Good day, everyone, and welcome to the Moody's Corporation 4th Quarter and Full Year 2020 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen only mode. At the request of the company, we will open the call to Shivani Kok, Head of Investor Relations. Please go ahead.
Thank you. Good morning and thank you for joining us to discuss Moody's Q4 2020 results And our outlook for full year 2021. I'm Shivani Kak, Head of Investor Relations. This morning, Moody's released its results for the 4th quarter of 2020 as well as our outlook for full year 2021. The earnings press release and the presentation to accompany this teleconference Also making prepared remarks on the call this morning is Mark Kaye, Moody's Chief Financial Officer.
During this call, we will also be presenting non GAAP or adjusted figures. Please refer to the tables at the end of our earnings press release filed this morning for Conciliation between all adjusted measures referenced during this call and GAAP. I call your attention to the Safe Harbor language, which can be found towards the end of our earnings release. Today's remarks may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the Act, I also direct your attention to the management's discussion and analysis section and the risk factors discussed in our annual report on Form 10 ks for the year ended December 31, 2019, made by the company, which are available on our website and on the SEC's website.
These, together with the Safe Harbor statements, Important factors that could cause actual results to differ materially from those contained in any such forward looking statements. I would also like to point out that members of the media may be on the call this morning in a listen only mode. I will now turn the call over to Robert Falba.
Thanks, Shivani. Good morning and thanks to everybody for joining today's call. I'm going to begin by summarizing Moody's full year 2020 financial results and then I'll provide an update On our strategic direction and following my commentary, Mark Kaye will provide further details in our Q4 2020 results as well as our outlook for 2021. After our prepared remarks, I'll respond to any of your questions. First, on behalf of the entire Moody's management team, I'd like to extend my appreciation to our employees for their steadfast dedication and resilience.
And your remarkable adaptability and commitment to providing our customers with world class service and supporting each other to our continued success. And we're really proud of your accomplishments. Our employees helped Moody's achieve record results in 2020 With revenue growth of 11% and an increase in adjusted diluted EPS of 22%. Against the backdrop of heightened credit market activity, Moody's generated $3,300,000,000 in revenue. That was up 15% from the prior year.
Moody's Analytics also performed well With revenue totaling $2,000,000,000 up 6% and demonstrating the strong value of our solutions during these unprecedented times. For 2021, we project Moody's revenue to increase in the mid single digit percent range. It's driven by our expectation that strong growth from MA And the favorable issuance mix for MIS will offset an expected decline in global debt activity. Moody's 2021 adjusted diluted EPS is forecast to be in the range of $10.30 to $10.70 In 2021 and beyond, We're going to continue to deliver solutions that meet our customers' evolving needs by integrating and leveraging our data and analytic capability and investing in innovation. In addition, recent acquisitions combined with organic investments position us well for the future and reinforce our long term growth opportunity.
Finally, we continue to emphasize our role as responsible stewards of our stockholders' capital. While investing in the business remains our top priority, We'll seek to return approximately $2,000,000,000 to our stockholders this year in the form of dividends and share repurchases. Turning to full year results, Moody's revenue grew an impressive 11% with record revenues from both MIS and MA that increased 15% and 6% respectively. On an organic constant currency basis, MA revenue increased 8%. Moody's adjusted operating income rose 16 percent to $2,700,000,000 and the adjusted operating margin expanded 230 basis points to 49.7 percent.
Adjusted diluted EPS was $10.15 up 22%. Together, we achieved many milestones in 2020. For the first time, revenue at MIS and MA surpassed $3,000,000,000 $2,000,000,000 respectively, with MIS having rated more than $5,500,000,000,000 in global issuance. Also made significant progress in delivering for our stakeholders. During 2020, we made an $11,000,000 contribution to the Moody's Foundation.
That was to support the work to empower people with the financial knowledge, resources and confidence they need to create a better future and to reach their potential for themselves, their communities and the environment. The events of the past year have also underscored the importance And a strong commitment to diversity and inclusion, both internally and externally. In this past year, we launched a number of initiatives to further support diversity and inclusion, Both across our company as well as within the communities we operate, including $2,000,000 in commitments to support equal justice and educational opportunities. On the environmental front, we furthered our sustainability leadership by enhancing our disclosures and establishing clear commitments to environmental sustainability. And as a result, Moody's was recognized by CDP with an A score for addressing climate change.
In 2020, amidst the pandemic, we continue to invest in our business and position the company for ongoing growth. In a range of product launches, we also acquired or invested in companies that complement and enhance our products and solutions and expand our market reach. And in September, we restructured our ESG assets under a single unit. This aligns our efforts across the firm, it strengthens our thought leadership in the ESG space and it better positions us to meet the needs of the market. Turning to MIS, Credit market activity reached record levels in 2020, especially for non financial corporate issuance, which grew over 16% from its previous high in 20 17 and was 34% above its prior 5 year average.
Both investment grade and speculative grade debt benefited from a favorable These shorts fortified their balance sheets and opportunistically refinanced that. However, leverage loan volumes remain modest for most of the year despite an uptick and M and A activity in the Q4. Mark is going to provide some details on MIS's 2021 issuance expectations Glenn discusses our guidance. Now pivoting to MA, we continue to see significant growth recurring revenue, which now comprises over 90% of its total. This has been driven by our strategic focus on building our subscription based business With mission critical products and services that are embedded in the customer workflows that support strong customer retention rates.
And as a result, MA's margin has grown 480 basis points over the past 3 years. This expansion is inclusive of the organic and inorganic investments that we've made in the business. And before I turn it over to Mark, I thought I'd provide some thoughts about the opportunity in front of us. And to do that, I think it's helpful to reflect on our journey as a company over the last 15 years in which we've expanded our capabilities in order to meet the Evolving needs of our customers. Back in 2007, we formed Moody's Analytics.
That was the first step in broadening beyond the rating agency through the development of From 2017 to 2020, we built out some very substantial Data and analytics capabilities, starting with the acquisition of Bureau Van Dijk, one of the world's largest company databases. And then we complemented that by adding depth across People, properties, ESG and climate, just to name a few. And this strategy has positioned us well to serve wide range of risk assessment markets Looking forward, Organizations face a complex interlinked world of risks and stakeholders. COVID has accelerated the digitization of manual processes Across the financial sector and the importance of resilience in scenario planning, we're in a variety of risks Just one on the radar screen years ago, where ESG to climate to cyber, it's a financial crime. They're seeking a more like 360 of risk of who they're connecting to and who they're doing business with.
So due to this, Companies are increasingly incorporating alternative data sets into their core risk processes and they're looking for insights amidst the proliferation of data. There are a variety of stakeholders influencing companies to better identify and manage these risks, includes regulators, customers, Employees, and there's some significant financial and reputational impact for not managing these risks effectively. And with this as a backdrop, Looking for trusted partners, we have the scale, the rigor capabilities to help them make decisions about a wider range As CEO, I'm focused on 3 key areas to meet these market needs and to realize the full potential we have As an integrated risk assessment business, first, our understanding of how our customers' needs are evolving, delivering solutions that can draw on The breadth and depth of our capabilities. 2nd, investing with intent to grow and scale, deepening and extending our presence and expanding risk assessment markets as we've done successfully with Know Your Customer and third, Collaborating, modernizing and innovating with a focus on technology interoperability and data access that allows us to maximize our data analytic and technology capabilities on behalf of our customers. And of course, this is all underpinned by supporting and developing our people so that we have the skills and the engagement needed to drive the business forward.
For the last year, we referred to Moody's as an integrated risk assessment business. Today, we serve a wide range of risk assessment use cases and end markets collectively worth north of 35,000,000,000 Our largest risk assessment business, of course, is the rating agency, serves fixed income issuers and investors. And as Moody's has evolved, We now help customers with everything from customer onboarding, commercial lending, sustainable investing and a number of other areas As you can see around the circle. And what's been a winning formula for us over the years has been combining our data, analytics and insights With our deep domain expertise and technology enablement to provide solutions for customers to identify, We're not just a data company or a software company, but a company that has a unique combination of strengths and assets, as well as a deeply trusted brand. We continue to invest in our people and these datasets and analytics capabilities As they're all increasingly important across a growing number of risk assessment use cases and markets, and that's what we mean by an integrated risk assessment business.
Now earlier this week, we announced our intention to acquire a company called Cortera. We're excited about the valuable assets that they're both in Moody's portfolio, including a world class database on private companies in North America One of the most comprehensive databases of commercial credit information featuring data and analytics on 6,000,000 companies. We put Courterra's data Into our offerings to better serve several markets, including commercial LIM, our onboarding, supply chain management, And by combining the data from Quartera with Moody's proprietary analytics, we look forward to helping our shared customer base make better decisions about their business relationships. Forterra builds on several acquisitions we've made over the past few years, Beginning with the Bureau Van Dijk Business in 'seventeen and followed more recently by RDC and Acquire Media this past year. Together, they form a comprehensive suite of reference and entity data and AI technology to serve a range of use cases, including among other things KYC and compliance.
In 2020, Moody's Analytics generated approximately $525,000,000 in annual sales of these solutions and we expect them to produce high teens growth in 20 The Know Your Customer and compliance use case in particular is generating over $200,000,000 in annual sales and is projected to grow by over 25% in 2021, continuing to be our fastest growing risk assessment market. I'm now going to turn the call over to Mark to provide further details on Moody's 4th quarter results as well as our outlook for 2021.
Thank you, Rob. In the Q4, Moody's total revenue increased 5% with MA and MIS contributing 8% and 2% of growth, respectively. We've adjusted operating income of $531,000,000 was down 5% from the prior year period. Solid revenue growth in the quarter was This resulted in a 4 10 basis points to time in the adjusted operating margin. 4th quarter adjusted diluted EPS was $1.91 down 5%.
For MIS, Q4 2020 revenue benefited from favorable issuance mix across all lines of business, Increasing by 2% against a 3% aggregate decline in global MIS rated issuance, financial institutions was the largest contributor in the 4th quarter, Growing 12%, double the 6% increase in issuance. This was driven by infrequent U. S. Bank issuers taking advantage of the low rate environment. Corporate finance revenue grew 2% despite a 9% decline in issuance.
This was primarily the result of strong contributions from both U. S. Leveraged loans Revenue from public, project and infrastructure finance declined 3% against a 12% decrease in U. S. Public finance activity Admin issues addressed with funding needs earlier in the year to avoid potential election related volatility.
In structured finance Revenue decreased 11% compared to 31% decrease in issuance. This is primarily due to lower CMBS activity Despite signs of improvements in CLO, in the 4th quarter, first time mandates grew 32%. For the full year, we received approximately 700 new mandates. MIS expense growth included non recurring costs Such as severance related to business efficiency initiatives and incentive compensation accruals associated with strong full year performance. Consequently, expense growth outweighed revenue expansion for the quarter, resulting in an adjusted operating margin of 48.3%.
On a full year basis, MIM's adjusted operating margin expanded 170 basis points to 59.7%. Moving to MA, 4th quarter revenue grew 8% or 5% on an organic basis. Continued robust demand for KYC and compliance Customer retention rates in the mid-nineteen percent range and strong sales of research subscriptions and data feeds. In ERS, Low double digit recurring revenue growth driven by strong demand for insurance products was offset by an expected decline And comparable year over year one time software licensing fees and implementation services, resulting in an overall growth rate of 1%. Growth in ERS' subscription products, the acquisition of REC, as well as the divestiture of MAX in 2019, All contributed to a 5 percentage point increase in image recurring revenue, now comprising 91% of its total, up from 86% in the prior year period.
In the 4th quarter, MA's adjusted operating margin increased 280 basis points, Benefiting from lower year over year incentive compensation accruals, for the full year, MA's adjusted operating margin increased 160 basis points, supported by growth in recurring revenue as well as expense efficiency initiatives. Turning now to Moody's full year 2021 guidance. Moody's outlook for 2021 is based on assumptions regarding many geopolitical conditions, macroeconomic and capital market factors. These include, but are not limited to, the impact of the COVID-nineteen pandemic, responses by governments, regulators, businesses and individuals, The outlook also reflects assumptions regarding general economic conditions, the company's own operations and personnel and additional items as detailed in the earnings release. Our full year 2021 guidance is underpinned by the following macro assumptions.
2021 U. S. GDP will rise approximately 4% to 5% And U. S. And euro area GDP will increase in the range of approximately 3.5% to 4.5%.
The U. S. Unemployment rate will Thanks. Finally, the global high yield default rate is expected to decline below 5% by year end. Our guidance assumes foreign currency translation at end of quarter exchange rates.
Specifically, our forecast for 2021 reflects U. S. Exchange rates for the British of $1.37 1 $0.22 for the euro. These assumptions are subject to uncertainty Results for the year could differ materially from our current outlook. In 2021, we project that Moody's revenue will increase in mid single digit percent range, given our Flat revenue outlook for MIS and the expectation of low double digit growth in MA.
Operating expenses are projected to increase in the mid single digit percent range as savings generated from our cost efficiency programs We invested in key strategic initiatives. I'll provide more detail on these shortly. Optics and Moody's adjusted operating margin in 2020 by 230 basis points to 49.7 percent, we are projecting 20 21's margin to remain in the range of 49% to 50 We estimate net interest expense to be in the range of $190,000,000 to $210,000,000 The full year 2021 effective tax rate is anticipated to be between 20% 22%. Diluted EPS and adjusted diluted EPS are forecasted in the range of $9.70 conditions and other ongoing capital allocation. Additionally, today we announced an 11% increase in our quarterly dividend, Bringing the total expected capital return to stockholders in 2021 to approximately $2,000,000,000 For the full list of our guidance, please refer to Table 12 of our earnings release.
For MIS, we estimate that revenue will be approximately flat Year over year, with global rated issuance projected to decline in the high single digit percent range, We forecast that full year investment grade and high yield activity will decline approximately 30% and 5%, respectively. In contrast, we anticipate leverage loan issuance to grow by approximately 10%, supported by increased M and A activity. Structured finance issuance is expected to grow in the 15% to 20% range due to increased asset formation and loan volumes contributing to larger pipelines from the CLO creation. In 2021, we expect 700 to 7.50 With the strongest contribution from leveraged finance activity, 1st time mandates contribute both to the current year's transaction revenue base and to recurring monitoring fees. MIS' adjusted operating margin will remain stable at approximately 60%.
Disciplined cost management is enabling ongoing investment back into the rating agency, enhancing our offerings and delivering greater value to our customers. For MA, we project 2021 revenue to increase in the low double digit percent range, supported by high single digit constant dollar organic growth, as well as recent M and A activity and favorable movement from foreign exchange rates. Robust customer demand for KYC and compliance solutions, Including contributions from the recent Cortera, RDC and acquired media acquisitions support future RD and A revenue growth. This expansion is further reinforced by We anticipate recurring revenue to continue growing at a double digit rate. As we deemphasize one time sales, we expect that transaction based revenue will decline 20% to 30% year over year.
MA's adjusted operating margin is projected to be approximately 30% in 2021. Our outlook assumes continued positive margin expansion of approximately 50 to 100 basis points inclusive of ongoing organic And inorganic investments in the business. Last quarter, we highlighted $80,000,000 to $100,000,000 of cost savings from our management initiatives that we will be reinvesting back into the business in 2021. In addition to the KYC and compliance opportunity, Our focus is on investing to meet our customers' evolving needs in ESG and commercial real estate. We are also strengthening our presence in emerging markets, including China and Latin America.
Furthermore, we continue to invest in our IT infrastructure and product development. Over the long term, these investments will reduce costs, promote interoperability and accelerate decision making. Before turning the call back Over to Rob, I would like to highlight a few key takeaways. Following a record year that validated our strategic direction, We're pleased to provide a robust outlook for 2021. This is driven by high demand for our data analytics and insights and reaffirms our long term growth opportunities.
Our capital allocation priorities remain unchanged and we prioritize opportunity to invest in our business before returning capital to our stockholders in dividends and share repurchases. Finally, we believe that Moody's long term sustainability is best served by meeting the needs of all of our stakeholders. By actively supporting our employees, Customers and community, we are able to demonstrate our commitment to sustainable future and create enduring value for all stockholders. And with that, let me turn the
call back over to Rob. Thanks, Mark. This concludes our prepared remarks, And Mark and I would be pleased to take your questions. Operator?
Thank you. Alex Kramm with UBS. Please go ahead. And we'll hear from Judah Soquel.
Hi. Can you hear me?
Yes. We sure can.
Okay, great. Thank you for taking my questions. The first question I wanted to ask was about margins. Specifically, the margin outlook for 2022, 2021, Thinking about balancing operating leverage from the top line through investments, I appreciate the color that you guys gave In the extra investments that you're making in emerging markets and taking some of the cost savings, generally, you guys have done great with margin And yet here we have a year coming up where margins are going to be a little bit more constrained. So how do you think about that balance Driving margin expansion, easing top line growth that you will have in 2021, especially in M and A, Coupled with the lead to
continued growth, the reinvestment for growth.
Thank you very much for the question. This is Mark here. We are constantly pushing to increase margin while ensuring to your point that we are balancing that against the need to invest in the business To maintain an accelerate top line growth. As we noted in the prepared remarks, there are a number of exciting investment that we've identified for 2021. And we're going to take advantage of those while preserving the margin At approximately 49% to 50% for the year, after having you spoke about this expanded the margin by 230 basis points in 2020.
Can I give a little bit more color in terms of how that's broken down? That might also be helpful. If we think about creation of margin in 2021 through operating leverage, that's probably 50 basis points to 100 basis points and that's going to come from things like Scalable revenue growth, a little bit of a benefit from the reset of our interest compensation accrual. And if I think about Creation of additional margin from savings and efficiency, that's probably between 140 and maybe 180 basis points to the positive. That's going to come from things like our restructuring program, which we can speak about later in the call, increased automation, utilization lower cost protection, procurement efficiencies, real estate efficiencies, etcetera.
And those positive margin creations are going to be offset then by Organic investments that we're going to be making back into the business. And we spoke last quarter about that $80,000,000 to $100,000,000 that we're going to be reinvesting into key strategic areas, which we can talk about Further on the call, if you would like. And then around 50 to 100 basis points from some of the recent M and A acquisitions that we've done. And then of course there's that math element in terms of business mix where MA is full cost to grow faster than MIS in 2021, That's probably a headwind of around 25 basis points. So if you put that all together, you get a sense of how we're managing the portfolio of businesses to ensure continued margin expansion while we're investing for growth in the future.
And we'll hear from Alex Hamill of UBS.
Can you hear me now?
Yes, Alex, we can.
Yes. Okay. I don't know what happened earlier. Anyways, maybe starting off on MIS. I'm sorry if I missed the last question, but can you perhaps attack The delta between your issuance forecast and then also how you get to the flat revenue forecast.
Particularly interested in the recurring revenue given the solid issuance that we had last year And then also, obviously, pricing and mix, any comments that would be helpful as well. Thank you.
Yes, Alex. So maybe let me talk to you a little bit about the 2021 issuance outlook. As I said back in October, we still think issuance is going to be down modestly year over year and we're guiding to And down in the high single digit percent range. And I would say, while we expect some very robust issuance activity to continue, we've got some favorable market conditions. The challenge is that the year over year growth is we've got some very tough comparables after 2 very strong issuance years between last year and the year before.
So our outlook assumes that these Constructed market conditions continue largely for 2021 widespread distribution of a vaccine and improving economic growth. Certainly, we're seeing continued recovery in M and A activity and we're seeing a lot of now sponsor driven activity and sustained central bank support And potentially another round of stimulus and all that I think will be underpinned by a continued low rate environment that's going to be supporting of refinancing. That means we're I think we're going to see growth in some areas like we have a rating and assessment service that M and A activity, leverage finance, various parts of structured finance and so on. So Alex, maybe let me take it by sector and then you can get A sense and you can do your own compare and contrast. But for investment grade, we're looking at something like a 30% decline, Moderating after what we all know was an extraordinary issuance year last year, and in particular, U.
S. Corporate investment grade issuance was up almost 80% in 2020. That should be a very tough comparable. That said, our outlook for 2021 investment grade would still be one of the strongest years on record And we think issuers are going to continue to come to market driven by refinancing and amidst all the, as I said, kind of ongoing low rates, Tight spreads and M and A activity. Leverage finance, we think that high yield bonds will remain elevated Relative to recent years, you can see we're estimating a very modest decline of 5%.
Think high yield activity outside the U. S. Should improve after a relatively slower year in comparison to the U. S. And I think we'll see that investor demand should remain quite strong in the ongoing search for yield.
Thinking about Leveraged loans, we actually think we're going to see some growth there coming off of obviously more subdued Activity in 2020, but also being driven by M and A and LBO activity that's going to help support issuance. When you think about structured finance, we see that improving somewhere in the range of 15% to 20%. And It's a mixed bag as you think about the different components of structured finance. ABS growth we think will be supported by asset classes like auto loans where we're Some good activity, maybe a little bit more muted in places like credit cards and student loans. We'll see some growth in RMBS.
I think we'll see some modest growth in CMBS, the market for whole asset securitizations, Even though you've got some parts of the commercial real estate market like hotels and retail that are experiencing some distress. And then as you know, as we think about CLOs, we also look at what's going on with the leverage loan market. So we think there'll be some growth in CLOs With just that stronger leverage loan supply and tightening spreads in the CLO market. So, and maybe just one other thing I'd add, just in public finance, very strong year generally for public finance, so we'd expect that to remain Elevated, but at levels consistent with last year.
And did you care to talk about the recurring versus transaction on pricing as from the question? Sorry.
Yes. Sorry. So from a recurring revenue standpoint, I think we'll be looking at probably There's something in the low to mid single digits. We've got some questions about just kind of thinking about how we characterize recurring revenue Versus others and I think if we included our rating assessment service and excess issuance fees and issuer rating fees, we'd be looking at something like a mid single digit Recurring revenue growth. And I think in general, when you look at it on a full year basis, pretty comparable outlook for recurring revenue.
And then secondarily, if that's okay, a quick one. Just on CCXI, I mean, definitely some headlines in December on China, Which is obviously an important topic for a lot of people. So can you just flush out how you're feeling around that JV considering that Essentially out of the market for a few months and really highlighted that maybe the market is ready for different Rating agency arrangement over there,
if that's the right word. Thank you. Yes, Alex, and maybe just to touch on that, obviously, CCXI had a license suspension, it was a 3 month Coming at the end of December, and they're taking a number of actions to address that. I guess as I think about The China strategy more broadly, we've got the MIS cross border rating business, we've got the MA business in China, Really no impact to that. In terms of the domestic rating market, I mean, obviously it's unfortunate That CCXI had this issue, but they do remain the leading domestic credit rating agency in China.
And I think early signs from the Biden administration It don't lead us to think that U. S. Policy towards China is likely to soften meaningfully. So I think for us looking at this, The environment for majority owned U. S.
Firms, I think in important sectors like credit ratings, I think will remain challenging To be truly successful over the long term. So we're going to continue to collaborate with CCXI like we have been on things like commercial engagement. And I guess I would also say Alex that given some of the challenges we've seen in the domestic credit rating industry and We're also thinking about how we can capitalize on the demand for things like Green Finance and insights into small businesses and know your customer solutions. Now thinking beyond CCXI, right, in October, we set up a new dedicated product development group Based in Shenzhen to develop data and analytics and other offerings for China's domestic Risk markets, in November we acquired a minority stake in a company called MEOtech and they're Kind of a cutting edge provider of alternative data and insights serving the ESG and KYC markets in Greater China. And then the last I'd say is, given the importance of sustainability in Green Finance in China, we'd also made an investment in a company called Shentao Green Finance and we're very excited About that and helping to support the growth of that market.
All right. Very helpful. Thank you.
Toni Kaplan of Morgan Stanley. Thank you. Rob, maybe you can help us understand your thoughts around M and A. Would you say you're more open to large deals or would you continue to stick to small or medium tuck ins? And what would be sort of the most attractive for you in an M and A target and what return thresholds do you look for?
Yes, Tony, thanks for the question. So I'd say our M and A criteria remain very consistent and we've talked about that over the years. What we're really looking for are things that are going to advance our strategy. And I laid that out in my prepared remarks and Quartera is an interesting example, right, because there's a company where we were able to acquire data that we thought was very valuable Across multiple customer segments and risk assessment use cases. So that's very attractive.
Another good example, Tony, would be what we do with Climate, right? We bought 427 a couple of years ago, That climate data is now being used in the rating agency and it's being integrated into a wide range of risk offerings across In addition to the standalone 427 offerings. So those kinds of Opportunities are very interesting to us, where we can acquire data and analytic capabilities that have relevance across A range of risk assessment use cases. And so that's what you've been seeing us do with some of these acquisitions we've done In commercial real estate and more recently, Corteva. And I would just say that when you've got very Strong industrial logic like that, it helps us meet the kinds of return criteria that we have had For years.
That's great. And then you've mentioned in the past year ESG revenue was about $15,000,000 to $20,000,000 Can you just update us on where that stands now and how fast it's growing? And then what particular areas of focus within Are you looking at in 'twenty one relative to like initiatives where and where do you see just the most opportunity there?
Good morning. This is Mark. In 2020, our ESG revenue was approximately $17,000,000 We're looking to grow that by around 25% in 2021 really for discrete sales through discrete sales to The interesting piece about the ESG revenue for 2021 is probably in addition to that looking at another $5,000,000 to $10,000,000 for revenue that will be earned through either MIS using their data and analytics To inform ESG data and analytics to better inform MIS ratings and enrich the research that we produce and through AMA Where we can continue to pilot and develop new products, including distributing ESG through CreditView and CreditEdge in some of our platforms. There are a lot of exciting developments that we have going into 2021 in terms of how we're thinking about our ESG products. So those, for example, include Integrating our Climate and ESG content into CreditView, updating, this is something we just did, our physical risk Scores for over 5,000 listed companies and that's leveraging of course BDD data and our hard methodology, of course increasing our coverage around transition risk.
And then finally, of course, incorporating ESG within credit, having ESG issuer profile scores, ESG's credit impact frameworks. So there's a lot of opportunity that we're capitalizing on this space. It's not just about the isolated ESG business, but how it integrates more holistically across MCO.
Thank you.
Ashish Sabadra of Deutsche Bank.
Thanks for taking my question. Rob, thanks for providing the color on the integrated risk assessment market and your focus on the KYC and compliance, obviously, very high growth areas. I was just wondering if you think about your growth going forward in addition to KYC compliance, Are there other use cases or geographies that you think are pretty attractive from a growth perspective? Thanks.
Ashish, first of all, welcome to the call and it's great to have you. And just to clarify, You're talking about kind of our portfolio more broadly. Is that right?
That's right. And how do you think about growing that business I'll say the P and Compliance. Thanks.
Yes. So maybe a couple of things I would say. First, I'm going to talk about kind of the broad portfolio of RD and A in MA. That's where we obviously where we have that business today. There's a portfolio of content there.
Obviously, the KYC and Financial Prime Solutions is 1 and we see some very strong growth rates behind that. There's also just a lot of demand for data and analytics on private companies. That's to support integrating that data into commercial lending Decisions, supply chain management decisions, transfer pricing is another place where we're seeing some growth. And then we've also got in that broader portfolio within RD and A, a lot of credit research data tools That are also increasingly incorporating content, as Mark said, like ESG and climate and cyber. We're building out our commercial real estate content because we've got a lot of demand there from our core customer base around Analytics and workflow tools for lenders and investors and we're also seeing some good demand for our economics content.
You think about that as being used to support scenario analysis and market planning and stress testing.
That's very helpful color, Rob. And maybe a quick question on the organic growth in the for the MA business, the high single digit group. If you could help parse the growth from RD and A, the recurring growth in ERS and then obviously, Mark, you talked about some of the headwinds from shift to the subscription model, Any incremental color that you could provide on individual pieces there, that will be helpful. Thanks.
Absolutely. I think forward to 2021, specifically in terms of growth here, you'll see the majority of growth is likely to be driven Through our RD and A segment, Rob spoke earlier, we spoke in part of the prepared remarks around ERS and the ongoing transition of that business It's more of a recurring revenue basis and that will offset some of the decline in one time sales in the ER access space. So if you're thinking about attributing some of that low double digit guidance, the majority will come through RD and A in 2021 And then we'll see a smaller growth, but still growth within the ERS of the year.
That's very helpful. Thanks, Mark.
Andrew Nicholas of William Blair.
Hi, good morning. I was hoping you could provide a bit more detail on the different strategic investments you outlined on Slide 23. Maybe some examples Of investments you're making that you're particularly excited about? And then also wondering, is there any single initiative there It's outsized relative to the others in terms of both investment spend and total opportunity.
We certainly feel very positive about some of the areas that we're investing that $80,000,000 to $100,000,000 of cost efficiencies into. Just to give you a sense, maybe we can start on the commercial real estate side, Both growth through our REITs business and then the integration, obviously of some of the data sets that we're producing and Many of our adjacencies into that those commercial real estate products. I think just simply about the KYC and compliance, it's about that further integration of the acquired media, REC, EBD, cloquera type datasets that really then begin to allow us to create synergistic opportunities. And then of course on the ESG side here, how we're beginning to build through, as we spoke a minute ago, to Tony's question Of the creation of new products and opportunities that give a holistic integrated risk view out to the market.
Yes. And maybe let me add to that, Mark, just specifically focusing on KYC and compliance and the company Reference data, because we've made a lot of investment there and we're continuing to make investments there, both organic and inorganic. And We're now 3 plus years out from the Bureau Van Dijk acquisition. You remember that puzzle page there on the webcast. And we're now thinking about this business more holistically inside of MA.
And collectively, our company reference data business It's growing sales, something like the high teens. So that suite of data products is performing very well. And we're continuing to look at opportunities To complement that ORBIS data, and we've seen us do that with RDC, that's where we got all the people data, acquire media with all the Adverse Media and the Cortera acquisition giving us even more data on private companies and commercial credit. So We're continuing to invest in building out what we think of as the world's most useful and usable database on companies. And let me give you an example Of the kind of thing we've done recently, this is one of our organic investments, part of the integration Bureau Van Dijk and RDC, we just completed the 1st commercial release where we're bringing together the ORVIS database and all of its corporate hierarchy data With all of the data on people risk profiles in RDC and that's all in one simple interface and screening tool and that is Very powerful.
It creates a lot of efficiency for our customers. We think it's one of a kind in the market. That was really the promise of the acquisition Well, R and D was to put all that in one place for our customers and we've had some immediate customer traction with this.
Great. That's helpful. And then maybe a follow-up to that QIC discussion. Obviously, it's among the faster growing opportunities at Moody's. From a margin perspective, is that becomes a bigger part of M and A?
Is that accretive to kind of long term margins for that business or pretty Consistent with the segment as a whole.
So absolutely. So as we think about longer term, Yes, KYC opportunity continues to be very attractive for us, both from a revenue and a margin perspective. We're not necessarily as focused on margins in the very near term as we build out and integrate that business. We're very focused on ensuring that margin profile approaches something like The BDD margin profile over the medium term. That really gives you
a sense of sort of
how we're balancing that revenue growth versus margin profile Over the next 12 to 18 months.
Overall, big scale business and a generally attractive margin profile.
Great. Thanks a lot.
Manav Patnaik of Barclays.
Thank you. I just wanted to focus on CORE Care, so my first question is that okay. Was hoping you could give us a little bit more on how big that asset is, what is growing. You have already partnered with them, I believe, and So tied to that also just wanted to see how much of the gap does that say for kind of the U. S.
Coverage that BBB didn't have I suppose?
Yes, Manav, good to hear from you. Look, I think the acquisition of Cortera, it's not a big acquisition, But it's important. It's an important next step in enhancing this data business that I've been talking about, particularly in the U. S. And Canadian market.
And They're already an important data contributor to our Orbis database. We've known Courterra for years. In fact, We worked with them on the Know Your Supplier portal that we rolled out last year during the height of COVID. So we have a really good working relationship with them And as I said, they're already contained their data is already contained in the Orbis database, but by owning Courterra, we now unlock The access to really the full suite of reference and trade credit data, as I said, 36,000,000 companies with something like a 1,500,000,000,000 Data plans, it's just an enormous amount of data that we think is going to have real relevance across the Moody's franchise and a So part of that is their contributory accounts receivable network and that gives great insights On the company spending and commercial credit, and you asked about growth, I mean frankly, Bob, I think they've really been focused On building out the data asset rather than really focusing on growth. They have a very small sales force.
So the data is going to enhance Our offerings, as I said, in multiple end markets. And then of course, we're going to enhance their offerings. We've got a lot of great proprietary credit and company data and analytics. We've got a global sales force, a big sales force in the United States to better serve the Cortera's core market and our shared customers.
Okay, got it. And then, I guess, the little data puzzle you're putting together all across Moody's Analytics, if I can call it that, It seems pretty exciting. I was just wondering, how do you see EIS given with those positive within these analytics?
Yes. I guess the way I might think about it Manav is we've got an enormous content engine, Right. And as you're getting a sense, this company in reference data that we talked about that kind of the puzzle piece, That's a big part of it. Now we've got other content engines, right? The rating agency is producing an enormous amount of content.
We've got commercial real estate capabilities. And then we have, I think there's kind of several ways to distribute that. One of them is through ERS, right. ERS It's effectively software that is being used and embedded into customer workflows in banks all across the world. And it gives us an opportunity, I always think of it as kind of risk as a service.
Maybe that's the term I'm going to coin on this call. But there's not we're putting a lot of that content. You can imagine the data and analytics, we're putting that content Through those software as a service solutions, right? We're also leveraging that content in our research business And then we're looking for other ways to be able to distribute that content, whether it's through APIs, whether it's Partnerships with 3rd parties. So, just a big content factory and I think of the Software as a Service business, the ERS business as one of the platforms for distributing that content.
And the other thing I'd say about ERS is It's deeply embedded into very important workflows at these financial institutions. So it is very sticky Once it's installed.
Okay. Thanks for that, Rob.
George Tong of Goldman Sachs has our next question.
Hi, thanks. Good morning. I wanted to dive deeper into your operating margin expectations by segment. Holistically, you're expecting margins to be relatively flat this year. Assuming MA margins continue to increase, how are you thinking about MIS margins And the sustainability as the issuance levels begin to normalize.
George, good morning. This is Mark. Maybe I'll step back for a minute and I'll talk a little bit about 4th quarter and then I'll talk a little bit about expectations for 2021 off to that. We're very aware based on our press release this morning that the Q4 margins for both MIS and MA themselves were down. Yes.
If I look at MCO in total, it's really the primary driver for that. The 4th quarter expenses grew by 16%. But The primary drivers of that 11% of the 16% were really attributable to what I think of as Unlikely to reoccur factor. So 5 percentage points of that 16 was restructuring and severance expenses on our efficiency programs, 3 percentage points of that would relate to sort of incentive stock and commissions on strong sales performance. And then around 3 percentage points of that would Really to the M and A impact as we continue to invest for growth.
The underlying core expense base there was really Salaries, salary increases in hiring and that was probably only 2%. So very consistent, very disciplined, very controlled. Now if we step back from Q4 and we look at 2021 as a whole, we feel very comfortable in terms of maintaining our operating expense base To be supportive of the revenue that we're able to achieve in 2021, and that's what led us to get confident in guiding towards that approximately 60% for that MIS margin outlook for 2021.
Got it. That's helpful. And then switching gears, if you look at your issuance expectations, you're looking for high yield issuance to be down about mid single digits Off of difficult comps. You also cited some factors that could be very conducive to high yield issuance like low default rates, low spreads, Including macro environment, M and A activity, etcetera. So how would you handicap the potential upside or downside This is your base case expectations for IU?
Yes. George, I might even Kind of broaden the lens out and just kind of talk about the puts and takes overall to issuance. And then maybe I'll also touch on just kind of what Seeing in the market right now in leverage finance. But I think in terms of upside, if we see A faster than expected health recovery leading to a faster than expected economic recovery, I think that could provide some upside. We could see some things coming out of the Biden administration that may be supportive of issuance, whether it's around infrastructure or public finance.
M and A is a wild card. We've expected M and A activity to pick up to what looks more like Levels that we've seen in kind of 2018, 2019, but it's possible that we could see M and A activity go beyond that. And that would provide some upside also to the specifically to the leverage finance market, right? Leveraged loans, M and A activity, sponsor activity would be very positive to the leveraged finance market. Maybe from what could be a headwind, you've got a lot of companies that have a lot of liquidity.
So, we have to see what the companies are going to do with all of that liquidity, whether they're going to use that to pay down debt, whether they're going to use that to make acquisitions, Invest in their business. And of course, if we see things drag out in terms of Health and economic recovery, that I think will probably lead to some downside in issuance. Interestingly, And Mark and I were talking about this the other day. If we see things get worse with COVID, I don't think we expect to see another surge In liquidity driven financing, like we saw in the Q2 of last year, because we still got companies that still have very healthy cash positions. Very helpful.
Thank you.
Owen Lau of Oppenheimer.
Good afternoon and thank you for taking my questions. So I just want to quickly go back to the Thanks, guidance. Up mid single digit, could you please talk about your assumption in terms of the P and E and marketing? Do you also include, for example, additional severance and incent or any charges related to real estate Or reorganization, what are the key drivers of this expense growth? Thank you.
Owen, good afternoon. If I think about the attribution of the 2020 actual Thanks to our 2021 outlook of mid single growth, it's probably, it's called 4 primary categories. The first category is really that savings and efficiency, the $80,000,000 to $100,000,000 that we anticipate creating. And that's probably 3% to 3.5% of that expense base. And the whole point of those savings and efficiencies is that it's going to enable us to self fund Namely, the opportunities that we see in 2021 as well as to be able to enhance our technology infrastructure to better enable automation, innovation and efficiency.
That investment base that it's going to go to is probably also going to consume somewhere between 3% and 3.5%. You could almost see the savings of efficiency And the reinvestment back into the business is washing itself out. Then we probably got around 2% to 2.5% of expenses related to that Incremental M and A activity. And that's going to be a big driver of that sort of guidance towards mid single digit growth. We've got a little bit of FX in terms of headwinds.
Dollars depreciated over or expected to depreciate over 2021 vis a vis 2020, and that's probably another 2% to 2.5%. And then of course, we don't expect to have sort of that same degree of restructuring and impairment charges. So that will give you a sort of sense of the breakdown in terms of our thinking and coming up with that mid single digit guidance. You had one specific question on T and E expenses. And we certainly have modeled an increase in T and E expenses as we move through the year.
We're probably going to return to a more normalized level by the time we get That's 3rd, maybe 4th quarter, but it's still going to be lower than those historical levels that we would have experienced pre pandemic as we become more efficient and more effective in communicating with our customers and our workforce.
That's very helpful, Mark. So my Follow-up is, thank you for the color on Slide 15. I think it's very helpful. Could you please talk about Maybe the pace of the integration in terms of these offerings, how do you expect you can fully realize The synergy of these 4 great assets and drive additional growth and penetration in some of just some of its parts. Thank you.
Yes. I guess I might start by just going back to Bureau Van Dijk and we had put some synergy targets Out into the market at the time of the acquisition and we effectively achieved those. So we feel very good about The integration of Bureau Van Dijk into the business. Then RDC is the other kind of big asset. RDC has performed Very well, in line with our expectations since we acquired it.
And the example I gave to you Earlier on the call that integration of RDC's grid database into the Orbis database to create a one stop shop That is a into the what we call compliance catalyst, is a great example of One of the most important things that we wanted to achieve with the RDC integration was getting all of that content that's relevant for our customers in one easy place So our integration of RDC, that's a big milestone for us. So we feel very good About that and we just bought AcquireMedia back in October. So we've got we actually stood up what we call an integration management office as we've had a number of these bolt on acquisitions and we wanted to make sure that we're able to Get out the business value as quickly as we can and get these corporate integrations done as quickly as we can to achieve the Realize really the full potential of what we're acquiring. Got it. Thank you very much.
Jeff Silber of BMO Capital Markets.
Thanks so much. You might have answered
this earlier. I just wanted to get a little Clarification.
I think Tony had asked about your M and A strategy. Would we expect going forward most of the acquisitions would be in the MA area as opposed to MIS, is there anything in MIS that might slip the traffic to you?
Yes. I mean historically that has been the case. There just Aren't that many scaled opportunities to build out the rating business. Now you did see us make an investment last year In a Malaysian rating agency, that was important for us because it's one of the largest Sukuk Islamic Finance Markets in the world. And so that was a we thought that that was an important opportunity to kind of Augment the global rating capabilities around Islamic Finance.
But as you look kind of look around the globe, there just Aren't that many sizable domestic markets and we're in them. We're in India. We're in China. The other thing I might say is, I mean, I think we highlighted in the webcast deck, we have been building out a platform in Latin America, we call it Moody's Local and that's basically think of that as kind of a pan regional approach to domestic markets in Latin America,
So that
we can provide locally tailored products with local analysts to meet local Market needs and we've been getting some good traction with that. But again, I just there just aren't that many Sizable opportunities and then you look over at MA and you look at the size of these addressable markets that I talked about and the growth rates And the nature of demand from our customers, I think you'll see that trend continue that we'll make Regionally focused investments in
the rating agency and then we'll continue
to build out our presence in these risk assessment markets in MA.
Okay. That's helpful. And then a quick question for Mark. Just looking at your MIS revenue guidance, can you scope out what the impact of Position that would be in 2021.
Thanks. Sure.
And good afternoon to you. I think about MIS for 2021, we are looking at organic growth as we'd Organic growth consistent with our overall outlook of approximately flat for the year, inorganic acquisitions would be relatively Carol, to your overall MIS outlook for 2021? Forgive me. I meant MA. I'm sorry about that.
All right.
Jeff, I'd assumed, M and A, that I wasn't 100% sure if I should ignore it and give you
no color.
In terms of M and A on M and A, we're looking at around 2 to 3 percentage points of growth From the inorganic acquisitions that we've completed over the last several months.
I see it. Thanks again.
Craig Huber from Huber Research Partners has our next question.
Thank you. Mark, I just wanted to get a little more clarity if I could on the Costs for the Q4,
how much what was the incentive comp there, please? And what was it for
the full year? And more importantly, can you quantify for us how much of the cost in the Q4 would you think are non recurring? I know you guys call off $30,000,000 restructuring charge in your presentation packet and press release. But what else is in there
Let me start with the 2020 Full year incentive compensation number, that was approximately $246,000,000 It's very consistent with the 2019 numbers you'll recall of the $237,000,000 If I think forward to 2021, the incentive compensation is expected to be between $50,000,000 to $60,000,000 per quarter. It's a little higher than what we had in 2020, really as we bring on and align in terms of compensation plans of those inorganic acquisitions into our business. I thought it might also be helpful to touch on the expense ramp that we anticipate in 2021, addressing your question. And from Q1 to Q4, we'd look to guide to between $45,000,000 $55,000,000 Primarily driven by selective growth in some of the investments, additional salaries and benefits, an increase in team to some extent. And then really and there are really other costs that support our overriding revenue growth line.
The expense numbers from the Q4 just to close out completeness for your question, really restructuring and severance is probably the biggest One there that was around $36 ish million and then really that incentive compensation stock and commission And that was above our normal run rate. That's probably another 23 ish. And those are the ones that I'd suggest to adjust down. Thank you for that. And
Rob, if I could just ask you, with the new Biden administration here, outlook seems to be with higher Well, the tax rate potentially perhaps we get increased regulations out there. So can you maybe just touch on that? I think we do basically a reversal of the prior Administration, what that potentially could mean for debt issuance once we get to that stage? And also, with the regulations on the rating agencies in general, I'd love to hear your thoughts on that. Will that change And impact on ESG perhaps favorably?
Thank you. Yes, Craig, happy to do that. In regards to a potential increase in corporate taxes, I don't think it's the first priority of the Biden administration. I mean, I think The COVID recovery and then the economic recovery are really the near term focus. So we may see discussions in the back half of this year for Potentially something in 2022.
And in terms of how it could impact issuance, maybe we'll roll the clock back So when there were all these questions about what would happen from a decrease in corporate tax rates and remember all the concern about The reduction of the value of the tax yield, right? And was that going to reduce negatively impact debt issuance? And our answer at the time was, Well, it's certainly a factor, but it's just one factor that drives debt issuance. And I guess I would say kind of looking the other way that In theory, the tax yield is going to be increased, but it could also be limiting to some extent the free cash flow of issuers. But I think in general, I would expect this to be pretty modest.
I mean, they're talking about a 28% rate. That's still lower than where the tax rate was Before any of this change, I think I would just look at things like the pandemic economic growth, Low rates for longer geopolitical factors, I think they're going to be more impactful than what looks like a relatively modest Change in the corporate tax rate. You mentioned ESG. Certainly, the Biden administration is very focused On climate change, they've already announced an attempt to rejoin the Paris agreement. It's one of their top priorities.
I think what we're going to see is more ESG disclosures for 1 in the United States. I think there's a real desire to just get more Comparability, consistency, availability, verifiability, if that's even a word, and a desire to kind of harmonize around A framework. And I think ultimately, that'll be good for the market, that'll be good for us as a provider of ESG Data and analytics, I think we're very well positioned to capitalize on the increased focus on ESG. Great. Thank
you. Next, we'll hear from Kevin McVeigh of Credit Suisse.
Great, thanks. Hey, just to follow-up on the ESG. Just any thoughts as to the restructuring, how that relates
Kevin, this is Mark here. Just confirming just because the audio broke up a little bit there. You're specifically asking about the restructuring programs that we're putting in place or So Kevin, in late December, We approved a new restructuring program that we estimate is going to result in annualized savings of somewhere between $25,000,000 30 $1,000,000 per year. And that's going to that program specifically relates to the strategic reorganization within the MA reportable segment. We also put in place, just as a reminder, in July, a separate restructuring program, primarily in response to the COVID-nineteen pandemic, That was around the rationalization and the exit of certain real estate leases.
So if I put those 2 together, total restructuring charges in 2020 were around $50,000,000 And we expect that those 2020 actions are going to generate a little bit more than maybe $30,000,000 in run rate savings. If I broaden the lens just for a second and I step back and I think in total since mid-twenty 18 And including our expectations for 2021, our rationalization and efficiency initiatives will have created almost $180,000,000 In run rate savings, and we probably roughly the rough order of magnitude invested about 50% of that towards Expanding the margin, we certainly saw the benefit of that in 2020 and about 50% of that reinvesting back into the business I think the 4th future, Bert.
That's super helpful. And then With the issuance outlook, does that factor any of the $1,900,000,000,000 or similar that's being debated now and what is potential
Yes. I think in general, we have an assumption that there will be a stimulus package. I don't think we've Necessarily tried to quantify the size of it in our assumptions around issuance, but if there were no stimulus package that would be a negative to our outlook. And I think in terms of things like infrastructure, I think that was sufficiently uncertain enough for us as we were thinking about our outlook We hadn't incorporated specifically or explicitly some sort of infrastructure package and what the upside. So If there were a meaningful infrastructure package, Bill, I think that could provide some upside.
I think you'd see that in our PPIF segment ratings.
Thank you so much.
Shlomo Rosenbaum of Stifel. Hi, thank you for taking my questions. I just want to hone in a little bit on that Courterra acquisition.
Well, on Porteur, besides focusing on banks and providing some
of the information for your scores and The trade credit is actually pretty interesting and within kind of the perennial thorn in the side of DNB, is that something that you guys are planning to pursue further To be more in the trade credit area, can you elaborate on kind
of the strategy on that part of that business?
Yes. So maybe I'll go back to you're right, that trade credit data is really interesting valuable data, It was part of the appeal of that acquisition. And as we said, I think you're going to see us thread that through our offerings Ranging from know your customer, we've got a supply a procurement catalyst that supports supply chain risk management. It'll be useful there. You can imagine us, we're thinking about integrating that into our commercial lending solution.
So a number of ways that we see monetizing That trade credit content. And I mentioned earlier, we also we have a lot of content, right, obviously through not only Orbis, but all of Our credit capabilities. And so we think there's some opportunities to enhance their core offering. We have a big sales force here in the United States and better serve their core market.
Okay. So is that a yes, we could be more heavy in the trade credit area, is
that the way to understand besides obviously enhancing the other part
It's a there are multiple ways to win here would be my answer.
Okay. And then just Mark, is this is Quatera part of your guidance as well in terms of the growth or not? So we have incorporated the Courterra into our guidance for 2021. And maybe if I just step back and I think about both Acquire Media, Diem Financial, Quaterra and Catalyst, just in aggregate this might be helpful. The relative The EPS impact for our 2021 guidance is relatively small.
It's probably around $0.05 or so. The margin impact, As we spoke a little bit earlier on the call, it's a bit more impactful. We see around that 130 ish basis points impact to the MA adjusted margin And around 60 basis points negative impact obviously to the in fee adjusted margin. So that might give some color in terms of those Recent acquisitions and how they impact our guidance for the year. Fully incorporated.
Great. Thank you so much. Great. Thank you.
And we'll now hear from Simon Klint of Atlantic Equities.
Hi, guys. Thanks for taking my questions.
I was wondering if we could cycle back
to what you're building within RD and A. And really, I'm interested in how competitive the environment is for acquiring these sort of little these data assets that you're hoping Continue doing. Because obviously, it's not going to notice that this is a very desirable part of the market. And so I'm just wondering how you think about Competitive environment and how and why Moody should win in terms of getting
the assets that you need to want? Yes. Simon, great question. It's a very competitive market. It's a frothy market.
You see the valuations are quite expensive. And we have always had a very disciplined approach to M and A, which I think puts a real premium On the industrial logic of these acquisitions, right, because we want to make sure that we are the natural owner for these assets And that the industrial logic gives us ways to really enhance and monetize What we're buying. You go back to Corteva, it's a good example, right? I talked about the value of the data, Putting it through multiple of our product offerings, we've used when we looked at Cortera I think they felt the same way. They felt we were the natural owner for that business.
I feel the same way about RDC and That's because when you think about what's going on with our customers, back to some of my prepared remarks, Our customers have huge pain points around understanding the risk of who they're onboarding as customers and monitoring this. And it has historically been a fragmented manual approach. And so the real promise Of RDC was to be able to put all that together for our customers. And then that then allows us to be competitive and in a process where there There are other parties that are looking at these assets. You've seen other certainly other companies are investing in anti financial crime and know your customer because it's a very high growth It's an attractive place to be.
So that industrial logic allows us to be Not only be the ultimate owner, but also to meet our acquisition criteria at the same time.
Okay. Understood. Thank you. And then just following up on ERS. I just want to make sure I understand this right.
So There's some fantastic growth in the recurring revenue line, but you're effectively winding down the sort of onetime The transactional side of that business. So I just wanted to make sure I understood how I guess, how long that sort of wind down should last And when we should start to see that really strong growth from the recurring side flow through more optically?
Through the total revenue line. Yes, and Simon, you've got it exactly right. Mark touched on it earlier. We've got Low double digit recurring revenue growth, that is the focus for us, right, is building up the recurring revenue, the subscription part of the business. And as you saw in the Q4, that was almost fully offset by that decline in one time sales.
Now we had talked about one time sales being Soft back in 2020. We also had a very tough comp on one time sales. But the reality is, I'm not sure I'd say winding down, but I would say deemphasizing. There are some customers who still Only want an offering through a licensed solution. In that case, we're probably going to sell it to them.
But our real focus is on Recurring revenue. So we are kind of pushing through right now where you're seeing the overall top line is a little bit soft Relative to what it's been historically, but that recurring revenue line is very strong. And what I Simon, maybe to give you also just a little bit of insight into What is driving that low double digit revenue growth for recurring revenue? There are really 3 main things I would cite. One is insurers.
They're seeking our help in getting compliant. You've heard us talking about IFRS 17 regulatory requirements. That stuff is very computationally demanding. And some of you may remember, we bought a company called GGY a few years ago. And the GGY product suite along with our own internal product development has really set us up nicely To capture the demand there.
So we're not only just adding new customers, but we're building new modules, we're adding analytic capabilities and we're deepening our penetration With the existing insurance customer base. So that's a great story. 2nd, we've got ongoing demand from U. S. Financial institutions To comply with the credit loss reporting requirements.
And then 3rd, you've heard us talk about credit lens, Right, our commercial lending application in the past. Again, we're deepening our penetration with our existing Bank customers, we're adding modules and capabilities that they need. This is another land and expand story and a great example of that we Launched an automated spreading tool called Quick Spread that came out of our accelerator. It was really an employee driven innovation That worked its way through the accelerator and that's now we're selling that alongside Credit Lens and it's in use of over 40 global banks. So that's what's driving the demand.
And as you said, we're going to continue to have some headwinds. I don't know exactly how long that's going to be. I would imagine it's The next couple of years as that one time line continues to decline. Okay. That's really helpful.
Thank you very much.
And it appears there are no further questions at this time. I'd like to turn the call over to our presenters for any closing or additional comments.
Yes, I guess I would just say thank you for joining today's call. I hope you all are well and we look forward to speaking with you again
As a reminder, immediately following this call, the company will post the DMIS revenue breakdown under the 4th quarter and full year 2020 section of the Moody's IR homepage. Additionally, a replay of this call will be available after 3:30 p. M. Eastern Time today on Moody's IR website. Thank you.
You may now disconnect.