zondag 24 oktober 2021

The $2 Billion Deal

Moody’s to Buy RMS in Bid to Boost Climate Risk Business

The $2 billion deal is a sign of the money to be made from selling data that analyzes changing climate patterns

Cleanup efforts followed summer flash flooding in Germany. Insurers are increasingly incorporating models that look at smaller, more frequent events that cause damage, as well as major ones.
PHOTO: THOMAS LOHNES/GETTY IMAGES

Updated Aug. 5, 2021 12:27 pm ET

Moody’s Corp. MCO 1.45% , best known for rating corporate and government debt, is diving into disaster and climate-change risk modeling.

The ratings company on Thursday said it had agreed to acquire RMS, a catastrophe risk-management and modeling firm, from its U.K. parent Daily Mail and General Trust DMGT 0.38% PLC for about $2 billion.

The deal is a sign of the big money to be made from selling data that analyzes changing climate patterns caused by global warming. RMS sells data and analytics to the property and casualty insurance and reinsurance sectors. It has grown rapidly alongside the increased frequency of natural disasters that are changing the way insurers price coverage.

Moody’s said the acquisition would help build its business of providing data and risk assessments to the insurance industry.

On a call with analysts, Moody’s Chief Executive Rob Fauber said “climate change is an issue that demands urgent attention.” He added that the acquisition will help customers manage exposure to climate-change risks in their investment and lending portfolios and meet regulatory requirements related to climate change.

Moody’s business of rating debt and other financial risk services has boomed during the pandemic. Its share price rose Thursday to an all-time high, and is up by a third this year, rewarding its biggest shareholder, Warren Buffett’s Berkshire Hathaway Inc.

Insurers and reinsurers, which traditionally focused on predicting big events that can cause widespread damage, such as earthquakes and volcanic eruptions, are increasingly incorporating other models that look at smaller, but more frequent events that cause damage such as hail, drought, wildfire and snow.

“Global risks are now more complex, connected and systemic, said Karen White, chief executive officer of RMS. “Climate change and catastrophic events like extreme weather, pandemics and cyberattacks have broader and more harmful impacts across virtually all industries.”

Moody’s said RMS expects to generate around $320 million in revenue this fiscal year and runs risk models for 120 countries. Moody’s said it would pay for Newark, Calif.-based RMS through a mix of cash and issuing new debt. The deal is expected to close late in the third quarter.