# Verisk Analytics, Inc. (VRSK) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Verisk Analytics, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1442145/000143774922004083/vrsk20211231_10k.htm
Accession: 0001437749-22-004083
Filing date: 2022-02-22
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/VRSK/
All MD&A years: /company/VRSK/mda/
Next year: /company/VRSK/mda/fy2022/ (FY 2022)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our historical financial statements and the related notes included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties, including the impact of the 2019 novel coronavirus ("COVID-19"). Our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

This discussion includes a comparison of our results of operations, liquidity and capital resources, financing and financing capacity and cash flow for the years ended December 31, 2021 and 2020. A discussion of changes in our results of operations and cash flows for the years ended December 31, 2020 and 2019 can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" within the annual report on Form 10-K for the year ended December 31, 2020  filed on February 23, 2021.

We are a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using advanced technologies to collect and analyze billions of records, we draw on unique data assets and deep domain expertise to provide innovations that may be integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, commercial banking and finance, and many other fields. In the U.S., and around the world, we help customers protect people, property, and financial assets. Refer to Item 1. Business for further discussion.

Our customers use our solutions to make better decisions about risk and opportunities with greater efficiency and discipline. We refer to these products and services as “solutions” due to the integration among our services and the flexibility that enables our customers to purchase components or the comprehensive package. These solutions take various forms, including data, statistical models, or tailored analytics, all designed to allow our customers to make more logical decisions. We believe our solutions for analyzing risk positively impact our customers’ revenues and help them better manage their costs.

Our Insurance segment provides underwriting and ratings, and claims insurance data for the U.S. P&C insurance industry. This segment's revenues represented approximately 73% and 72% of our revenues for the years ended December 31, 2021 and 2020, respectively. Our Energy and Specialized Markets segment provides research and consulting data analytics for the global energy, chemicals, and metals and mining industries. Our Energy and Specialized Markets segment's revenues represented approximately 22% of our revenues for the years ended December 31, 2021 and 2020. Our Financial Services segment provides competitive benchmarking, decisioning algorithms, business intelligence, and customized analytic services to financial institutions, payment networks and processors, alternative lenders, regulators and merchants. Our Financial Services segment's revenues represented approximately 5% and 6% of our revenues for the years ended December 31, 2021 and 2020, respectively. 

COVID-19

Since January 2020, an outbreak of COVID-19 has evolved into a worldwide pandemic. We have modified our operations in line with our business continuity plans due to COVID-19. While our facilities generally remain open, we are making extensive use of the work-from-home model at this moment. On a daily basis, management is reviewing our operations and there have been to date minimal interruptions in our customer-facing operations. Given the digital nature of our business and the move toward cloud enablement, we expect to remain operationally stable and fully available to our customers. We are in compliance with all financial and non-financial covenants and have not observed a loss of any significant customers, a significant deterioration in the collectability of receivables, a significant reduction in our liquidity, nor a significant decline in the subscription renewal rates.

We have analyzed our solutions and services to assess the impact of COVID-19 on our revenue streams. We have not identified any material impact stemming from COVID-19 on approximately 85% of our revenues at this point, as much of these revenues are subscription in nature and subject to long-term contracts. These revenues grew approximately 6% for the year ended December 31, 2021.

Of the remaining 15%, we have identified specific solutions and services, largely transactional in nature, that are being impacted by COVID-19. The primary causal factors are lower auto and travel insurance activity, the inability to enter commercial buildings to perform engineering analyses, decreased capital expenditure in the energy sector, and reduced levels of advertising by financial institutions and marketers. The portion of our revenue that is attributable to these solutions has been negatively impacted by COVID-19 beginning in March 2020 with the onset of the pandemic. These revenues increased approximately 1% for the year ended December 31, 2021 as compared to the same period in 2020. As the global outbreak of COVID-19 continues to evolve, management continues to closely monitor its impact on our business.

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Recent Developments

As of December 31, 2021, we reassessed the recoverability of the long-lived assets for our Financial Services reporting unit based upon the weaker than expected operating performance as a result of changing market conditions. These conditions constituted a triggering event, which resulted in a $134.0 million impairment to the long-lived assets for our Financial Services reporting unit including $88.2 million to intangible assets and $45.8 million to fixed assets. We based our analysis of the fair value of our long-lived assets on the indication of fair value provided by the offer to purchase such reporting unit, which was approved by our Board of Directors on February 16, 2022. This impairment is included within "Other operating loss (income)" in our accompanying consolidated statement of operations.

On January 12, 2022, our Board of Directors approved the action to make our environmental health and safety business within the Energy & Specialized Markets segment available for immediate sale at its current fair value. On January 21, 2022, we entered into a stock purchase agreement (the “Purchase Agreement”) to sell 3E Company Environmental, Ecological and Engineering ("3E") to Tamarack Buyer, L.L.C. (“Buyer”) in exchange for a potential aggregate cash consideration of up to $950.0 million. Buyer is an entity that was formed on behalf of, and is controlled by, certain investment funds affiliated with New Mountain Capital, L.L.C. (“New Mountain”).

The purchase price consists of $630.0 million of cash consideration to be paid at the closing of the transaction (subject to customary purchase price adjustments for, among other things, the cash, working capital and indebtedness of 3E as of the closing), up to $50.0 million of earnout payments based on 3E’s financial performance in 2023 and 2024, and up to $270.0 million of additional deferred payments based on New Mountain’s future return on its investment in 3E.

Buyer has secured financing, consisting of equity financing to be provided by certain investment funds affiliated with New Mountain and committed debt financing, to consummate the transaction. The closing of the transaction is not subject to a financing condition, but is subject to other customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act. There can be no assurance that these closing conditions will be satisfied.

The Purchase Agreement contains representations, warranties and covenants of the parties that are customary for transactions of this type and that are subject, in some cases, to specified exceptions and qualifications. Until the consummation of the transaction, we have agreed, subject to certain exceptions, to, conduct 3E’s business in the ordinary course consistent with past practice. The parties are required to use their respective commercially reasonable efforts to take, or cause to be taken, all actions necessary, proper or advisable under applicable laws to consummate the transaction. We will enter into a transition services agreement with Buyer at the closing of the transaction to ensure an orderly transition.

On February 11, 2022, we acquired 100 percent of the membership interest of Infutor Data Solutions, LLC ("Infutor"), for an aggregate net cash consideration of $223.5 million, of which $1.5 million represents a working capital escrow, plus a contingent earn-out payment of up to $25.0 million subject to the achievement of certain revenue and other performance targets. Infutor, a leading provider of identity resolution and consumer intelligence data, has become a part of the underwriting & rating category within our Insurance segment. We believe this acquisition further enhances Verisk’s marketing solutions offerings to companies across several industries including the insurance industry. 

On February 16, 2022, our Board of Directors approved the action to make our financial services business within the Financial Services segment available for immediate sale at its current fair value. On February 21, 2022, we entered into a stock purchase agreement to sell our financial services business to TransUnion, a global information and insights company, for $515.0 million in cash consideration paid at closing. This transaction is subject to customary closing conditions, including regulatory approvals and working capital adjustments.

Executive Summary

Key Performance Metrics

Revenue growth. We use year-over-year revenue growth as a key performance metric. We assess revenue growth based on our ability to generate increased revenue through increased sales to existing customers, sales to new customers, sales of new or expanded solutions to existing and new customers, and strategic acquisitions of new businesses.

We believe our business’s ability to grow recurring revenue and generate positive cash flow is the key indicator of the successful execution of our business strategy. We use year-over-year revenue and EBITDA growth as metrics to measure our performance. EBITDA and EBITDA margin are non-GAAP financial measures. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization of fixed and intangible assets. We calculate EBITDA margin as EBITDA divided by revenues. The respective nearest applicable GAAP financial measures are net income and net income margin. Although EBITDA is a non-GAAP financial measure, EBITDA is frequently used by securities analysts, lenders, and others in their evaluation of companies; EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our operating income, net income, or cash flow from operating activities reported under GAAP. Management uses EBITDA and EBITDA margin in conjunction with traditional GAAP operating performance measures as part of its overall assessment company performance. We believe these measures are useful and meaningful because they help us allocate resources, make business decisions, allow for greater transparency regarding our operating performance, and facilitate period-to-period comparisons. Some of these limitations involved in the use of EBITDA are: 

• EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments.

• EBITDA does not reflect changes in, or cash requirements for, our working capital needs.

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future and EBITDA does not reflect any cash requirements for such replacements.

• Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

EBITDA growth. We use EBITDA growth as a measure of our ability to balance the size of revenue growth with cost management and investing for future growth. EBITDA growth allows for greater transparency regarding our operating performance and facilitate period-to-period comparison.

EBITDA margin. We use EBITDA margin as a performance measure to assess segment performance and scalability of our business. We assess EBITDA margin based on our ability to increase revenues while controlling expense growth.

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Revenues

We earn revenues through agreements for hosted subscriptions, advisory/consulting services, and for transactional solutions, recurring and non-recurring. Subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. As a result, the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments. Examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language, our claims fraud database, or our actuarial services throughout the subscription period. In general, we experience minimal revenue seasonality within the business.

Approximately 81% and 82% of the revenues in our Insurance segment for the years ended December 31, 2021 and 2020 were derived from hosted subscriptions through agreements (generally one to five years) for our solutions, respectively. Our customers in this segment include most of the P&C insurance providers in the U.S. Approximately 83% and 85% of the revenues in our Energy and Specialized Markets segment for the years ended December 31, 2021 and 2020 were derived from hosted subscriptions with long-term agreements for our solutions, respectively. Our customers in this segment include most of the top 10 global energy providers around the world. Approximately 83% and 77% of the revenues in our Financial Services segment for the years ended December 31, 2021 and 2020 were derived from subscriptions with long-term agreements for our solutions, respectively. Our customers in this segment include financial institutions, payment networks and processors, alternative lenders, regulators, merchants, and the top 30 credit card issuers in North America, the United Kingdom, and Australia.

We also provide advisory/consulting services, which help our customers get more value out of our analytics and their subscriptions. In addition, certain of our solutions are paid for by our customers on a transactional basis, recurring and non-recurring. For example, we have solutions that allow our customers to access property-specific rating and underwriting information to price a policy on a commercial building, or compare a P&C insurance or a workers' compensation claim with information in our databases, or use our repair cost estimation solutions on a case-by-case basis. For the years ended December 31, 2021 and 2020, approximately 19% and 18%, respectively, of our consolidated revenues were derived from providing transactional and advisory/consulting solutions.

Principal Operating Costs and Expenses

Personnel expenses are a major component of both our cost of revenues and selling, general and administrative expenses. Personnel expenses, which represented approximately 55% and 59% of ourtotal operating expenses for each of the years ended December 31, 2021 and 2020, respectively, include salaries, benefits, incentive compensation, equity compensation costs, sales commissions, employment taxes, recruiting costs, and outsourced temporary agency costs.

We assign personnel expenses between two categories, cost of revenues and selling, general and administrative costs, based on the actual costs associated with each employee. We categorize employees who maintain our solutions as cost of revenues, and all other personnel, including executive managers, salespeople, marketing, business development, finance, legal, human resources, and administrative services, as selling, general and administrative expenses. A significant portion of our other operating costs, such as facilities and communications, are either captured within cost of revenues or selling, general and administrative expense based on the nature of the work being performed.

While we expect to grow our headcount over time to take advantage of our market opportunities, we believe that the economies of scale in our operating model will allow us to grow our personnel expenses at a lower rate than revenues. Historically, our EBITDA margin has improved because we have been able to increase revenues without a proportionate corresponding increase in expenses. However, part of our corporate strategy is to invest in new solutions and new businesses, which may offset margin expansion.

Cost of Revenues. Our cost of revenues consists primarily of personnel expenses. Cost of revenues also includes the expenses associated with the acquisition and verification of data, the maintenance of our existing solutions, and the development and enhancement of our next-generation solutions. Our cost of revenues excludes depreciation and amortization.

Selling, General and Administrative Expense. Our selling, general and administrative expense also consists primarily of personnel costs. A portion of the other operating costs such as facilities, insurance, and communications are allocated to selling, general and administrative costs based on the nature of the work being performed by the employee. Our selling, general and administrative expenses excludes depreciation and amortization.

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Trends Affecting Our Business

We serve customers in three primary vertical markets: P&C insurance, energy and specialized markets, and financial services. The industry trends in each of those markets can affect our business.

A significant change in P&C insurers’ profitability could affect the demand for our solutions. For insurers, the keys to profitability include increasing investment income, premium growth and disciplined underwriting of risks. Investment income remains under pressure as a result of low interest rates. Growth in P&C insurers’ direct written premiums is cyclical, with total industry premium growth receding from a peak of 14.8% in 2002 to a trough of negative 3.1% in 2009 and subsequently recovering to 4.4% in 2012, slowing down to 3.7% in 2015 and 2016, accelerating to 4.7% in 2017 and 5.5% in 2018, then again slowing down to 5.1% in 2019. In recent years, we have signed multi-year contracts with certain customers, and pricing is fixed at the beginning of each multi-year period; pricing for other customers is still linked to prior years' premiums. Direct premium growth slowed to 2.3% in 2020 due to COVID-19 pandemic, and premiums for personal automobile insurance actually declined. Based on the most recent results available, direct premium growth recovered in 2021, despite continuing disruptions and uncertainties associated with the COVID-19 pandemic. In 2020 and 2021, insurers were also challenged by heightened catastrophic losses associated with a record number of events ISO's Property Claims Service classified as catastrophes in each of the years. The catastrophes of 2020 included the hurricane Laura and the Midwest derecho, both in August 2020, and multiple wildfires in the Western states, while the most notable events of 2021 included the winter storm in February that left much of Texas without power and hurricane Ida in August. Both Ida and Laura are among the strongest hurricanes to ever make landfall in the United States. These events illustrate the need for broader coverages, such as flood to meet the changing needs of communities. We continue to provide the necessary resources to meet insurer needs. In the life insurance market, carriers are looking to modernize and digitize their core platforms, as well as offer streamlined underwriting decision-making process to expand the number of policies which can be offered more rapidly, and without cumbersome medical tests. Our no-code modular technology stack and advanced analytics (such as using electronic health records to model mortality and detecting of tobacco use through voice analysis) enable the digital transformation of our customers' core infrastructure and automate their decision-making processes across the policy lifecycle.

Trends in catastrophe and non-catastrophe losses (such as from weather, climate, cyber, casualty, terrorism, pandemics, and tsunamis) can have an effect on our customers’ profitability, and therefore on their appetite for buying analytics to help them manage their risks. Any increase or decrease in frequency or severity of these events over time could lead to an increased or decreased demand for our catastrophe modeling, catastrophe loss information, and repair cost solutions. Likewise, any structural changes in the reinsurance and related brokerage industry from alternative capital or newer technologies could affect demand for our products. We also have a portion of our revenue related to the number of claims processed due to losses, which can be impacted by seasonal storm activity. The need by our customers to fight insurance fraud - both in claims and at policy inception - could lead to increased demand for our underwriting and claims solutions.

Trends in the energy, chemicals, metals and mining sectors, and activity in financial markets can influence our revenues. In 2021, global economic growth, commodity flows and prices recovered strongly after being impacted negatively by the COVID-19 pandemic in 2020. Commodity markets performed impressively, with Brent oil averaging $71 dollars per barrel in 2021, compared to an average of $42 dollars per barrel in 2020. Gas prices also increased from their 2020 levels, as global energy demand recovered. Investment in the natural resources increased in 2021, following a sharp decline in 2020. We expect investment to continue to increase this year as natural resources companies reinvest the higher cashflows generated from their operations as a result of the significantly higher commodity prices seen in 2021. However, natural resources companies are also expected to demonstrate capital discipline, using higher commodity prices as an opportunity to build stronger balance sheets and to return capital to shareholders. The energy transition continues to gather pace. Governments and companies in all areas of our customer base globally are setting targets for the reduction in CO2 emissions and are adjusting their investment plans to take into account expected changes in energy demand, regulation and consumer behavior. The transition presents both a threat and an opportunity for the sector and our revenues. Fossil fuels will meet much of global demand for some decades, but investments in zero carbon energy (renewables and emerging technologies such as electric vehicles and energy storage) and the associated infrastructure will grow in importance. Electrification of economies will drive demand for base metals, some bulk commodities and battery raw materials. Climate change and decarbonization are rising up the agenda, and policy on environmental and social governance is intensifying. Attracting the capital needed to meet future energy demand is one of the industry’s challenges and data, analysis and insight will help our customers achieve this.

Trends in the banking and retail sectors, as well as material external factors can influence revenues in our Financial Services segment in many ways. COVID-19 has had a significant impact on our one-time consultative revenue streams over the past year as our clients sought to temporarily reduce external expenditure while they focused on critical customer needs. Additionally, governmental intervention and actions to support indebted consumers by extending credit terms has created a lag in bankruptcy and similar filings which have adversely impacted our credit analytics business, but we do believe this is a temporary impact which will reverse over time. As retailers saw reduced consumer spend due to COVID-19 however, this created an opportunity for our spend analytics businesses to work more closely with retailers to help them understand and target emerging spend as the economies in our markets re-emerged. Our sector specific trends have remained broadly consistent with fraud and similar financial crimes continuing to impact our customers in ways ranging from regulatory risk and credit loss for financial institutions, to counterfeit loss and inventory shrinkage for merchants, with risks being elevated at times of financial stress. This can strengthen demand for our credit risk and fraud solutions ranging from enhanced brand protection solutions for retailers, through to enhanced artificial-intelligence led models to identify cross bank and cross-border fraudulent transactions. We continue to see increasing competition for traditional retail banks and consumer lenders from financial technology companies and other on-line lending new entrants, which provides opportunities for us to support many existing and potential clients, with our enhanced digital solutions and analytical tools providing new ways for us to communicate and engage with our clients today in our remote environment, and in the future.

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Description of Acquisitions

We acquired sixteen businesses since January 1, 2019. These acquisitions affect the comparability of our consolidated results of operations between periods. See a description of our 2021 acquisitions below and Note 10. Acquisitions to our consolidated financial statements included in this annual report on Form 10-K for further discussions.

2021 Acquisitions

On December 23, 2021, we acquired approximately 96.7 percent of the stock of ACTINEO GmbH ("ACTINEO") with an option to acquire the remaining shares at a future date, for a net cash purchase price of $148.9 million. ACTINEO offers a comprehensive portfolio of services, technology and data solutions to support the entire bodily injury settlement process. With this acquisition, we add ACTINEO's established claims management solutions to our leading data analytics and insurance ecosystem, providing customers with digitalization and medical expertise solutions throughout the entire claims process. ACTINEO is part of the claims vertical within our Insurance segment.

On November 2, 2021, we acquired 100 percent of the stock of Data Driven Safety, LLC ("Data Driven Safety") for a net cash purchase price of $93.5 million, of which $2.0 million represents indemnity escrows. Data Driven Safety, a leading public record data aggregation firm that specializes in driver risk assessment in the U.S., has become a part of the underwriting & rating category within our Insurance segment. We believe that Data Driven Safety will expand our robust auto insurance analytics, providing insurers with information to further refine underwriting, improve the customer experience and promote public safety.

On September 1, 2021, we acquired 100 percent of the stock of Ignite Software Systems Limited ("Ignite") for a net cash purchase price of $13.8 million. Ignite, a provider of insurance policy administration systems to brokers, managing general agents, and insurers, has become a part of the underwriting & rating category within our Insurance segment. We believe that Ignite's client focus and deep domain knowledge will fit into our business model providing new and existing clients with access to a broader expert advice and service.

On June 17, 2021, we acquired 100 percent of the stock of Roskill Holdings Limited ("Roskill") for a net cash purchase price of $22.1 million, of which $4.8 million represents indemnity escrows. Roskill, a provider of metals and materials supply chain intelligence, has become part of our Energy and Specialized Markets segment. Roskill’s capabilities reinforce our ability to provide comprehensive analysis across the energy, and metals and mining value chain while adding analysis, data, and insight on battery raw materials metals.

On March 2, 2021, we acquired a 51.0 percent ownership in Whitespace Software Limited ("Whitespace") for a net cash purchase price of $16.8 million. The remaining 49.0 percent ownership interest in Whitespace will be acquired by us, in three equal proportions over the next three years, at a purchase price determined based upon a fixed revenue multiple and adjusted for any free cash flow shortfall. Whitespace, a provider of digital placing technology to the (re)insurance market, has become part of the underwriting & rating category within our Insurance segment. We expect our investment in Whitespace to enable a seamless real-time quote-to-bind electronic placing and global distribution solution, with straight-through submissions for our customers.

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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Consolidated Results of Continuing Operations

Revenues

Revenues were $2,998.6 million for the year ended December 31, 2021 compared to $2,784.6 million for the year ended December 31, 2020, an increase of $214.0 million or 7.7%. Our recent acquisitions (Franco Signor, Jornaya, Whitespace, Ignite Software Systems, Data Driven Safety within the underwriting & rating category of the Insurance segment, ACTINEO within the claims category of the Insurance segment, and Roskill within the Energy and Specialized Markets segment) and dispositions (the aerial imagery sourcing group and the compliance background screening business within the claims category of the Insurance segment and the data warehouse business within the Financial Services segment) contributed net revenues of $53.7 million. The remaining growth in consolidated revenues of $160.3 million or 5.8% is related to the following: revenues within our Insurance segment increased $146.0 million or 7.3%; revenues within our Energy and Specialized Markets segment increased $26.8 million or 4.3%; offset by revenues within our Financial Services segment which decreased $12.5 million or 8.1%. Refer to the Results of Operations by Segment within this section for more information regarding our revenues.

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Cost of Revenues

Cost of revenues was $1,057.8 million for the year ended December 31, 2021 compared to $993.9 million for the year ended December 31, 2020, an increase of $63.9 million or 6.4%. Our recent acquisitions and dispositions accounted for a net increase of $14.9 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining increase in cost of revenues of $49.0 million or 4.9% was primarily due to increases in salaries and employee benefits of $24.3 million, information technology expenses of $18.9 million, professional consulting costs of $8.3 million, and other operating costs of $0.7 million. The increase in salaries and employee benefits was primarily due to a pause in our employee hiring activities in the prior year's period as a result of COVID-19, which have gradually resumed in the second half of 2020 through 2021. These increases were partially offset by decreases in travel expenses of $3.1 million and data costs of $0.1 million. The decrease in travel expense primarily resulted from travel restrictions in connection with the COVID-19 pandemic.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SGA") were $422.7 million for the year ended December 31, 2021 compared to $413.9 million for the year ended December 31, 2020, an increase of $8.8 million or 2.1%. Our recent acquisitions and dispositions accounted for an increase of $18.2 million in SGA primarily related to salaries and employee benefits. Our acquisition-related costs (earn-outs) accounted for a decrease of $2.0 million (See Note 10. Acquisitions to our consolidated financial statements included in this annual report on Form 10-K). The remaining SGA decrease of $7.4 million or 1.8% was primarily due to decreases in professional consulting costs of $36.4 million and travel expenses of $2.0 million. The decrease in professional consulting costs is primarily due to the release of the previously established Xactware Solutions Patent Litigation's ("EVT Litigation Reserve") reserve once the final payment was made in the fourth quarter of 2021 (the original accrual for this matter was recorded as part of SGA). See Note 21. Commitments and Contingencies. The decrease in travel expense primarily resulted from travel restrictions in connection with the COVID-19 pandemic. These decreases were partially offset by increases of salaries and employee benefits of $27.3 million, information technology expenses of $3.3 million, and other operating costs of $0.4 million. The increase in salaries and employee benefits was primarily due to a pause in our employee hiring activities in the first half of the prior year as a result of COVID-19, which have gradually resumed in the second half of 2020 through 2021.

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Depreciation and Amortization of Fixed Assets

Depreciation and amortization of fixed assets was $206.9 million for the year ended December 31, 2021 compared to $192.2 million for the year ended December 31, 2020, an increase of $14.7 million or 7.6%. The increase was primarily driven by assets placed in service of $14.3 million to support data capacity expansion and revenue growth and due to recent acquisitions of $0.5 million. These increases were partially offset by our recent dispositions of $0.1 million. 

Amortization of Intangible Assets

Amortization of intangible assets was $176.7 million for the year ended December 31, 2021 compared to $165.9 million for the year ended December 31, 2020, an increase of $10.8 million or 6.5%. This was primarily driven by the additional amortization of intangible assets incurred in connection with our recent acquisitions.

  Other Operating (Loss) Income

Other operating (loss) income was a loss of $134.0 million for the year ended December 31, 2021 compared to a gain of $19.4 million for the year ended December 31, 2020. This decrease of $153.4 million was primarily related to the long-lived asset impairment loss associated with our Financial Services segment recorded in the current period and gains associated with the dispositions of our compliance background screening business and data warehouse business that were recorded in 2020. 

Investment Income (Loss) and Others, Net

Investment income (loss) and others, net was a gain of $1.9 million for the year ended December 31, 2021 compared to a loss of $2.4 million for the year ended December 31, 2020. The increase was primarily due to a gain on foreign currencies. 

Interest Expense

Interest expense was $127.0 million for the year ended December 31, 2021 compared to $138.2 million for the year ended December 31, 2020, a decrease of $11.2 million or 8.2%. We repaid our 5.800% senior notes in May 2021, which contributed to a lower interest expense.

Provision for Income Taxes

The provision for income taxes was $209.1 million for the year ended December 31, 2021 compared to $184.8 million for the year ended December 31, 2020, an increase of $24.3 million or 13.2%. The effective tax rate was 23.9% for the year ended December 31, 2021 compared to 20.6% for the year ended December 31, 2020. The increase in the effective tax rate in 2021 compared to 2020 was primarily due to the deferred tax impact of the tax rate increase in the United Kingdom that was enacted and recorded in 2021, the impact of the current year Global Intangible Low-taxed income inclusion ("GILTI"), and the impact of higher tax benefits from equity compensation in the prior period versus the current period.

Net Income Margin

The net income margin for our consolidated results was 22.2% for the year ended December 31, 2021 compared to 25.6% for each of the year ended December 31, 2020. The decrease in net income margin was primarily related to the long-lived asset impairment loss associated with our Financial Services segment.

EBITDA Margin

The EBITDA margin for our consolidated results was 46.2% for the year ended December 31, 2021 compared to 50.1% for the year ended December 31, 2020. The decrease in EBITDA margin was primarily related to the long-lived asset impairment loss associated with our Financial Services segment, partially offset by the release of the previously established EVT Litigation Reserve once the final payment was made in the fourth quarter of 2021.

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Results of Continuing Operations by Segment

Insurance

Revenues

Revenues were $2,206.9 million for the year ended December 31, 2021 compared to $2,008.7 million for the year ended December 31, 2020, an increase of $198.2 million or 9.9%. Our underwriting & rating revenues increased $142.1 million or 10.1%. Our claims revenues increased $56.1 million or 9.4%.

[[GREPCENT_TABLE]]
[["","","2021","","","2020","","","Percentage change","","","Percentage change excluding recent acquisitions, businesses held for sale and disposition"],["","","(in millions)"],["Underwriting & rating","","$","1,555.1","","","$","1,413.0","","","","10.1","%","","","7.2","%"],["Claims","","","651.8","","","","595.7","","","","9.4","%","","","7.5","%"],["Total Insurance","","$","2,206.9","","","$","2,008.7","","","","9.9","%","","","7.3","%"]]
[[/GREPCENT_TABLE]]

Our recent acquisitions (Franco Signor, Jornaya, Whitespace, Ignite Software Systems, and Data Driven Safety within the underwriting & rating category and ACTINEO within the claims category) and dispositions (the aerial imagery sourcing group and the compliance background screening business within the claims category) contributed net revenues of $52.2 million and the remaining Insurance revenues increased $146.0 million or 7.3%. Our underwriting & rating revenues increased $101.7 million or 7.2% primarily due to an annual increase in prices derived from continued enhancements to the content of the solutions within our industry-standard insurance programs as well as selling expanded solutions to existing customers within commercial and personal lines. In addition, catastrophe modeling services contributed to the growth. Our claims revenues increased $44.3 million or 7.5%, primarily due to growth in our repair cost estimating solutions revenue and claims analytics revenue related to annual price as well as volume increases.

Cost of Revenues

Cost of revenues for our Insurance segment was $704.4 million for the year ended December 31, 2021 compared to $644.3 million for the year ended December 31, 2020, an increase of $60.1 million or 9.3%. Our recent acquisitions and dispositions represented a net increase of $14.7 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining increase in cost of revenues of $45.4 million or 7.1% was primarily due to increases in salaries and employee benefits of $24.3 million, information technology expenses of $16.4 million, professional consulting costs of $2.9 million, data costs of $2.0 million, and other operating costs of $0.9 million. The increase in salaries and employee benefits was primarily due to more robust employee hiring activities as stated above. These increases were partially offset by a decrease in travel expenses of $1.1 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic. 

Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Insurance segment were $239.1 million for the year ended December 31, 2021 compared to $248.1 million for the year ended December 31, 2020, a decrease of $9.0 million or 3.6%. Our recent acquisitions and dispositions accounted for an increase of $15.2 million primarily related to salaries and employee benefits. Our acquisition-related costs (earn-outs) accounted for a decrease of $2.0 million. The remaining decrease in SGA of $22.2 million or 9.1% was primarily due to decreases in professional consulting costs of $42.3 million, travel expenses of $1.3 million, and other operating costs of $0.7 million. The decrease in professional consulting fees was primarily due to the release of the previously established EVT Litigation Reserve once the final payment was made in the fourth quarter of 2021 (the original accrual for this matter was recorded as part of SGA). These decreases were partially offset by increases in salaries and employee benefits of $19.5 million and information technology expenses of $2.6 million.

Other Operating Income

Other operating income was $0.0 for the year ended December 31, 2021 compared to $15.9 million for the year ended December 31, 2020. This decrease was primarily related to the gain associated with the disposition of our compliance background screening business that was recorded in 2020.

Investment Income (Loss) and Others, Net

Investment income (loss) and others, net was a gain of $2.3 million for the year ended December 31, 2021 compared to a loss of $1.2 million for the year ended December 31, 2020. This change was primarily due to a gain on foreign currencies. 

EBITDA Margin

EBITDA for our Insurance segment was $1,265.7 million for the year ended December 31, 2021 compared to $1,131.0 million for the year ended December 31, 2020. The EBITDA margin for our Insurance segment was 57.4% for the year ended December 31, 2021 compared to 56.3% for the year ended December 31, 2020. The increase in EBITDA margin was primarily due to the release of the previously established EVT Litigation Reserve once the final payment was made in the fourth quarter of 2021, a reduction in travel expenses as a result of COVID-19, and cost discipline.

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Energy and Specialized Markets

Revenues

Revenues for our Energy and Specialized Markets segment were $648.9 million for the year ended December 31, 2021 compared to $619.2 million for the year ended December 31, 2020, an increase of $29.7 million or 4.8%. Our recent acquisition within this segment, Roskill, contributed revenues of $2.9 million. The remaining increase in revenue of $26.8 million or 4.3% was primarily due to increases in our core research subscription solutions, and environmental health and safety service subscription revenues.

Cost of Revenues

Cost of revenues for our Energy and Specialized Markets segment was $263.0 million for the year ended December 31, 2021 compared to $256.8 million for the year ended December 31, 2020, an increase of $6.2 million or 2.4%. Our recent acquisition accounted for an increase of $0.9 million in cost of revenues, which was primarily related to salaries and employee benefits. The remaining cost of revenues increase of $5.3 million or 2.1% was primarily due to increases in professional consulting fees of $6.5 million, information technology expenses of $2.3 million, and salaries and employee benefits of $0.7 million. These increases were partially offset by decreases in travel expenses of $1.3 million,and data costs of $0.6 million, and other operating costs of $2.3 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Energy and Specialized Markets segment were $154.4 million for the year ended December 31, 2021 compared to $146.1 million for the year ended December 31, 2020, an increase of $8.3 million or 5.6%. Our recent acquisition accounted for an increase of $3.7 million, primarily related to salaries and employee benefits. The remaining SGA increase of $4.6 million or 3.1% was primarily due to increases in salaries and employee benefits of $2.6 million, professional consulting costs of $2.1 million, information technology expenses of $0.2 million, and other operating costs of 0.3 million. These increases were partially offset by a decrease in travel expenses of $0.6 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic.

Investment Loss and Others, Net

Investment loss and others, net was a loss of $0.2 million for the year ended December 31, 2021 compared to a loss of $1.2 million for the year ended December 31, 2020. 

EBITDA Margin

EBITDA for our Energy and Specialized Markets segment was $231.3 million for the year ended December 31, 2021 compared to $215.1 million for the year ended December 31, 2020. The EBITDA margin for our Energy and Specialized Markets segment was 35.6% for the year ended December 31, 2021 compared to 34.7% for the year ended December 31, 2020. The increase in EBITDA margin was primarily related to cost-discipline, a reduction in travel expenses as a result of COVID-19, and a decrease in acquisition-related costs (earn-outs).

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Financial Services

Revenues

Revenues for our Financial Services segment were $142.8 million for the year ended December 31, 2021 compared to $156.7 million for the year ended December 31, 2020, a decrease of $13.9 million or 8.9%. Our recent disposition of the data warehouse business contributed a decrease in revenues of $1.4 million. The remaining decrease in revenue of $12.5 million or 8.1% was related to projects that did not reoccur and decrease in revenue in connection with the COVID-19 pandemic, which resulted in lower consulting revenue, and lower transactional bankruptcy revenue because of government support and forbearance programs. 

Cost of Revenues

Cost of revenues for our Financial Services segment was $90.4 million for the year ended December 31, 2021 compared to $92.8 million for the year ended December 31, 2020, a decrease of $2.4 million or 2.6%. Our recent disposition of the data warehouse business represented a decrease of $0.7 million, which was primarily related to salaries and employee benefits. The remaining cost of revenues decrease of $1.7 million or 1.9% was primarily due to decreases in data costs of $1.5 million, professional consulting costs of $1.1 million, salaries and employee benefits of $0.7 million, and travel expenses of $0.7 million. The decrease in travel expenses primarily resulted from travel restrictions in connection with the COVID-19 pandemic. These decreases were partially offset by increases in information technology expenses of $0.2 million, and other operating costs of 2.1 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for our Financial Services segment were $29.2 million for the year ended December 31, 2021 compared to $19.7 million for the year ended December 31, 2020, an increase of $9.5 million or 48.6%. Our recent disposition represented a net decrease of $0.7 million. The remaining increase in SGA of $10.2 million or 53.9% was primarily due to increases in salaries and employee benefits of $5.2 million, professional consulting costs of $3.8 million, information technology expenses of $0.5 million, and other operating costs of 0.8 million. These increases were partially offset by a decrease in travel expenses of $0.1 million.  

Other Operating (Loss) Income

Other operating (loss) income was a loss of $134.0 million for the year ended December 31, 2021 compared to a gain of $3.5 million for the year ended December 31, 2020. The decrease of $137.5 million was primarily due a long-lived asset impairment loss that was recorded in the current period and a gain generated from the sale of our data warehouse business that was recorded in 2020.

Investment Loss and Others, Net

Investment loss and others, net was a loss of $0.2 million for the year ended December 31, 2021 compared to $0.0 for the year ended December 31, 2020. The variance was primarily due to a loss on foreign currencies. 

EBITDA Margin

EBITDA for our Financial Services segment was a loss of $111.0 million for the year ended December 31, 2021 compared to $47.7 million for the year ended December 31, 2020. The EBITDA margin for our Financial Services segment was -77.7% for the year ended December 31, 2021 compared to 30.4% for the year ended December 31, 2020. The decrease in EBITDA margin is primarily related to the long-lived asset impairment loss, decrease in revenue, and the gain generated from the sale of our data warehouse business that was recorded in 2020. 

See Note 19. of our consolidated financial statements included in this annual report on Form 10-K.

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Liquidity and Capital Resources

As of December 31, 2021 and 2020, we had cash and cash equivalents and available-for-sale securities of $285.3 million and $222.9 million, respectively. Subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year. Subscriptions are automatically renewed at the beginning of each calendar year. We have historically generated significant cash flows from operations. As a result of this factor, as well as the availability of funds under our syndicated revolving credit facility, we believe we will have sufficient cash to meet our working capital, human capital and capital expenditure needs, and to fuel our future growth plans.

We have historically managed the business with a working capital deficit due to the fact that, as described above, we offer our solutions and services primarily through annual subscriptions or long-term contracts, which are generally prepaid quarterly or annually in advance of the services being rendered. When cash is received for prepayment of invoices, we record an asset (cash and cash equivalents) on our balance sheet with the offset recorded as a current liability (deferred revenues). This current liability is deferred revenue that does not require a direct cash outflow since our customers have prepaid and are obligated to purchase the services. In most businesses, growth in revenue typically leads to an increase in the accounts receivable balance causing a use of cash as a company grows. Unlike these businesses, our cash position is favorably affected by revenue growth, which results in a source of cash due to our customers prepaying for most of our services.

Our consolidated capital expenditures as a percentage of consolidated revenues for the years ended December 31, 2021 and 2020, were 9.0% and 8.9%, respectively. Expenditures related to developing and enhancing our solutions are predominately related to internal-use software and are capitalized in accordance with ASC 350-40, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use.” We also capitalize amounts in accordance with ASC 985-20, “Software to be Sold, Leased or Otherwise Marketed.”

We have historically used a portion of our cash for repurchases of our common stock from our stockholders. For the years ended December 31, 2021, 2020, and 2019, we repurchased $475.0 million, $348.8 million and $300.0 million, respectively, of our common stock. For the years ended December 31, 2021, 2020, and 2019, we also paid dividends of $188.2 million, $175.8 million, and $163.5 million, respectively.

Financing and Financing Capacity

We had total debt, excluding finance lease obligations, unamortized discounts and premium, and debt issuance costs of $3,310.0 million and $3,200.0 million at December 31, 2021 and 2020, respectively. The debt at December 31, 2021 primarily consists of senior notes issued in 2020, 2019, 2015, 2012 and 2011 and borrowings outstanding under our committed senior unsecured Syndicated Revolving Credit Facility ("Credit Facility"), described below. Interest on the senior notes is payable semi-annually each year. The unamortized discount and debt issuance costs were recorded as "Long-term debt" in the accompanying consolidated balance sheets, and will be amortized to "Interest expense" in the accompanying consolidated statements of operations within this Form 10-K over the life of the respective senior note. The indenture governing the senior notes restricts our ability to, among other things, create certain liens, enter into sale/leaseback transactions and consolidate with, sell, lease, convey, or otherwise transfer all or substantially all of our assets, or merge with or into, any other person or entity. As of December 31, 2021, we had senior notes with an aggregate principal amount of $2,700.0 million outstanding, and we were in compliance with our financial and non-financial debt covenants.

We have a Credit Facility with a borrowing capacity of $1,000.0 million with Bank of America N.A., HSBC Bank USA, N.A., JP Morgan Chase Bank, N.A., Wells Fargo Bank, National Association, Citibank, N.A., Credit Suisse AG, Cayman Islands Branch, Morgan Stanley Bank, N.A., First Commercial Bank, Ltd., Los Angeles Branch, TD Bank, N.A., and the Northern Trust Company. Interest on borrowings under the Credit Facility is payable at an interest rate of LIBOR plus 1.0% to 1.625%, depending upon the public debt rating. A commitment fee on any unused balance is payable periodically and may range from 8.0 to 20.0 basis points based upon the public debt rating. The Credit Facility also contains certain financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants place restrictions on mergers, asset sales, sale/leaseback transactions, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, we have a consolidated funded debt leverage ratio of less than 3.5 to 1.0. At our election, the maximum consolidated funded debt leverage ratio could be permitted to increase one time each to 4.0 to 1.0 and 4.25 to 1.0. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividends and the share repurchase program (the "Repurchase Program"). As of December 31, 2021, we were in compliance with all financial and other debt covenants under the Credit Facility. As of December 31, 2021 and 2020, the available capacity under the Credit Facility was $384.9 million and $944.6 million, net of the letters of credit of $5.1 million and $5.4 million, respectively. Subsequent to December 31, 2021 we have made repayments of $130.0 million under the Credit Facility resulting in $480.0 million in borrowings under the Revolving Credit Facility.

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Cash Flow

The following table summarizes our cash flow data for the years ended December 31:

[[GREPCENT_TABLE]]
[["","","2021","","","2020"],["","","(in millions)"],["Net cash provided by operating activities","","$","1,155.7","","","$","1,068.2"],["Net cash used in investing activities","","$","(592.0",")","","$","(595.8",")"],["Net cash used in financing activities","","$","(498.9",")","","$","(445.2",")"]]
[[/GREPCENT_TABLE]]

Operating Activities

Net cash provided by operating activities was $1,155.7 million for the year ended December 31, 2021 compared to $1,068.2 million for the year ended December 31, 2020, an increase of $87.5 million or 8.2%. The increase was primarily due to an increase in customer collections, partially offset by the prior year deferral of certain employer payroll taxes resulting from the CARES Act and a payment to settle the EVT litigation. 

Net cash provided by operating activities was $1,068.2 million for the year ended December 31, 2020 compared to $956.3 million for the year ended December 31, 2019, an increase of $111.9 million or 11.7%. The increase was primarily due to an increase in collections, the deferral of certain employer payroll taxes resulting from the CARES Act and a reduction in travel payments as a result of COVID-19. 

Investing Activities

Net cash used in investing activities of $592.0 million for the year ended December 31, 2021 was primarily related to acquisitions of $299.0 million including escrow funding, capital expenditures of $268.4 million, and investments in nonpublic companies of $23.6 million.

Net cash used in investing activities of $595.8 million for the year ended December 31, 2020 was primarily related to acquisitions of $285.1 million including escrow funding and capital expenditures of $246.8 million.

Financing Activities

Net cash used in financing activities of $498.9 million for the year ended December 31, 2021 was driven by repurchases of common stock of $475.0 million, repayment of our $450.0 million 5.800% senior notes on May 3, 2021, and dividend payments of $188.2 million, partially offset by proceeds, net of repayments, from our Credit Facility of $560.0 million and proceeds from stock options exercised of $84.3 million.

Net cash used in financing activities of $445.2 million for the year ended December 31, 2020 was driven by net debt repayments on our Credit Facility of $445.0 million, repurchases of common stock of $348.8 million, and dividend payments of $175.8 million, partially offset by proceeds from the issuance of long-term debt, inclusive of original issue premium and net of original discount, of $494.8 million, and proceeds from stock options exercised of $88.0 million.

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Contractual Obligations

The following table summarizes our contractual obligations at December 31, 2021 and the future periods in which such obligations are expected to be settled in cash:

[[GREPCENT_TABLE]]
[["","","Payments Due by Period"],["","","Total","","","Less than 1 year","","","2-3 years","","","4-5 years","","","More than 5 years"],["","","(in millions)"],["Contractual obligations"],["Long-term debt, current portion of long-term debt and interest","","$","4,591.6","","","$","1,068.9","","","$","196.3","","","$","1,040.7","","","$","2,285.7"],["Operating leases","","","351.9","","","","51.5","","","","88.9","","","","65.7","","","","145.8"],["Pension and postretirement plans (1)","","","14.5","","","","2.3","","","","3.3","","","","2.8","","","","6.1"],["Finance lease obligations","","","14.8","","","","13.0","","","","1.7","","","","0.1","","","","\u2014"],["Total (2)","","$","4,972.8","","","$","1,135.7","","","$","290.2","","","$","1,109.3","","","$","2,437.6"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","Our funding policy is to contribute at least equal to the minimum legal funding requirement."],["","(2)","Unrecognized tax benefits of approximately $3.4 million have been recorded as liabilities in accordance with ASC 740, which have been omitted from the table above, and we are uncertain as to if or when such amounts may be settled, with the exception of those amounts subject to a statute of limitation. Related to the unrecognized tax benefits, we also have recorded a liability for potential penalties and interest of $0.5 million."]]
[[/GREPCENT_TABLE]]

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require management to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, goodwill and intangible assets, pension and other postretirement benefits, stock-based compensation, and income taxes. Actual results may differ from these assumptions or conditions.

Revenue Recognition

We recognize revenue based on the transfer of promised goods or services to customers for the amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recognized in a five-step model: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; and 5) recognize revenue when or as the company satisfies a performance obligation. Revenues for hosted subscription services are recognized ratably over the subscription term. Revenues from certain discrete project based advisory/consulting services are recognized over time by measuring the progress toward complete satisfaction of the performance obligation, based on the input method of consulting hours worked; this aligns with the results achieved and value transferred to the customer. Revenues from transactional solutions are recognized as the solutions are delivered or services performed at point in time.

We invoice our customers in annual, quarterly, or monthly installments. Amounts billed and collected in advance are recorded as deferred revenues on the balance sheet and are recognized as the services are performed and revenue recognition criteria are met.

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Stock-Based Compensation

Stock-based compensation cost, including stock options, restricted stock, and performance share units ("PSUs"), is measured at the grant date, based on the fair value of the awards granted, and is recognized as expense over the requisite service period. The fair value of stock options is measured using a Black-Scholes option-pricing model, which requires the use of several estimates, including expected term, expected risk-free interest rate, expected volatility, and expected dividend yield. The fair value of the restricted stock is determined using the closing price of our common stock on the grant date. The fair value of PSUs is determined on the grant date using the Monte Carlo Simulation model.

Option grants and restricted stock awards are generally expensed ratably over the four-year vesting period. PSUs are generally expensed ratably over the three-year vesting period. We follow the substantive vesting period approach for awards granted after January 1, 2005, which requires that stock-based compensation expense be recognized over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service.

We estimate expected forfeitures of equity awards at the date of grant and recognize compensation expense only for those awards expected to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate.

Goodwill and Intangibles

Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have definite lives are amortized over their useful lives. Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of June 30, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable, using the guidance and criteria described in the accounting standard for Goodwill and Other Intangible Assets. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value.

As of December 31, 2021, we had goodwill of $4,331.2 million, which represents 55.5% of our total assets. During 2021, we performed an impairment test as of June 30, 2021 and confirmed that no impairment charge was necessary as the fair value of each reporting unit exceeded its carrying value. There are many assumptions and estimates used that directly impact the results of impairment testing, including an estimate of future expected revenues, EBITDA, EBITDA margins and cash flows, useful lives and discount rates, and an estimate of value using multiples derived from the stock prices of publicly traded guideline companies applied to such expected cash flows and market approaches in order to estimate fair value. We have the ability to influence the outcome and ultimate results based on the assumptions and estimates we choose for determining the fair value of our reporting units. To mitigate undue influence, we set criteria and benchmarks that are reviewed and approved by various levels of management and reviewed by other independent parties. The determination of whether or not goodwill or indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions and estimates underlying the approach used to determine the value of our reporting units. Changes in our strategy or market conditions could significantly impact these judgments and require an impairment to be recorded to intangible assets and goodwill. As of December 31, 2021, we reassessed the recoverability of long-lived assets for our Financial Services reporting unit based upon the weaker than expected operating performance as a result of changing market conditions. These conditions constituted a triggering event, which resulted in a $134.0 million impairment to the long-lived assets in our Financial Services operating segment including $88.2 million to intangible assets and $45.8 million to fixed assets. We based our analysis of the fair value of our long-lived assets on the indication of fair value provided by the offer to purchase such reporting unit, which was approved by our Board of Directors on February 16, 2022. This impairment is included within "Other operating loss (income)" in our accompanying consolidated statement of operations. Please refer to Note 9. Fixed Assets and Note 12. Goodwill and Intangible assets for more information.

We allocate the fair value of the purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. The estimates used in valuing the intangible assets are determined with the assistance of third-party specialists, a discounted cash flow analysis and estimates made by management. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Income Taxes

In projecting future taxable income, we develop assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use to manage the underlying businesses. The calculation of our tax liabilities also involves dealing with uncertainties in the application and evolution of complex tax laws and regulations in other jurisdictions.

We account for uncertain tax positions in accordance with Accounting for Uncertainty in Income Taxes — an interpretation of ASC 740, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this interpretation, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position.

We recognize and adjust our liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

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We estimate unrecognized tax positions of $0.6 million that may be recognized by December 31, 2022, due to expiration of statutes of limitations and resolution of audits with taxing authorities, net of additional uncertain tax positions.

As of December 31, 2021, we have gross federal, state, and foreign income tax net operating loss carryforwards of $154.6 million, which will expire at various dates from 2022 through 2041. Such net operating loss carryforwards expire as follows:

[[GREPCENT_TABLE]]
[["Years Ending","","","(In millions)"],["2022 - 2029","","","$","21.9"],["2030 - 2034","","","","20.5"],["2035 - 2041","","","","112.2"],["Total","","","$","154.6"]]
[[/GREPCENT_TABLE]]

The net deferred income tax liability of $463.9 million consists primarily of timing differences involving amortization.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2(s) to the audited consolidated financial statements included elsewhere in this annual report on Form 10-K. 

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