Ratings Firm Moody’s to Acquire Catastrophe Modeler, Analytics Firm RMS for $2 Billion

August 5, 2021

Moody’s Corp. has agreed to acquire RMS, a global provider of climate and natural disaster risk modeling and analytics, for approximately $2.0 billion (1.425 billion pounds) from Britain’s Daily Mail and General Trust.

Moody’s said the acquisition will increase Moody’s insurance data and analytics business to nearly $500 million in revenue and accelerate the development of the company’s global integrated risk capabilities to address the next generation of risk assessment.

California-based RMS is a leading provider of climate and natural disaster risk modeling services to the property/ casualty insurance and reinsurance industries. For the fiscal year ending Sept. 30, 2021, RMS said it is expects to generate revenue of approximately $320 million and adjusted operating income of approximately $55 million.

Moody’s said it will fund the transaction through a combination of cash-on-hand and the issuance of new debt. The acquisition is expected to close in late third quarter 2021.

Insurance Journal reported last month that British newspaper Daily Mail and its owner General Trust were in discussions to sell RMS, following a number of third party inquiries. DMGT, which has owned RMS since 1998, said its largest shareholder, Rothermere Continuation had notified it of a possible cash offer to take it private — if the sale of its insurance risk unit and the U.S. floatation of another subsidiary, online used car business Cazoo, are completed. DMGT companies provide businesses and consumer information, analysis, events, news and entertainment.

“Consistent with our objective of delivering compelling returns for our investors, we have decided that now is the right time to monetise our investment in RMS at a premium valuation. Moody’s is ideally positioned to drive the next stage of RMS’s growth and deliver revenue synergies,” DMGT CEO Paul Zwillenberg commented.

“Today’s leaders face a complex, interlinked world of risks and stakeholders,” said Rob Fauber, president and chief executive officer of Moody’s. “In the context of a global pandemic, the climate crisis and increasing cyberattacks, our customers must manage a wider range of risks than ever before.”

Karen White, RMS chief executive officer, called Moody’s is an “exceptional fit” for RMS and its customers. “Global risks are now more complex, connected and systemic. Climate change and catastrophic events like extreme weather, pandemics and cyberattacks have broader and more harmful impacts across virtually all industries. We share the vision to bring a global, integrated risk assessment platform to our markets with the goals of deeper, more sophisticated risk insights and greater global resiliency,” White said.

As part of the Moody’s Analytics platform, RMS is expected to generate up to $150 million of revenue by 2025. On a U.S. GAAP basis, the acquisition is expected to be accretive to Moody’s diluted EPS in 2025 and, excluding purchase price amortization, is expected to be accretive to adjusted diluted EPS in 2024.

Moody’s said the acquisition builds upon the firms’ complementary customer bases and capabilities in the life and P/C insurance and reinsurance segments. Moody’s offers pricing, capital management, financial and regulatory reporting capabilities. RMS provides climate and catastrophe risk modeling for P/C insurers and reinsurers.

As a result of the RMS acquisition, Moody’s has updated its guidance for full year 20212. Share repurchases are now expected to be approximately $750 million. Additionally, Moody’s full year 2021 diluted EPS is now projected to be in the range of $10.90 to $11.20. The company’s 2021 adjusted diluted EPS outlook remains in the range of $11.55 to $11.852.

New York-based Moody’s offers data and analytics to help businesses and organizations manage risks. It has more than 11,500 employees in more than 40 countries.

RMS offers more than 400 risk models covering 120 countries. Its models and analytics help insurers manage global risk from natural and man-made catastrophes including hurricanes, earthquakes, floods, climate change, cyber, and pandemics.

Topics Mergers Catastrophe

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