D.E. Shaw calls for Verisk Analytics to divest assets, add new directors

D.E. Shaw & Co. has built a significant stake in Verisk Analytics Inc. and is calling on the company to make changes, including selling off non-core businesses in moves that it said would create $20 billion in value for shareholders.

The New York-based investment firm said in a letter to the company’s board Thursday that it has also been advocating for more independent directors on the board and operational improvements at the company in recent months.

“The company has underperformed for a decade because of operational missteps, poor capital allocation, a misguided diversification strategy, and lack of sufficient oversight,” D.E. Shaw managing directors Edwin Jager and Michael O’Mary said in the letter, a copy of which was reviewed by Bloomberg News.

Verisk shares rose as much as 3.3% on the news Thursday.

A representative for Verisk didn’t immediately respond to a request for comment.

The pair commended the company for implementing several initiatives it has been advocating for in recent months, including selling Verisk Financial Services, declassifying the board, and separating the role of chairman and chief executive officer. But they argued more is needed.

“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,” the duo said.

Pure-play insurance

Shares in Verisk have gained about about 14% in the past year, giving the company a market value of about $31.6 billion. D.E. Shaw argues that as a result of the company’s operational underperformance, misguided capital allocation, and suboptimal business configuration, Verisk has underperformed its peers by nearly 400% over the last decade.

The firm is calling on Verisk to commit to becoming a pure-play insurance business through separation of all non-insurance assets. It also wants Verisk to renew its focus on improving sales and margins, and undertake several governance changes, including appointing new independent directors.

It said it believed implementing these measures would result in a 70% increase in the company’s shares price.

D.E. Shaw had committed to working with the company to implement these changes in private but said Verisk insisted on the firm signing a non-standard cooperation agreement that would have forced the firm to support the company on almost every matter it pursued for several years, Jager and O’Mary said.

“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,” they said.

D.E. Shaw, which has $60 billion in assets under management, has pushed for changes at several companies in the past, including Exxon Mobil Corp., Bunge Ltd., and Lowe’s Cos., among others.