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Moody's Wins New Client


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The analytics arm of Moody’s Corp (MCO - Analyst Report), Moody’s Analytics or MA, will provide its Solvency II solutions to Gjensidige, an insurance company from Norway. Gjensidige will be using MA’s Solvency II software, RiskIntegrity, which would enable the Norwegian company to better manage its risks and meet regulatory demands.

RiskIntegrity was added recently to Moody’s Analytics Enterprise Risk Solutions Suite. Using RiskIntegrity, Insurance companies can get consolidated solutions such as data management, Solvency Capital Requirement (“SCR”) calculations and regulatory reporting know-how.

The increasing regulatory mandates have compelled insurance companies around the world to look for consolidated risk management solutions. Moody’s Analytics has been offering its solutions to a number of insurance and financial companies, which is well reflected in its encouraging performance in the first nine months of fiscal 2012.

During the aforementioned period, revenue from the Moody’s Analytics segment increased 19% year over year. Within this segment, Enterprise Risk Solutions increased 20% year over year. Moreover, the company expects Moody’s Analytics to grow in the high-teens percentage rate in fiscal 2012, while revenue from Enterprise Risk Solutions is expected to grow in the low-20s percentage rate.

Based on the diversified credit research business model and international growth opportunities, we believe that Moody’s remains a solid franchise in rating debt instruments. Moreover, strength in new domestic debt issuance and improving clarity over the regulatory climate in Europe are positives.

However, increasing headcount and incremental compliance related costs (due to Dodd-Frank adoption) are expected to drive operating expenses higher in the near term. Increasing competition from Dun & Bradstreet Corp (DNB - Analyst Report) and privately-held Fitch Ratings Inc. and Standard & Poor’s Financial Services LLC also remains a headwind going forward.

We remain Neutral on a long-term basis. Currently, Moody’s has a Zacks #2 Rank (Buy).