Verisk Analytics Inc, an insurance services firm partly owned by Warren Buffett's Berkshire Hathaway, soared in its first day of trading on Wednesday, and stirred hopes that the appetite for such offerings is warming.
Shares of Verisk rose nearly 24 percent in their first day of trading on Nasdaq, after the company completed the largest IPO by a U.S. company in 18 months. Verisk shares gained $5.22 to close at $27.22, after touching $28.97 earlier in the trading session.
Buffett's firm was the only major institutional shareholder not to sell any shares.
It immediately gives credibility, because if he (Buffett) owns it you know he has done his work, and it is a positive vote on management, said Paul Lountzis, president of Lountzis Asset Management, which has about $60 million in assets under management and counts Berkshire as its largest holding.
Lountzis said that could bode well for another IPO candidate, life insurance firm Symetra Financial, which is also partly owned by Berkshire Hathaway and filed this week to raise up to $575 million with a public stock sale.
Frank Coyne, chief executive of Verisk, said it was important to the company, as it prepared to launch its IPO, that it had the support of Buffett's Omaha, Nebraska-based Berkshire Hathaway.
From the get go, said Coyne, Buffett indicated he would not sell stock in the IPO.
The Verisk IPO raised $1.9 billion, above the expected proceeds, making it the biggest by a U.S. firm since credit card operator Visa Inc raised $19.6 billion in 2008.
Buffett, the world's second richest man, is often referred to as the Oracle of Omaha for his long-standing track record of high investment returns.
So far, the pipeline of prospective U.S. IPO candidates features few other insurance firms, but the strong reception for Verisk could open the gates to others, potentially helping to end a drought of such offerings.
Besides the Symetra filing this week, American International Group Inc is considering selling stakes through initial public offerings in New York of some of its largest insurance divisions, including life insurer Alico and property-casualty unit, Chartis.
The performance of our IPO could give a sense of confidence to other companies, that if they have good story, the market will support it, Coyne said.
To be sure, Verisk's decades-long track record of serving its niche market, and of steady profitability, helped give its offering a shot in the arm.
It opens the door, but raises the bar, said Francis Gaskins, president of research firm IPODesktop.com. We need to see consistent record of profits -- there are not a lot of companies like Verisk.
Verisk, originally a nonprofit association of property and casualty insurers, has been collecting actuarial and underwriting data related to U.S. property and casualty insurance risks since 1971, under the name Insurance Services Office, later shortened to ISO.
It was the first insurance-services firm to pull off an IPO on a U.S. exchange since Puerto Rican health insurance company Triple-S Management Corp raised $233.5 million in 2007 with a listing on the New York Stock Exchange, according to Thomson Reuters data.
Next on tap could be Symetra Financial Corp, a Bellevue, Washington-based life insurer majority owned by subsidiaries of White Mountains Group and Berkshire, which filed this week to raise as much as $575 million in an initial public offering.
It was not clear from the initial filing whether Berkshire planned to sell or hold onto its Symetra stock.
Symetra had originally filed for the IPO in June 2007, but withdrew the application last October, citing depressed market conditions.
(Reporting by Phil Wahba and Lilla Zuill; Editing by Gerald E. McCormick, Leslie Gevirtz and Bernard Orr)