renewals that provide upside to multi-year growth.

As Lee mentioned, we are excited to announce the launch of Verus Energy Studio in June with our first client already onboarded and a pipeline for additional clients to migrate onto the platform. Additionally, we released our re-engineered U. S. tropical cyclone model, which delivers comprehensive advances in how hurricane risk is quantified and applied and is exclusively available through Verus Energy Studio.

In anti-fraud, we delivered another quarter of strong growth, driven by good price realization, early renewals, adoption of newer innovations including digital media forensics, and healthy growth in adjacent markets. Our transactional revenues, which comprise 17% of our total revenues, declined 4.2% on an OCC basis, a sequential improvement from the first quarter.

The declines were primarily driven by three factors. One, tougher comparisons from overages in the prior year as well as lower volumes in our commercial property business that could persist in the second half of the year. Two, the carryover impacts from lower weather events in our property restoration solutions. And three, lower volumes in our international travel business, primarily related to Middle Eastern travel disruptions. This was offset by strong ILS issuance within our catastrophe and risk solutions business, which we do not expect to benefit the third quarter.

Moving to our adjusted EBITDA results, OCC adjusted EBITDA growth with 7.4% in the quarter, compounding on 9.7% growth in the prior year period. Total adjusted EBITDA margins, which included both organic and inorganic results, were 57.5% down 10 basis points from the prior year. As a reminder, the prior year quarter's reported margins benefited from a foreign currency translation impact, which contributed 120 basis points to margin then. Excluding this nonrecurring benefit, we delivered solid margin expansion driven by revenue growth, discipline expense management, and ongoing global talent optimization initiative. Moving down the income statement, net interest expense was $53 million in the quarter, compared to $36 million in the prior year period, due to an increased debt balance, as well as higher interest rates.

Our current lovers level is in the middle of our targeted range of two to three times adjusted EBITDA. Our reported effective tax rate was 24.6%, compared to 22.7% in the prior year quarter. The year over year increase was driven by lower tax benefit from a lower level of employee stock option exercise activity. Adjusted net income decreased 1.9% to $259 million. The year over year decline in adjusted net income was the result of a divestiture and higher below the line items, including higher interest expense and a higher tax rate. Yet we still grew diluted adjusted EPS by 5.3% to $1.98 per share, reflecting our capital return activity, which reduced our weighted average share count by 6.8%.

On a reported basis, net cash from operating activities increased 50% to $366 million, while free cash flow rose 58% to $298 million. The increase was driven primarily by growth and operating profit, as well as the timing of certain cash payments. We remain committed to returning capital to shareholders, and during the second quarter, we paid a cash dividend of $0.50 per share, an 11% increase from the prior year. Additionally, we initiated a $200 million accelerated share repurchase program, which was in addition to the $1.5 billion program we entered into during the first quarter. In total, we retired 8.5 million shares during the first half of 2026. Both programs concluded earlier this week, and we currently have approximately $800 million remaining under our share repurchase authorization.

We are pleased to deliver continued momentum in the second quarter, and are reaffirming our outlook for 2026. A complete list of all guidance measures can be found in the earnings slide deck, which has been posted to the investor section of our website, Ferris. com. We continue to expect consolidated revenue in the range of $3.19 to $3.24 billion. Adjusted EBITDA is expected to be between $1.79 and $1.83 billion, with adjusted EBITDA margins of 56 to 56.5%. We continue to expect net interest expense of $190 to $200 million, and our effective tax rate to be in the range of 23 to 26%. This results in adjusted earnings per share for the year in the range of $7.45 to $7.75.

A few things to note as you update your models and think about pacing for the final two quarters of the year. First, we continue to expect a gradual recovery in OCC growth rate for the remaining two quarters of 2026.

Second, the transactional revenues in the second quarter benefited from strong ILS activity that will not repeat in the third quarter, as this is a seasonal market. Third, while it is still early, the hurricane season is off to a slower start, as June and July have had limited storm activity.

These factors could continue to exert pressure on transactional revenues in the second half of the year. Still, taking everything together, we remain confident in our ability to deliver results in line with our financial guidance for 2026 and in line going forward with our investor day target. And now, let me turn the call back over to Lee for some closing remarks.

Thanks, Elizabeth. In summary, we are experiencing the growth rebound that we anticipated in our financial results. Additionally, the increased value in our products from AI functionality is improving price realization and the increased engagement from our clients and partners as they recognize the value of our data and expertise in generating real returns on their AI investments. This has further enhanced our confidence in the operating momentum we are building in the business.

We continue to appreciate all the support and interest in various. Given the large number of analysts we have covering us, we ask that you limit yourself to one question.

With that, I'll ask the operator to open the line for questions.

Yeah, thank you. Thanks, Tony. So I think you touched on a couple of the elements that we've talked about previously and I want to reaffirm. First, for some historical context, our experience has been in soft markets that we've generally grown at approximately a 6.8% organic cost and currency growth rate and in hard markets, 7.3. So both of those are well within the range that we talk about at Investor Day. And I think you also correctly identified that in these periods, the value of our data sets in assessing risk and supporting good pricing decisions become more important. And I think that's something that we have certainly heard in our client engagement as we've been talking about where we can be most helpful.

And as you heard, in our comments on the call, the level of engagement of clients wanting to have discussions around AI impact on pricing on other kind of market dynamics is evidence of that. But I think the most important point that I would center on is the fact that our growth is driven much more by the value that we are able to deliver to our clients and our ability to participate in that. And I think over the past six months, and certainly the past 12 months, the ability for us to utilize our data and our expertise to support our client's value journey in using AI has been very clearly demonstrated across our businesses. And so despite the softening market, well, that will have an effect.

I think we're more bullish on our ability to create value for our clients and for the industry by supporting their adoption of AI in workflows in processes in connecting the industry. And we're beginning to see that in the pricing dynamic that we described for the premium audit AI and exact AI. So I think that that is certainly a difference that we've had relative to prior on the growth our growth perspective in the softer market.

Thanks for the question, Andrew. Yes, our guidance as we typically do, the range still considers in the base case an average year of weather activity and of hurricane activity. So what we're highlighting is that it plays out to be lighter. Again, and there's different views from the experts as to how it may play out this year. But playing out lighter would be a would be a bit of a risk on the transactional side. Again, these differentials are small in the overall context of our business and even within the guidance range that we're that we're talking about. As to, you know, as to the discussions on El Niño and the risk to insurers, it's something that our catastrophe and risk modeling team is engaging with clients on there.

They're discussing the latest weather impacts. And I'll highlight the acquisition, the small acquisition that we just announced today of Mackenzie Intelligence Services as a geospatial intelligence platform and event risk management is one that can over time help to give kind of real time insights to events as they unfold.

Thank you.

But are you also looking at partnering with some of these AI companies for model code development? And if so, are there specific areas or processes that you're interested in joining forces with them to add that intelligence layer? Thanks a lot.

Thank you, Kelsey. Certainly we are engaged in discussions with all of the significant frontier model companies. Tangibly, you saw our announcement of the Claude Connectors, an MCP solution that had two applications, one to underwriting and one to claims that were starting points in demonstrating what our data sets could do by pairing them with natural language capabilities of the model. And the feedback from our clients have been strong in many ways. Those were test cases or proof points that we could roll out very quickly.

One thing that we've heard from clients is they want us to focus on what can we deliver now that has an impact and not conceptual what's in development, but what they can use now, and that was a demonstration of it. And coming out of that was a clear appetite for us to go deeper and broader in those types of connectors, which will require some further development in a number of our product areas. So specific to your question, we believe that that type of engagement and work with the model companies is going to be beneficial for our clients. It will, I think, take time for clients to test the products, understand how they apply and develop it, but there clearly is enthusiasm and engagement.

We are doing this across the board with the model companies. One thing to your question on distribution. I think we would observe that our ability to provide distribution to the insurance industry as the last mile, particularly to workflows, is a very important part of the dimension. Our connectivity to claims professionals, underwriting professionals, risk professionals, it gives us an ability to identify where those models can be best applied, most effectively applied, in order to generate real returns to our clients. And that's clearly something that's been recognized by the model companies that we've been in discussions with. And I think that strengthens our position in helping them and helping our clients bring that model capability together with the data sets.

Thanks, Scott. I'm going to turn this over to Sir Rob Kempka, who runs our underwriting businesses to give you a perspective on the on the commercial property, what we're experiencing, what we're hearing from clients.

Yeah, absolutely. So in overall, in the commercial property line, in the insurance industry, what we're seeing is in soft pricing. And it's a cyclical thing that happens. And what the behavior that it's driving is is our clients are looking at their business, they're looking at maybe not quoting as many of the opportunities that are out there. And then when they do make the quotes, they're also looking at how much they're spending on underwriting data and analytics to analyze that business. So those impacts are being felt in our transactional part of our business. I do want to say the underlying business remains very strong. So the subscription side of our business is good and continues to be healthy.

Great. Thanks for the question. So we certainly, data security has been a critical question and issue that we have managed very carefully over decades with our clients. So it is kind of central to our DNA to make certain that we are protecting our clients data and any application or new technology that we're developing is done with careful consideration and discussion with them about the rights to utilize that data and that technology. And so that has informed our governance approach to the use of data. We have had the data policy and an AI policy for many years. And that serves as a great guide for us to make certain that we are protecting that data. Now, two additional points.

One is that in our work with the Frontier Model Companies, it was absolutely critical that the use of the data was controlled in the client's instance and could not be used to train models. That's a protection that we think is important for our clients, certainly important in protecting our overall data access. So that is a demonstration of our care in managing access to those data sets and protecting them. It is front of mind in making sure on an ongoing basis that our client's proprietary information is protected. And while we are finding ways to effectively utilize that data for what we feel are valuable applications that our clients are looking for in querying that data. And so, given, for instance, the success that we've had with premium audit and client uptake in the use of that AI product as well as an exact AI, just two examples across the businesses, I think the one thing that I would have a different point of view is if our clients are definitely interested in applying AI to the underwriting or claims functionality, but we're doing that in a very safe and carefully thought out process.

Thanks, Manav. And, you know, clearly is a topic that we're focused on and we're approaching this with a recognition that this is still evolving. We're applying new technologies. We are at the core assessing how this technology is creating incremental value for our clients. How can we, how are we helping them create a real return on their investment in AI? So if we can demonstrate, I think we believe that our clients clearly see value with the gone beyond the step of just testing it, but a demonstration that it improves efficiency, productivity, accuracy. And I think there will be several channels in which we are currently monetizing and expect to continue to monetize that incremental value. One, most immediately, and while this at a scale level is not significant for us yet, but I think has clearly has the potential to support ongoing growth is simply improving the value of our pricing renewals upon subscription.

We've talked a little bit about the our ability to do that in our underwriting data, renewals, and I specifically to the premium audit product. Similarly, in our exact word licenses, we are expecting to be able to capture the incremental value that we're delivering there through these additional products on that front. And I think that, ideally is kind of the broad based ability for us to realize value as we have in the past, as we have with the core lines reimagine where more current data sets, expanded data sets, we're able to capture that value in increasing subscriptions over time. Additional channels may include, as we see appetite and early adoption of AI functionality, potentially some transactional pricing on an initial basis for clients to test and experiment with new AI applications.

So I think there are aspects where we could see pursuing an initial transactional model, but we would want we would probably want to see that migrate into a more stable and growing subscription business over time. And then thirdly, we have a number of projects that we've talked about in the past where the ability to deliver an agentic AI platform or another AI solution may enable us to generate license fees for that software or for that platform that our clients will view as an appropriate way for us to monetize the investment that we've made in delivering that solution. So I think all three of those will be paths. I think we are realizing that already on the pricing front.

I think as we move from piloting to greater client usage, we could see the transactional element. And we are clearly exploring the licensing component on a number of the platforms that we're pursuing. Overall, I mean, I think that we come out of the last six months and our experience with anthropic and other frontier AI model companies with increased confidence that the value of our data, the value of our ability to support our clients, AI journey and investment returns on that technology to be a clear upside for us over the next several years.

I'm going to turn that question over to Sarav as well.

Yeah. Thank you, Fazeh. I think on the auto side, you continue to make progress there. The competitive environment remains robust, but our focus on differentiated platforms like Lightspeed and new analytic objects that we're bringing out in our coverage of our business is delivering good results for us in terms of Lightspeed being adopted by more customers and good engagement on these differentiated analytics with other customers. So we continue to focus on that strategy as we go forward.

Thanks for the question, Henry. Specifically on the MCP connections, it is included in the client base subscription. Their their quad costs or token costs are covered by them separately. So that is not an expense to us directly. More generally, I think we have strong governance on AI spending across our enterprise. And as for the pace of adoption and the rate of diffusion across the insurance industry, I think you've heard Lee talk about that. The clients are adopting. We are, you know, ready to move with them as they move into more systematic deployment.

But I think given some of the discussion, you've heard some of the insurance focus on governance, on data security protection and other things. So as the industry works through and moves through that, you will see our modernization opportunities increase gradually over time. But it will probably be a slow and steady build.

It sounds like transactional, at least from the storm activity. It's softer to these first two months, but also I do recognize that I think last quarter it was like a store or last third quarter was it a store below and storm activity. So I'll just curious like, why is the business you think or are giving you the most confidence on the acceleration and growth net bank half the year? Thank you. Yeah, thanks. Thanks for the question, Tom. A couple things. Two things that give us confidence in the build. One is the subscription, you know, the subscription growth rate. Again, that's 83% of our businesses where we have some visibility into that.

I would add that supported, we had highlighted the federal government contract and a work stoppage there. That work stoppage now has been lifted as of the beginning of the third quarter for a one-year term. So that work has resumed. That was, I will add, that was always the assumption that we had going forward, but this, so this is now the removal of that risk. So those are some of the elements of the steady acceleration. That said, I do want to highlight, it may be more of a sort of steady step up in that year over year organic constant currency growth rate. You know, we highlighted some of the headways on the transactional side.

You know, that strong ILS contribution that we had in the second quarter is not likely to repeat. And so I think you've heard from us, we do have a slightly more cautious view on the transactional revenue, especially in the third quarter with the property market and of course the weather as a TBD. So taking all that together, you know, we may see less of the upside in the third quarter and more of an acceleration into the fourth quarter as the year plays that out again with full confidence in the full year range supported by the subscription revenue.

Thanks, Jeff. I'm going to start off and then I'm going to on the on the on the differentiation and then I'll turn it over to Elizabeth to kind of talk through the kind of the pricing revenue elements to it. You know, first, I think what's what's important is that, you know, first, the models are the starting point and there what we are releasing or what we feel are the most sophisticated scientific leading catastrophe models with a much more physics, reality oriented solution for our clients. And so with the US tropical cyclone model, we think that that is cutting edge science and a leading model synergy studio as a platform enables our ability one to increase the capacity of our clients to run larger simulations over longer periods, which adds value to them and do that more quickly.

So the capability of that platform is a significant enhancement. And secondly, our ability to update those models is much easier for our clients than a traditional on-premises solution. Finally, the I think a key competitive differentiation is a consistent economic framework so that all of our models are can be utilized to assess risks on a consistent basis across that entire portfolio. And I think that's that is a distinctive differentiation for our clients that want to understand risk on a on a global and a portfolio basis. So those are the elements I think go to your question from a competitive standpoint in terms of why we think these are great products and why Synergy Studio as a new product will be delivering more value to our clients.

Yeah, and I'll add it on the pricing. Well, so first I'll comment, you know, all of our models are on that next generation financial framework. And we talked about it a while ago on earnings when we kind of launched that and put all of our models on that next generation financial framework.

So that'll be available on on their synergy studio. There is not as the pricing check. There is not a specific platform upgrade fee that we're that we're monetizing with that. We do think, you know, the overall platform itself derives greater value. And the other the other piece I will add to it is that some customers may choose to have that operated on a hosting basis. And so some of our customers have migrated to a hosted model and some even before even even on their touchstone platform have added a hosting component which has added to our revenue. So take it all together. That is all contemplated in the investor day guidance for that catastrophe and risk business at eight and a half to nine percent on a long-term basis.

Yeah, thanks, Kurt. We don't we don't give specific disclosure on that on that business on an ongoing basis. It has been a strong contributor and of course the second quarter has the securitization market as a benefit on the transactional side. But they're seeing steady uptick and performance that is in line with their long-term guidance.

So I'm curious if there's an opportunity here to use AI to maybe push a little bit more into workflow software. I know historically you've really been more of a data company. You have some software solutions, but here's how you're thinking about that from a high level perspective in terms of where you want to take the business. Thank you. Thanks, Jason. So there clearly are elements for us to integrate our data and our insights into workflows. I think the predominant path will be in integrating those data sets into our clients, either AI solutions or their existing, their existing workflows. But we have had, as you've noted, clients who have asked us to work on developing a platform, which would be a software platform or an AI platform that integrates their workflows more effectively.

And we're excited about that because we clearly have the expertise, the data sets are familiar with the workflow in order for us to be able to do that. And as you also reference, that services the needs of a wide range of claims companies and professionals. So yes, there is a software opportunity for us to deliver on our clients' needs for data integration, automation, and modernization of their processes, also connecting participants within those workflows outside of the individual client's basis. So that level of connectivity and integration of data, we can deliver in a variety of ways in partnership with our clients' preferred platforms, particularly among our larger clients, in partnership with AI solutions that may be developed by frontier model companies, as we've done with the anthropopic MCPs, or in specialized platforms that we have developed for clients that want us to deliver that capability.

At the end of the day, what we're focused on is leveraging our data sets on our expertise to create more value for the clients, and we have a variety of means to do that.

And yes, we do have there are clients that are developing their own LLMs. And I think the opportunity with them for us remains as strong, if not stronger, because the utilization of the unique data sets that we have, the standardized and cleanse data, are just as relevant to them in this context as it would be for a frontier model company. And those have been discussions that we think are that we have had and have supported our clients with. I would also use that as an opportunity to say the context or the semantic layer of what we have delivered and our retrieval augmentation generation technology is important, our ability to access all of that data and deliver what's really relevant to them is just as important in that context.

So I think we, to us, that's a very positive development. Our general experience is the more sophisticated our clients are from a technology and data standpoint, the more data that they consume, the broader relationship that we have. And on your first question, I may not have heard it, but I think it was a bit. We're moving to the sales cycles and the elongation that we referred to in the first quarter. I think that pattern in that environment does remain consistent. As you heard of discussed earlier on the call, there is a tremendous amount of client focus on questions of data, data usage rights, data protection. There's also our own focus on ensuring that our IP and our valuable data is well protected.

So those discussions, you know, both sides are working through the legal terms, ensuring that confidence. In the long run, we view that as a competitive differentiator for us because we have a long history of trust with the insurance industry and the robust governance processes and robust legal team to ensure and give confidence to the clients in the protection that we have there.

Thanks Ryan. Thanks so much for the question. Yes, it was. It was a strong margin quarter for us. As we highlighted that year over year comp, the Q2 of 25 included a 120 basis point impact of FX that that impact is small to minimal in this current quarter. So that margin expansion is real, so to speak. On a trailing 12 month basis, we're at 56.3%, which is in the midpoint of the guidance. Factors for the strong margins this quarter are a couple. Number one, you've seen historically, there's seasonality in our margins with Q2, often being the strongest quarter, because in part because that ILS transactional revenue comes in at a high incremental margin and our expenses tend to build steadily over the course of the year.

I think I would also just, I want to highlight, we did, beyond that, we have had strong expense discipline over the course of the year, and I want to highlight that we delivered margin expansion in every single one of the past quarters, even despite the more modest transactional revenue impact. So I think we've had consistently strong expense discipline over that time. As we build into the balance of the year, though, both the seasonality on the second half margins will have an impact, and then we will have both general timing of expenses as well as perhaps an opportunity to invest further behind these innovative products as our revenue growth continues to accelerate from here.

Thanks, George. Look, it's hard. We're still at an early stage, so I don't think that we are able to quantify certainly its current impact. I do think that based upon what we see, we clearly think it should lift our organic growth rate to some degree. It's difficult to parse out across overall renewal and value that we're providing in other areas. But I certainly feel more confident that this is additive to our overall growth rate, certainly on a growth basis, and on a net basis. We see just increasing in client engagement and a recognition of the tangible value that they're getting by integrating our datasets with AI models.