Good morning, welcome to S&P Global's fourth quarter 2016 earnings conference call. I'd like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation, and instructions will follow at that time. To access the webcast and slides, go to investor.spglobal.com. That is investor.spglobal.com, click on the link for the quarterly earnings webcast. If you need any additional technical assistance, please press star zero and I will assist you momentarily. I would now like to introduce Mr. Chip Merritt, Vice President of Investor Relations for S&P Global. Sir, you may begin.
Good morning. Thank you for joining us for S&P Global's earnings call. Presenting on this morning's call are Doug Peterson, President and CEO, and Ewout Steenbergen, Executive Vice President and Chief Financial Officer. This morning, we issued a news release with our fourth quarter and full year 2016 results. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com. In today's earnings release and during the conference call, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. Before we begin, I need to provide certain cautionary remarks about forward-looking statements.
Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates, and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Forms 10-Ks, 10-Qs, and other periodic reports filed with the U.S. Securities and Exchange Commission. I would also like to call your attention to a European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should give me a call to better understand the impact of this legislation on the investor and potentially the company.
We are aware that we do have some media representatives with us on the call. However, this call is intended for investors, we would ask that questions from the media be directed to Jason Feuchtinger at 212-438-1247. At this time, I would like to turn the call over to Doug Peterson. Doug?
Good morning. Thank you, Chip. Welcome everyone to the call. I'd also like to welcome our new CFO, Ewout Steenbergen. Ewout joined us in November and is participating in his first earnings conference call with us. You'll hear more from him shortly. 2016 was a memorable year, with market uncertainty surrounding pivotal outcomes from Brexit, the U.S. elections, and the long-awaited increase in U.S. interest rates. Despite this uncertainty, spreads tightened, issuance was strong, equity markets ended up the year, and S&P Global delivered another solid performance. Let me begin with the 2016 highlights. We finished the year with strong fourth quarter results. We delivered another year of impressive financial performance with mid-single-digit revenue growth and mid-teens adjusted EPS growth. We rebranded the company as S&P Global with the new ticker SPGI. We reshaped the portfolio with a number of divestitures and acquisitions, the most significant divestiture being J.D. Power.
We successfully completed our 2014 to 2016 $140 million cost reduction initiative. We made substantial progress on our SNL integration synergies. We generated nearly $1.5 billion in free cash flow, and we returned $1.5 billion through share repurchases and dividends. We also delivered excellent financial results. The company reported 7% revenue growth. Of this growth, 89% was pulled through to adjusted operating profit. This is a direct result of our continued focus on productivity. On an organic basis, revenue grew 6%, and the pull-through to adjusted operating profit was also high. These achievements led to a 300-basis point improvement in adjusted operating profit margin and continued a string of annual improvements in adjusted operating profit margin of more than 275 basis points for the third year in a row.
While Forex had a $24 million unfavorable impact on revenue, it had a $43 million favorable impact on adjusted operating profit, with Market Intelligence realizing the majority of the gain. I'm very pleased that we were able to leverage 7% revenue growth into 14% adjusted EPS growth through a combination of productivity improvements and share repurchase activity. 2016 was not an isolated year. Our revenue growth was consistent with the 7% annual growth over the past four years. Our 300-basis point margin improvement caps 1,000 basis points of margin improvement over the past four years. Our focus on growth and performance has materially changed the earnings power of the company. This earnings power is translated into a substantial increase in adjusted earnings per share. In 2016, we almost doubled our 2012 EPS, delivering 18% compounded annual growth rate over the last four years.
During 2016, we continued to add capabilities and reshape S&P Global. In Platts, we're building world-class supply-demand capabilities. With Bentek and Eclipse already in place providing U.S. and European natural gas analytics, we purchased PIRA Energy Group, RigData, and Commodity Flow, adding a wealth of expertise in global energy market analysis, U.S. rig activity, and waterborne analytics. With our deep history of providing benchmark commodity prices, we believe providing the supply-demand analytics around these prices will be of great value to our customers. S&P Dow Jones Indices purchased Trucost, a leader in carbon and environmental data and risk analysis. Not only will this acquisition enable the creation of unique new indices, but our ratings business will leverage Trucost capabilities in the creation of new ESG products, such as green bond evaluations.
Ratings added to its international capabilities with the acquisition of a 49% stake in TRIS, Thailand's leading credit rating agency. Thailand is ASEAN's second-largest economy and third-largest bond market. We reshaped our portfolio with the divestitures of J.D. Power, our pricing businesses, and our equity and fund research business, and QuantHouse in January 2017. These moves left us with a stronger, more cohesive set of businesses. I want to turn to our outlook for 2017 and discuss key themes that are shaping 2017 and beyond. These are topics I've discussed with our board as well as the division presidents as we look to the next year and the next three to five years. We look forward to discussing these themes with you this quarter and during the year. Global GDP, though increasing this year, is running much lower than the past.
Interest rates that have been declining since 1981 could continue to rise. Geopolitical considerations like Brexit, populous changes to governments, and threats to established trade deals create new risks. Regulation has become an unparalleled force for change. We count 22 ratings regulators worldwide today, with the majority less than five years old. All of you have witnessed the rise of compliance within your own firms. Our customers have changing expectations, are feeling competitive pressures, and facing changing business models. Technology continues to disrupt every industry, including ours. According to Citibank, there's been a tenfold increase in fintech companies in the past five years. It took 75 years for the telephone to reach 50 million users, radio 38 years, TV 13, internet four years, and Pokémon GO 19 days. Sustainability is becoming ubiquitous among companies and investors. Climate change conferences, ESG investable funds point to significant changes in behavior.
We need to stay ahead of these trends and create products that address the changing needs of our clients and markets. Things like green bond evaluations, ESG indices, new credit tools, and new product platforms are opportunities that we are pursuing. Our economists expect global GDP to grow 3.5% in 2017. The chart depicts their view for the next two years, in which all world areas except Europe will experience accelerated GDP growth. In the U.S., low unemployment and increased consumer spending will underpin GDP growth. In Europe, recovery is on track and showing resilience, but not enough to boost GDP. In Asia, we expect reasonable growth and little inflation, with India being the bright spot. In Latin America, we expect improvement driven by continued recovery in commodity prices and stabilizing domestic demand. Last week, Ratings issued its annual global refinancing study.
This yearly study shows debt maturities for the upcoming five years. The chart on the left illustrates data from the 2016 and 2017 studies. The five-year period in the 2017 study shows a $100 billion increase in the total debt maturing versus the 2016 study. We use this study along with other market-based data to forecast issuance. Taking a closer look at data from the study reveals an important trend in high yield maturities. Over the next five years, the level of high yield debt maturing significantly increases each year, which is a potential source of revenue in the coming years. Last week, Ratings also published their latest issuance forecast. Looking ahead to 2017, we expect an overall increase in global issuance of 3%.
Positive global trends for issuance include the European Central Bank's quantitative easing program, continued strong issuance out of China, and expectations for slightly stronger GDP growth in the U.S. Global issuance is still likely, however, to face headwinds from global political uncertainties and a continued devaluation of most currencies relative to the U.S. dollar. One item that seems very clear is that interest rates will continue to rise in the U.S. Rising rates have been an investor concern for several years now, as the belief is that rising rates will impair debt issuance. Our fixed income analytical team has explored this topic and published a report called Recent Policy Proposals: Potential Impact on U.S. Corporate Bond Issuance. You can see it on RatingsDirect. This chart shows U.S. corporate issuance and GDP since 1996. Both GDP and issuance increased over the period.
We find a statistically significant relationship between U.S. corporate issuance and GDP. This next chart shows U.S. corporate issuance and the 10-year Treasury yield since 1996. Our statisticians ran a number of tests, including the Granger causality test, a statistical test used to determine whether one time series is useful in forecasting another time series. Their conclusion was there is a weak negative correlation between interest rates and issuance. We've seen a number of tax proposals since the recent election, and we've been studying them. People from our tax, finance, economics, and public policy teams have been evaluating potential changes. The proposals remain in a state of flux, and it's difficult to draw definitive conclusions. Nevertheless, I want to review our current thinking on the most commonly discussed potential tax changes. First, on a lower corporate tax rate.
As a company with a relatively high tax rate, this would be very positive for the company. On repatriation, a one-time repatriation event would likely reduce issuance, but would be unlikely to have a major impact on long-term capital structures. In addition, much of the cash held overseas is by large technology companies like Apple and Oracle that have very little debt. For our company specifically, we would reevaluate our investment strategies, and that could lead to repatriating much of our overseas cash. We believe that the removal of interest expense deduction could reduce the attractiveness of debt, particularly for high-yield issuers, and likely reduce issuance. However, lower tax rates would provide greater borrowing capacity for companies, which could be positive. As for S&P Global, this would be a negative as we currently have $3.6 billion of long-term debt.
The removal of the municipal bond tax exemption would reduce the attractiveness of muni bonds to investors, requiring alternative funding of local projects. Therefore, it would likely hurt municipal bond issuance, but infrastructure issuance could potentially increase to partially offset this. Border adjustment could benefit our company as a net exporter. Please note our 2017 guidance does not consider any of these potential tax law changes. Let me finish by sharing some of our most important initiatives in 2017. As always, delivering financial performance is at the top of the list. We're introducing organic revenue guidance of mid-single-digit growth, adjusted diluted EPS guidance of $5.90 to $6.15, and free cash flow guidance of approximately $1.6 billion. Ewout will provide more color to the guidance in a moment. Throughout the company, I'm stressing the need to build excellence into all that we do. To be competitive, nothing less is acceptable.
Some of the more visible areas include launching a beta version of the new Market Intelligence platform in the fall, leveraging recent acquisitions to create world-class supply-demand analytics for Platts customers, continuing index innovation in international partnerships, advancing ratings, commercial discipline, analytical quality, and IT-driven productivity. We continue to track and execute on our SNL synergy program, fund additional productivity initiatives and process improvements, and we remain committed to compliance, control, and risk management across the company. We're pleased with our progress, but we're working to make this company even better. With that, let me turn the call over to Ewout. Thank you.
Thank you, Doug. Good morning to everyone on the call. This morning, I would like to discuss the fourth quarter results, then provide guidance for 2017. Let's start with the consolidated fourth quarter income statement. Reported revenue increased 2%. However, organic revenue increased 11%. This was the strongest quarterly organic revenue growth of the year. Adjusted operating profit increased 17%, and adjusted operating margin increased 530 basis points. The adjusted operating margin improved primarily due to revenue growth, continued progress on productivity initiatives, and the sale of lower-margin businesses. The adjusted effective tax rate increased 500 basis points, primarily because the fourth quarter 2015 tax rate was unusually low, largely due to favorable tax benefits from the resolution of prior year tax audits.
In addition, the fourth quarter 2016 rate included the impact from dividends we received from foreign subsidiaries and a slight increase in the U.S. state income tax rate. Adjusted diluted EPS increased 14%, and we decreased our average diluted shares outstanding by 4%. Both our fourth quarter and full-year results were impacted by changes in foreign exchange rates. In the fourth quarter of 2016, the two main impacts were a $2 million unfavorable impact on ratings, adjusted operating profit, primarily due to the weaker British pound. A $9 million favorable impact on markets and commodities intelligence adjusted operating profit, primarily due to the weaker British pound and the weaker Indian rupee. Let me turn to adjustments to earnings to help you better assess the underlying performance of the business.
Pre-tax adjustments to earnings totaled to a gain of $272 million in the quarter and included a $347 million net gain on the recent divestitures, predominantly from the sale of the pricing businesses, and this also includes a $31 million expense associated with the disposition of QuantHouse. A $54 million expense associated with an increase in financial crisis legal reserves and a $21 million expense related to the early retirement of our 2017 debt. In the fourth quarter, every business segment contributed to gains in organic revenue and adjusted operating profit. While this slide shows an 11% decline in reported revenue at markets and commodities intelligence, excluding the impact of asset sales, organic revenue increased 8%. Adjusted operating margins improved significantly in ratings and markets and commodities intelligence, but declined in S&P Dow Jones Indices. I will discuss these changes within each segment discussion.
Let me now turn to the individual segments' performance. Ratings had a strong quarter, leading the company in both revenue and operating profit growth. Revenue increased 14%, including a 1% unfavorable impact from Forex. Considering normal seasonality in the fourth quarter, U.S. bond issuance was robust despite U.S. election uncertainty, which only constrained bond market activity for a few days. Adjusted operating margin increased 360 basis points due to strong revenue growth, reduced legal and outside services spending, partially offset by increased incentives. While not shown on the slide, full year adjusted operating profit margin reached 49.8%, an increase of 240 basis points, aided by a modest boost from Forex. Strong transaction revenue underscores ratings fourth quarter revenue growth. Non-transaction revenue increased 5% from growth in surveillance fees, increased inter-segment royalties from Market Intelligence, and growth at Crestel.
Transaction revenue increased 26% as a result of improved contract terms, growth in structured U.S. public finance and corporate issuance, as well as increased bank loan ratings. This slide is a new quarterly disclosure that illustrates ratings revenue by its various markets. First, note that corporates and financials make up the majority of revenue. Second, U.S. public finance is the largest component of governments. In the fourth quarter, there were broad gains in every market, with the exception of financials, which was negatively impacted by concerns about the U.S. election and an interest rate increase.
If you look more closely at the largest markets, fourth quarter issuance in the U.S. was up 14%, with investment grade decreasing 2%, high yield climbing 12%, public finance growing 19%, and structured finance soaring 45% due primarily to a 143% increase in CLOs in advance of the implementation of risk retention regulations, which took place on December 24, and a 40% increase in ABS. In Europe, issuance decreased 11%, with investment grade declining 18%, high yield decreasing 1%, and structured finance increasing 5%. In Asia, issuance increased 1%. Excluding issuance that we do not rate, notably domestic China issuance, Asian issuance increased 8%. Let me now turn to market and commodities intelligence. This segment includes S&P Global Market Intelligence and S&P Global Platts. In the fourth quarter, reported revenue declined 11% due to recent divestitures. Excluding these divestitures, organic revenue increased 8%.
Despite disposing of businesses that contributed more than $100 million of quarterly revenue, adjusted operating profit increased 8%. This puts into perspective the enormous improvement that has taken place in this segment. Adjusted operating margin improved 600 basis points, primarily due to SNL integration synergies, Platts expense control, the divestiture of lower margin businesses, and Forex. Let me add a bit more color on the fourth quarter revenue growth in Market Intelligence. The most significant items in the quarter were the divestitures of the SPSE and CMA pricing businesses, and equity and fund research. In January, we divested QuantHouse. Due to the fourth quarter divestitures, revenue remained unchanged. Organic revenue increased 10%, with growth across all major products. Another highlight was the progress we made in the $100 million synergy target, as illustrated on this slide.
Successful integration of SNL and delivery of synergies was a top priority for the company in 2016. We made tremendous progress, as evident in the margin improvement, and remain committed to achieving our integration synergy targets and delivering on our expected return on investment in SNL. We estimate that two-thirds of the $100 million synergy target was achieved at year-end 2016 on a run rate basis. We estimate that approximately one-half of the $100 million is reflected in our full year 2016 results. We are particularly pleased to have achieved about $10 million in run rate revenue synergies. About one-half of the revenue synergies came from utilizing Capital IQ relationships to sell the SNL Global Financial Institutions product, about one-quarter from using SNL relationships to sell the Capital IQ Desktop, and one-quarter from new business combining Cap IQ risk scorecards with SNL bank data.
If you look at the markets within Market Intelligence more closely, within financial data and analytics, S&P Capital IQ Desktop and Enterprise Solutions revenue increased 7%, with high single-digit growth in S&P Capital IQ Desktop. In addition, SNL revenue increased 14% over the fourth quarter of 2015. SNL and S&P Capital IQ Desktop experienced year-over-year user percentage growth of 11% and 8%, respectively. Risk Services revenue increased 10%, led by growth in RatingsXpress. Platts delivered solid organic revenue growth in an improving commodity environment. Oil prices rallied around the OPEC agreement to cut production. PIRA forecasts 2017 oil prices in the range of $60-$70 a barrel if OPEC members comply with the agreement.
While the OPEC agreement provides support for the oil prices, RigData has reported that the weekly U.S. rig count reached 782 in January, and that's the highest level in over a year, creating downward pressure on pricing. Nevertheless, the outlook for many of our customers is better now than at the start of 2016. Fourth quarter revenue increased 12%. However, excluding revenue from recent acquisitions, organic revenue increased 5% due to growth in subscriptions and double-digit growth in global trading services. The core subscription business delivered mid-single-digit revenue growth led by the petroleum and petrochemical sectors. Global trading services double-digit revenue increase was primarily due to strong trading volumes. Now, let me turn to S&P Dow Jones Indices. Revenue increased 13%, mostly due to ETF assets under management growth and increased data subscriptions. Adjusted operating profit increased 10%, primarily as a result of increased revenue.
Adjusted operating margin declined 200 basis points to 61.6%, due primarily to the Trucost acquisition. Investments in a third data center increased marketing costs and higher cost of sales from growth in OTC derivatives activity. The highlight of the quarter was ETF AUM tied to our indices, topping $1 trillion in December. We celebrated the $500 billion mark in 2013, and three years later, we doubled that milestone. Clearly, the trend from active to passive investing has been an advantage for the index business. Asset linked fee revenue increased 10% during the quarter. The exchange-traded fund industry recorded enormous inflows for the second straight quarter, amassing $133 billion in the fourth quarter, driving yearly inflows of $380 billion, a new annual record. Average ETF AUM associated with our indices increased 19% year-over-year.
As mentioned, 2016 ending ETF AUM associated with our indices reached a new record of $1 trillion, increasing 25% over year-end 2015, with inflows of 15% and market appreciation of 10%. Transaction revenue from exchange-traded derivatives increased primarily due to an 8% increase in average daily volume of products based on our indices. S&P 500 index options led growth with a 22% increase in volume. The VIX options and futures and CME equity complex contracts increased mid-single digits. Subscription revenue, which consists primarily of data subscriptions and custom indices, increased 24% due to growth in data subscription revenue and the timing of subscription revenue. During the quarter, the company launched 88 new indices, and our partners launched 23 new ETFs based on our indices. Our capital position is strong.
As we look at the net debt of the company, we ended the year with $2.4 billion of cash, of which approximately $1.7 billion was held outside the U.S. and $3.6 billion of long-term debt. Our debt coverage improved year-over-year as measured by gross debt to adjusted EBITDA from 1.6 times to 1.4 times. Free cash flow during the year was approximately $1.2 billion. To get a better sense of our underlying cash generation from operations, it is important to exclude activity associated with divestitures and related tax expenses and the after-tax impact of legal and regulatory settlements and related insurance recoveries. On that basis, free cash flow in 2016 was nearly $1.5 billion.
As for return of capital, the company returned $1.5 billion to shareholders in 2016, $1.1 billion through share repurchases as we completed our $750 million accelerated share repurchase plan in December, and $380 million in dividends. Lastly, I will review our 2017 guidance. Based upon modestly improving global GDP and issuance growth, we introduce 2017 adjusted guidance as follows. Mid-single-digit organic revenue growth with contributions by every business segment. Unallocated expense of $145 million-$150 million, a modest increase over 2016 due to investments in Asia and upfront investments in office consolidation. Deal-related amortization of about $100 million. Operating margin increase of roughly 100 basis points. Interest expense of approximately $155 million. A tax rate of about 30%-31%. Diluted EPS, which excludes deal-related amortization, of $5.90-$6.15.
The range is wider than prior years due to recent FASB guidance for accounting for stock payments to employees, which we estimate could increase EPS by $0.10-$0.15 depending on SPGI's share price development and option exercise activity. Capital expenditures is a range of $125 million-$140 million as we anticipate increased investments in technology, data, and efficient real estate solutions. Free cash flow, excluding after-tax legal settlements and insurance recoveries of $1.6 billion, and we expect an annual dividend of $1.64 per share. Our guidance does not take into consideration any potential policy changes from the new U.S. administration. Overall, this guidance reflects our expectation that 2017 will be another strong year for the company. With that, let me turn the call back over to Chip for your questions.
Thank you, Ewout. Just a couple of instructions for our phone participants. Please press star one to indicate that you wish to enter the queue to ask a question. To cancel or withdraw your question, simply press star two. I would kindly ask you to limit your questions to two questions. That's two questions in order to allow time for other callers during today's Q&A session. If you've been listening through a speakerphone but would now like to ask a question, we ask that you lift your handset prior to pressing star one and remain on the handset until your question has been answered. This will ensure better sound quality. Operator, we'll now take our first question.
Thank you. This question comes from Alex Kramm of UBS. You may now ask your question.
Yeah. Hey, good morning, everyone. First of all, thanks for the Pokémon GO step. Definitely the highlight of my day, so nicely done. Secondly, in terms of the business, just wanted to come into the ratings guidance a little bit more, what you're expecting there. If I look at the mid-single-digit growth for the whole company, and I look at where Indices is running right now in terms of the run rate, and I look at where Market Intelligence is probably growing consistently. It seems like it's a little bit conservative or light on the ratings side, in particular, if you're telling us 3% growth in the issuance. So either you're a little bit more conservative on pricing or you're just conservative in general, but what are you expecting in terms of ratings revenue here?
Alex, this is Doug. Well, thank you for joining the call and for your comments. On issuance, we've incorporated various factors into our issuance forecast. As you know, in the slides we gave you before, we showed you the expectations for issuance coming up. We've always talked before about the relationship between GDP growth and issuance being a stronger one than interest rates. As you know, January had very strong issuance. The issuance in January was a record. It was $532 billion. It was up 13.6% from the prior years. A lot of that issuance was in the U.S. The U.S. was up 93%. We've incorporated that into the year.
Our expectation is that the first half of the year should be fairly strong, given the overall investment profile that we expect of the economy. We've looked at more uncertainty in the second half of the year, as we don't know exactly what the impact's going to be of the new administration aspects that are going to be rolling out, whether it's tax reform, regulatory reform, infrastructure investment, et cetera. In addition, we've incorporated some uncertainty into the second half of the year related to Brexit and other geopolitical aspects. Overall, we believe that the 3% forecast, which was prepared by our fixed income analytics team, is strong. It's based off of a combination of refinancing, which we already are aware of, and we're expecting that most of that will come through.
What we see in pipelines from meeting with investment banks and ratings issuance advisors to build our forecast. It's built off of a base, as you know, of those different factors, and we're comfortable today that that's what we're including in our guidance.
All right. Fair enough. Thank you. Just secondly, quickly, maybe on the Market Intelligence side a little bit here. When we talk to customers, it sounds like you're increasingly bundling all these different products, which obviously you've put under one roof now. Maybe you can talk a little bit more about this. Seems like there's more of a move to enterprise pricing, and it seems like you're able to maybe gain a little bit of more pricing power in the process. Maybe just talk about what's going on there and how that could be impacting revenue, maybe more than what we've seen in the last couple of years.
We've made great progress on the integration of SNL and Cap IQ to turn it into Market Intelligence. As you know, we've been reporting on our synergies throughout that time and how we've done with the different expense synergies and revenue synergies. On our expense synergies, as you've seen, we've made excellent progress. This has allowed us to have an intensive focus on our commercial activities, on our operational activities, and be able to address customer needs in a way that's more comprehensive and integrated across the Cap IQ and SNL platforms. As I mentioned in my remarks, we're developing and will be launching later this year a pilot program, Market Intelligence Window, which will allow us on the desktop through mobile platforms, et cetera, to be able to address the needs of our customers.
What that's leading to from a commercial point of view, what your question is more specifically about, is that we can provide enterprise licenses which take into account the usage and the breadth of need of a firm and provide them with a more simple contract that allows, in many cases, more users or more access to the system. Which on the one hand might, as a per user basis, end up maybe being less expensive to them, but they're using a lot more data and they have many more users in it, which is very beneficial to us. This, like many of our different products and services across the company, these truly are a customer-by-customer basis in terms of how we deal with them. The sales process, it's a long professional market sales process.
We've restructured our sales team so they're unified, they've been rolling out a comprehensive approach to our different markets, whether it's by regions or it's by different types of industries and segments. As you pointed out, that is our approach this year would be to rolling out almost everywhere, but especially where it makes sense, enterprise-wide pricing for Market Intelligence.
Excellent. Thanks for the color.
Thanks, Alex.
Thank you. The next question is from Manav Patnaik of Barclays. You may ask your question.
Thank you. Good morning, gentlemen, and congratulations and welcome to Ewout, to the call. Maybe just on the Ratings question, another way to ask that question is your 3%, sorry, issuance volume forecast for 2017. If you were to back out sovereign Ratings, which I think you guys don't make much money on, and then China domestic, you said you don't do, what would that 3% number look like from a volume perspective?
If you just give me 1 second. I've got that calculated here. Let me just give you some of the numbers more specifically with the breakdown with and without those. I don't know if I have the aggregate number in front of me. When you look at non-financials, it's going to be in a range of approximately 2%-6%. financial institutions from about 1.5%-4%. structured is right now one of the areas that I'm the least certain about. It's more in kind of the 0%-6% range. Even though you look at public finance potentially dropping a lot this year, given the headwinds, and what we saw was very strong issuance the last couple of years. public finance could be down 5%-10%. overall issuance, about 3%, and excluding sovereigns in domestic China is also about 3%.
Once you take the positive upside in non-financials, what you've seen like in this first month of the year, and then you subtract some of the downsides, we still end up with about 3% excluding sovereigns.
Okay, got it. In the Market Intelligence side, I think you said two-thirds of the $100 million was realized so far on a run rate basis. You're targeting three-fourths by the end of 2017. Is that being conservative, or is that factoring in, I guess, your new platform launch, it probably requires a bunch of investments. I just wanted some color there in terms of how we should think about the progress.
Good morning, Manav. This is Ewout. We would certainly not consider that guidance as conservative. What you obviously might see when you do an integration is that you first take care of the low-hanging fruit. That's why there's always a larger acceleration of the benefits at the beginning. The remaining of the integration synergy benefits come later during the year and take more time to achieve that. This is really the best guidance we have. We expect that the remaining of the gains will be more back-end loaded because this is the harder part of the synergies, especially related to bringing our products to a one platform. That is really the main outstanding, where the remainder of the synergies will be achieved.
Got it. Thanks a lot, guys.
Thank you. Next question is from Ms. Toni Kaplan of Morgan Stanley. Your line is open.
Hi, good morning.
Morning.
Morning.
Could you give us a rough breakdown of what drove the margin expansion within Market Intelligence this quarter on an apples-to-apples basis? Basically, just trying to get at how much of the expansion was driven by legacy Capital IQ, Platts, and from the SNL synergies.
Let me first of all just tell you what some of the elements are. I don't know if I can give you a precise basis-point by basis-point approach to that. As you remember, we have a combination of the three different businesses within Market Intelligence, which you've seen, the Desktop, the Enterprise business, the SNL business, and then the Risk Services. We have Platts. We've taken out J.D. Power. We've taken out what was our pricing businesses. J.D. Power had generally a lower margin than the new average margin. The pricing businesses had higher margins than the actual businesses. I don't have the actual numbers, and I'm going to look to Ewout to see if he has a chart with those actual numbers. Those are the elements that are incorporated into that margin.
Yeah. Toni, what I specifically would like to point out is that the total margin change for Market and Commodities Intelligence for the full year 2016 was 410 basis points. The FX element in that was 140 basis points. That gives you the breakdown of how much was really underlying performance improvement of the different areas versus the amount that came from FX. Then as Doug said, there is the different elements of the businesses that are having different levels of margins. We probably need to come back to you later on with more specifics on that.
Okay. Are you providing updated targets for, I guess, Market Intelligence margins now that the segment includes Platts?
Well, let me just tell you a little bit about margins generally. If you don't mind, I'll give you some broader aspects to it. We don't have any guidance specifically about our margins, but we do have what I might call aspirations. As you know, in the last few years, we've had an intensive focus on margin. That's a combination of improving commercial activities, growing our top line, as well as maintaining productivity and being very disciplined around investments. In Ratings, we aspire to have a five handle at the beginning of our margin, where we've been there in some of our quarters, but we'd aspire to be in the low 50s. This, we believe we could get there through the continued commercial discipline in some of our productivity programs. In the Market Commodity Intelligence segment, we aspire to the mid to high 30s.
We think that as we complete our synergy programs over the next couple of years, as well as ongoing productivity programs and commercial programs, that we'd be aspiring towards that. In Index, we do not have a target. We are very comfortable with the level of margin that we have now in the last year or so, it's been between 60 and 66. We know that it bobs around a little bit, but we don't have any target that's different than what we have there, which would be in the low 60s. For the three segments, those are our aspirations of our margins.
Terrific. Thanks. Congrats on the quarter.
Thank you.
Thanks, Toni.
Thank you. Next question is from Hamza Mazari of Macquarie Research. You may ask your question.
Good morning. Thank you. The first question is if you could just give us an update on European bank disintermediation and whether Europe's mix, how does that stack up to the U.S. in terms of loans and bonds?
Yeah. That's been something that's been really interesting as we've continued to watch the development of the European markets. It almost goes in fits and starts between when do you see issuance that's starting off in the European markets, and you can get some very strong quarters of European issuance, and then you get some very weak quarters of European issuance. The main factor which is inhibiting that is really the ECB liquidity program. The ECB liquidity programs have continued to provide a lot of liquidity in the European banks, and it's basically between the strength of their capital, which has been improving, and the European liquidity programs that are in place. It's allowing the banks to continue to be strong lenders. There is a general shift overall towards more and more issuance in the markets.
Just as an example, in this year, during the year, in January, you saw the issuance go up in Europe, in financial institutions. In industrial, it was down a little bit. You've also seen more in sovereign. Total Europe was up about 13% in January. Over the last couple of years, it's been up and down. It goes from being up to flat, et cetera. I do think that the most important factor is really a combination of what we see happening with the LTRO programs, the ECB liquidity programs, and the overall bank behavior that they're holding more and more credit on their balance sheets. The other final point I'd make is that the ECB itself has a very high demand for the purchase of assets. They continue with the quantitative easing program, and the assets they want to buy are investment-grade debt securities.
The ECB itself has been talking about promoting the development of capital markets. In addition, there is a program based out of Brussels called the Capital Markets Union. The Brussels financial regulators are all in favor of having a more cohesive and a more European-wide approach to capital markets. We're very close to those initiatives. We have people in Brussels. We visit Brussels a lot. We visit all of the major financial capitals, and we believe that this will continue to be positive over the long run, but it might be going in fits and starts.
Great. Just to follow up. Within the indices business, are you concerned at all around fee pressure given how concentrated the ETF market is? I know back in 2012, we had a Vanguard change the way that they looked at their customer base. I know they were more retail versus institutional, any color around how you're thinking about fee pressure in the indices business, or is that just not a concern?
It is a concern to the extent that we're going through a lot of change in the industry. If I told you otherwise, I probably wouldn't be telling you something we spent a lot of time thinking about. We do have, though, a few factors which we think position us incredibly well. One is that we have benchmarks that are must-have benchmarks, like the S&P and Dow Jones and other branded benchmarks that we have that are really necessary for whether it's the actual ETFs or other investment products or for the data that's required by investment managers to be able to benchmark their portfolios and their performance. We think that we have one advantage is in terms of the types of brands and the kinds of products we have.
The second is maybe a little bit if you go back to microeconomics and you remember those curves of elasticity of demand, and some of the products which we believe are going to see price cuts, the price cut might be offset by the volume growth. I don't want to say that that's always going to necessarily work out that way, but if you look at the overall growth of volume in this industry and the recent DOL ruling, which looks like it might be reversed, that was going to probably benefit ETFs and passive investments. We probably see some sort of passive investment benefit from a lot of these trends that will also benefit us. Even if some of the fees do go down and there's some fee pressure, we should be seeing some advantage of that from volume.
Just as an example, we mentioned it in our call, but it was just three years ago that we had crossed the $500 billion line for ETF AUMs, and we now crossed $1 trillion at the end of the year, last year. Even only a year ago, we were $815 billion. The growth in these, it's a combination of new flows into the asset classes as well as obviously increase in the value of the indices themselves that we see that from. We're very aware of the cost pressure. We're working closely with ETF providers and others, and it's something that we're ensuring that we can maintain a leadership position in the quality of our benchmarks, the positioning that they have. Pricing pressure is something that we're aware of and we're trying to actively manage towards.
Great. Thank you, Doug.
Thank you. Next question is from Jeffrey Silber of BMO Capital Markets. You may ask your question.
Thanks so much. Wanted to go back to some of the debt issuance trends you were talking about earlier. You mentioned how January was a real strong month, specifically in the U.S. Do you think any of your U.S. clients might be front-running some potential policy changes, and we'll get a big inflow early on in the year that'll taper off as the year progresses?
It's really hard for me to project. I've been doing this for now almost six years, and every quarter there's a different mix of what has been attractive in the markets. It depends on investment, on growth, on GDP growth, on what the interest rate environment's going to be, what Janet Yellen might do with interest rates, what the net exchange rate's going to be for people that have global operations. It's possible that there's some pull forward that's taken place in January. It's also possible there was some pull forward into the fourth quarter. There is a very healthy refinancing pipeline that we look at. Some of the issuance that was done in January was issuance by companies that already have incredible amounts of cash on their balance sheets, like Microsoft and IBM and AT&T and Morgan Stanley and Wells Fargo and Bank of America.
The largest issuers in January weren't necessarily those that needed the cash. They also are all corporations that have massive amounts of cash offshore. I don't know. I can't really answer your question about this pull forward or not. We do, in our forecast, if you look at the forecast that we've prepared, we do have a more robust first half of the year than the second half of the year in the forecast that we've prepared, which shows the 3% growth in issuance for 2017.
All right. That's helpful. If I could just switch over to margins, you were kind enough to give us some of your long-term targets by segment. I know you don't usually guide by specific segment for the year, but I'm just wondering directionally what you're incorporating for margins by segment to get to your target for the company overall. Thanks.
Well, we don't give specific by segments, as we said in the prepared remarks, that we expect margin expansion for each of our businesses.
Okay, great. I'll follow up offline. Thanks so much.
Thank you. Next question is from Peter Appert of Piper Jaffray. You may ask your question.
Thanks. Good morning. Doug, the strength in the fourth quarter ratings revenue performance is very impressive. I'm wondering if it's possible to give us any granularity in terms of the drivers of the revenue performance, in terms of market share pricing and just overall market growth.
Let me give you some of the components here. I'm looking here at the revenue components. If we make a breakdown between transaction and non-transaction, transaction was up 26%, non-transaction was up 5%. If you look at a breakdown by region, U.S. saw the largest growth of close to 17%. The EMEA region was around 6%. Asia, ex-Japan, was around 8%, Japan itself was 13%. The rest were other smaller numbers. I have to note that Canada had a quite large increase of 63%. If you look at another breakdown of revenue, corporates we saw up by 18%, financial services down 9%, infrastructure up 40%, U.S. public 37, sovereigns 10%, structured 11%. Overall, I could say revenue was up very strong across the board. We saw expenses up $30 million quarter-over-quarter.
That has mostly had to do with incentive compensation, a catch-up, given the strong results for the quarter itself. If you look at the combination of strong revenue growth across the board in almost all regions and issuer types, as well as really good expense control with the one change and increase related to incentive compensation, we saw that those margins in ratings went up in a very healthy way.
Peter, let me add that if you go back to the slides that Ewout presented, there is a new slide which shows the revenue mix across broad categories. We thought it was helpful for you to see a little bit further breakdown on that. I don't remember the actual slide number. We can pull that up. It shows where we've got the growth across the different business segments. As an example, in financials, there was a drop in the fourth quarter in financial issuance from $115-$104. That's our revenue mix. In corporates, they went up 20% from $283-$340. We think that that should also help give you some kind of a direction as to what the issuance trends are, as well as the revenue that we're seeing from those.
You can get a view across the board how we think we're doing those different groups. All of them are a combination of all the different factors which Ewout mentioned.
Got it. Thank you. Then, Doug-
That's slide 29. Sorry.
Right. Great. Thank you. Do you have any preliminary thoughts on how potential changes in Dodd-Frank might impact the business?
Not really. We have looked at Dodd-Frank. There's really two aspects to it that I could mention, but think of this a little bit more as speculation because we don't have a lot of facts as to where this might go. On ourselves, we believe that the overall Dodd-Frank rules that have come in place are similar to the other 21, I guess, jurisdictions around the world where we're also rated. Even if Dodd-Frank changes, it's not going to change our operating model very much because we're regulated similarly or even more heavily in other jurisdictions, like by ESMA in Europe.
There might be changes to Dodd-Frank that could have some small benefits to us in the U.S., but they're not necessarily going to have that much of an impact if we have to continue to comply with a similar or the exact same kind of provisions everywhere else in the world. On the actual markets themselves, to the extent that there are Dodd-Frank provisions which improve market liquidity or investor-issuer access or clarify some of the things around, for instance, the Volcker Rule, if we see banks getting back into more proprietary trading and higher liquidity and issuance in the markets, or if there was a change to the risk retention rule that allowed CLOs and CMBS issuance to explode. If there has been that much of an impact from the risk retention rules, I can't quite tell, but it looks like it might be a slight impact.
Those are the things that could be more market impacts. They don't have anything to do with us directly, but if they end up providing an environment where there's growth in the market, in particular growth in financial markets, higher liquidity, higher issuance, we would potentially benefit from that.
Thank you, Doug.
Thanks, Peter.
Thank you. Next question is from Tim McHugh of William Blair. You may ask your question.
Thanks. Just following up a little bit on that question, I guess. I think, Peter, we're getting at some of your initiatives to improve pricing and I guess the strength in bank loans. Were there any kind of big incremental changes in the fourth quarter, I guess how much more room is there to run with trying to drive, I guess, your improvement even relative to whatever the market does?
I don't know if I'd call it relative to what the market does, but relative to ourselves, we've had a what I would call a multi-year program to bolster our commercial activities in the rating agencies. As a result of our own changes in Dodd-Frank, we have hired a world-class team of commercial people in our rating agency. They are now out building relationships with customers, anticipating their needs for capital markets activities by looking at their own exposures around the globe. By being closer in a relationship, having this relationship model, it's allowed us to also demonstrate what is the value that we bring and have a one-off, as I call them, kind of individual conversations and negotiations with customers around the globe. We've started seeing the benefit of that from higher contract realization. We expect that that will continue to flow through in 2017.
We saw the benefit of that in last year, some of that into the fourth quarter. It is part of our top-line growth strategy is to have these one-off relationship conversations with the issuers, ensure that they understand the value, and we can see some of that value through improved pricing and contractual terms.
Okay, thanks. Then SNL, the growth rate improved there versus a little bit at least versus what you guys had been talking about. I know you listed a couple of different areas of that business that did well, but was there anything in particular that changed, I guess, in terms of the performance or got much better that drove the acceleration?
Yeah, if you look for the last, I guess 12 years or so, they've grown over 12% per year. You just bounce in the low teens from quarter to quarter. I think it just kind of noise from quarter to quarter whether they're 10% or 14%. We continue to see nice strength in the international FIG product, which is one of the new things we're launching. Conversely, we don't see much strength in the metals and mining work. There's a difficult environment. Those are the two kind of newest areas that we've been focusing on. Overall together, it's kind of better than our model, but it just kind of bounces quarter to quarter. Difficult to explain that.
Okay, thanks.
Thank you. Next question is from Bill Warmington of Wells Fargo. You may ask your question.
Good morning, everyone. Congratulations on the strong quarter and also welcome to Ewout. First question, I wanted to ask about the Platts organic revenue growth. It had been trending down for the past three quarters, and this quarter it showed an improvement up to 5%. I wanted to ask whether you're seeing an inflection point in renewals and how those are going, whether you think the stabilization in oil price is helping, and if you're seeing any differences there, U.S. clients versus international clients.
Thank you for that question. On Platts, on our top-line growth, it clearly is a combination of all the factors that you discussed. As you remember a few years ago, and going back to the question about Dodd-Frank, there was one of the provisions of Dodd-Frank ended up that all of the major financial institutions exited the commodities businesses. That had been a major drag on our top-line growth on our revenue levels as all of the major global financial institutions exited commodities trading and commodities businesses. A few of those have a tiny trading desk left, but most of them sold their commodities businesses to other trading organizations who were already our customers, and we saw some loss of revenue there. That had been a headwind.
There was also a headwind when you saw the oil price, which had been in the $100 range, drop into the 20s and 30s, and it put a lot of pressure on our major customers that are producers on the upstream side who were getting squeezed on their profit margins, and they were in tough negotiations to see what kind of renewal levels we'd get, what kind of increase in pricing. There were some headwinds there. Obviously, on the other hand, some of the users, power plants and airlines and others, saw a big benefit from the lower oil prices and lower energy prices, and maybe we had some potential upside there. I think we're getting into a normalized position with the oil prices in the 40s, 50s and 60s. There still are some organizations that that's not the right level that they can be very profitable in.
We do think that we will look carefully at the overall market positioning. We felt that the increase in maybe more stable oil market benefits us. As you know, one of our revenue streams that we talk about is the market services area. It's not just We saw strong growth in that area, which is one of the other areas. We're not only just a subscription business, but we do have a small amount of our revenue coming from market and trading services, and that area did benefit from the volatility as the market moved back up from the lower price to the middle price. Every factor you mentioned are things that we watch. We think that we're in a more stable environment.
We don't think that there's going to be anybody getting in and out of this business, and we'll be negotiating throughout this year our ongoing long-term contracts.
Right. For the second question, just a housekeeping question. On the $5.90-$6.15 EPS guidance, does that include or assume a $0.10-$0.15 benefit from the stock-based comp in that? Would that stock-based comp be incremental to that $5.90-$6.15?
That includes the $0.10-$0.15 from the accounting change for tax-based payments.
Great. All right. Thank you very much, congratulations again.
Thank you.
Thank you.
Bill, I don't want to pick on you, but I want to clarify this right now. The pronunciation is Awaut. The W is pronounced like a V. It's Awaut for everybody.
Awaut.
Awaut.
Thank you very much.
No problem, Bill.
Thank you. The next question is from James Friedman of Susquehanna Financial Group. You may ask your question.
Hi. I wanted to just ask my two upfront. Ewout, I was wondering if you could repeat what you said, if anything, about what assumptions are embedded with regard to repurchase. I heard the stock-based comp, but the repurchase. Doug, if I could ask, just because we get this one a lot, it's a deep end of the pool, but with regard to the border adjustability tax, if you could just give us the CliffsNotes from your view at least. Do you think of the company as an exporter? And maybe if you can give us some qualitative observations about that would be helpful. Thank you.
Okay. Let me start, James. Good morning. Regarding the assumptions underneath our EPS guidance with respect to buyback activities. At this moment, we cannot specifically comment on the size and timing for obvious reasons. What I can say is the following. We will continue with buyback activities also in 2017 following the strong track record of the company. We believe it's a good use of the strong cash position we have, and also the strong future cash generation we predict, and we believe our stock today is attractive at current levels. We will, of course, be disciplined and focused on the way how we really can create value enhancements for shareholders. Definitely there is an assumption with respect to buybacks, but I cannot give you the specifics.
I hope that gives you a flavor for the underlying philosophy and especially the disciplined capital management we will apply as a company.
Let me pick up the question about border adjustability. As you know, the tax code was updated 30 years ago in 1986, and at the time, our economy and the tax code was still very much skewed towards agriculture and manufacturing, especially with preferences and special exemptions for a lot of industries. It's been a long time that we needed an update of our tax system. We also have, as you know, have one of the highest corporate tax rates in the industrialized world, with us ourselves paying over a 30% rate, which has been very high. Now, specifically related to border adjustability, this is one of those areas that is probably quite controversial because the way it impacts different types of organizations. As you know, because we have such a high tax rate, any lowering of rate would benefit us.
Specifically on border adjustability, we're an intellectual property firm that has been around for a long time, and our intellectual property is principally registered in the U.S., and in fact, even in New York. When we sell and when we have customers that are paying us from offshore to use our ratings or our indices or our Market Intelligence or Platts data, and that is being purchased overseas, that would be considered to be an export of services, and we would benefit from a lower tax rate or from the border adjustability where we would not be having to pay a tax on that export of services. I don't have a specific dimension yet that I could tell you exactly what the benefit could be because we don't have enough of the proposal.
I would tell you that we would be a major beneficiary of that border adjustability, and it's something that as that is developed, we have our tax team, our economics team, our public affairs team, et cetera, are working closely with other advocacy groups and organizations in Washington to understand all of these proposals and what the impact might be. This is one that for us could be a major benefit.
Got it. Thank you very much.
Thank you. Next question is from Craig Huber of Huber Research Partners. You may ask your question.
Yes, good morning. My first question, I guess, has to do with interest expense deductibility and this whole issue, if it will or will not be included in the potential tax plan later this year. If it is included in there, and I guess depending on how it may be structured, if it's similar to Germany, where you can only deduct interest expense up to about 30% of EBITDA, or if it's 100% eliminated. On those two different scenarios, the German one versus getting rid of it 100%, what is your general thought again, a little bit further, what it would do to the corporate finance debt issuance once it gets up and rolling, say in 2018 or something, or if it's retroactive?
Yeah. Craig, as you can imagine from my prior answer, this is also on our list with the same teams that we're looking at with advocacy groups and our tax accounting, finance, public affairs groups, et cetera. This is one of those proposals that we think would also potentially have a negative impact on issuance. Clearly, it's a proposal that is linked with a pay for to other sorts of changes in the tax code. For example, accelerated depreciation would be paid for with the elimination of the interest rate deductibility. We see it typically in combination with other types of benefits, which then need to get paid for, and they were paid for by this interest rate deductibility. In all of the work that we've done looking at the different systems, we think that the major impact is going to be on high yield issuers.
As you know, if you go back to what's the typical deal thesis of a leverage buyout or many sponsor deals, the high yield debt not only provides them access to capital and improves in ROE, it also provides a tax shield, and the interest rate expense itself is part of the deal calculation as to what sort of tax shield you get from the interest rate. This is the part of the yield curve and the credit curve where we think there would be the biggest impact, and potentially issuance could get hit there. When we look at the higher quality end of the rating scale, so Blue-chip companies, investment grade companies, even without the deduction, we think debt would still be more attractive to companies in issuing equity.
I don't think companies are going to be wanting to flood the market with equity to do their financing. There might be a boon to investment bankers to structure hybrid or other sorts of instruments that could be debt-like or maybe equity-like, but not considered to be common equity. We do rate a lot of those types of instruments, so preferred shares and anything with kind of a fixed coupon. We do rate those kinds of equities or things like that. We do think that overall, elimination of interest rate deductibility would probably be a net negative to issuance, and that is what we're operating on right now. We're trying to look very closely at the market and what the actual proposal is, since we don't really know what the proposal is and what it's linked to. We're going to have to watch this.
We do know that over the long term, issuance levels are much more related to GDP growth. This discussion about interest rate deductibility and tax law changes does throw some new elements into our planning and our thinking that we've got to be very close to.
My other question, please, on your S&P Ratings business, the up 14% revenue growth in the quarter, I want to better understand this better contract terms. For roughly the last year, you guys have changed your contract terms with your customers to help you put on the net on the pricing side for you guys. Do you have a sense of how much that 14 percentage points of growth came from better contract pricing? Also, as you think out to 2017, is there much left to do there? I realize it's generally annualized here, but is there more that you can change here to help boost revenue growth in 2017? If you'd help quantify that a little bit. Is that a few hundred basis points or not even that?
We don't quantify the amount of the contract changes, Craig. We can't help you with that portion of the question. Was there another part to the question? I apologize.
Is there much left to go in 2017?
Yeah. As Doug mentioned earlier, we think we made some nice progress in 2016. We think there's more progress that can be made in 2017. I would say in those two years, that will be probably the bulk of the progress on these programs we're working on. Could be a little tail after that, but most of it will be in 2016 and 2017.
Okay. Thank you.
Thanks, Craig.
Thank you. Your next question is from the line of Joseph Foresi of Cantor Fitzgerald. You may ask your question.
Hey, guys. This is Mike Reid on for Joe. Thanks for taking our call.
Mike-
Do you think you can give a little color on some of the continued prospects for indices outside of equities, I guess including fixed income all the way through the custom indices? Also, do you see the custom indices helping you gain market share?
Well, first of all, on index, as you know, we have been diversifying our business in various ways. One of them is through different sorts of indices, as you mentioned, fixed income indices. Right now, that is a very new industry, so to speak. It just recently have the index of large index complexes started moving into organizations to see them more in a professional index managed approach to building up ETF products, et cetera. We think that space is still wide open and one that there's not a lot of ETF volume and should be growing, and we're hoping to play a much larger position there. Custom indices and factor indices are getting very popular, especially with family offices, sovereign wealth funds, and investors that need some sort of benchmark to manage specifically against risk or asset liability matching in their portfolio.
We continue to see that as an area where we're investing and growing. We also have two other areas I want to mention. One is the ESG. We bought Trucost, and Trucost is an organization that provides a very precise and high-quality climate and water and other sorts of environmental facts and environmental data. We're able to use that to build environmental or climate or other ESG type funds. We see a very high demand for data and analytics, and now increasingly also for funds that have incorporated ESG or sustainability or long-term growth type factors, especially coming from sovereign wealth funds and from pensions and endowments in Northern Europe and some places around Europe and the United States. That's another area of growth.
Generally across the business We're looking to see how we can capitalize off of the value of our data more and more, and see that as one of our growth areas and not just the traditional ways that we've had with AUMs and a fund approach and using our benchmarks into the fund area. Data and analytics is an area that we're looking at, and that's where some of the other aspects to how the data's used, how we look at markets, et cetera, we're thinking that there should be some opportunities there as well.
Thanks. Thank you for the color on that.
Yep.
Thank you. The next question is from Andre Benjamin of Goldman Sachs. You may now ask your question.
Thanks. Good morning. My question is back to tax reform. I was wondering if you are talking to any of the larger CFOs about how they're thinking about their balance sheet and EPS impact. I was just wondering, is there any indication that people are putting more weight on the impact of funding costs versus the bottoms-up impact on EPS? I'm just trying to get some insight into how CFOs are actually weighing those two offsetting factors.
Andre, I don't have enough of a base of discussions yet to give you a scientific answer. I can just tell you anecdotally that every CEO and every CFO that we've been meeting with are studying the tax reform proposals the same way we are. If you met with the largest global organizations, if you look at the repatriation topic, which we haven't touched on, repatriation is one that also has a very large impact on companies and could have, as I mentioned in my comments, a shorter-term impact on issuance if people brought back a lot of cash and don't need to go to the markets. We don't think it would have a long-term impact. There's a lot of corporations that have literally-- there's a couple trillion dollars, $2.5 trillion, we believe, in overseas cash that could also go into that equation.
As I said, I only have anecdotal evidence. I do not have anything that's scientific yet. Each company is impacted differently. If you went and met with retailers that import a lot of their products from offshore, whether it's clothing, apparel, toys, electronics, et cetera, the approach towards the border adjustability has a very negative impact on them. If you speak with large exporters like GE and Boeing and Caterpillar, border adjustability has a very positive impact on them. A lot of the CFOs of the more highly rated companies, the combination of a much lower tax rate and interest deductibility are kind of a wash. They would say that the interest rate deductibility is not going to have any impact whatsoever on their issuance programs because the net after-tax cost is even going to be lower because the interest rate is lowered so much.
Again, I can only be anecdotal. I would hope that as we go throughout the year and we get more specific proposals, that I could give you better answers than I just did. Those are the kinds of factors that are being looked at and the kinds of conversations we've been having. Right now, it's all anecdotal.
All right. That's helpful. I guess just one homework question or model keeping from, I guess, the combined Market Intelligence/Platts business going forward. As we combine those segments in our model, should we assume that we'll continue to get the individual revenue from Market Intelligence and Platts going forward?
Yes. We will disclose that going forward as well. You should see that breakdown in the future.
All right. Thank you.
Thanks, Andre.
Thank you. We will now take our final question from Anjaneya Singh from Credit Suisse. You may now ask your question.
Man, guys. My first question on the revenue synergies inside of Market Intelligence related to the integration that's going on. I realize you spoke to some lift from synergies in the quarter, but hoping for some more color on how that's going. Is it going along with your expectations, slightly better, slightly weaker? Just wanted to get your perspective on how customers are responding to your early cross-sell and integration efforts.
It's better than expectations. They had a target that we're not going to necessarily share with you folks on what they would accomplish at this point in time, and the $10 million target has exceeded or number has exceeded that target. They were pleased with that. To me, the biggest move really can't take place until you have one integrated platform, right? That's when you can really begin to shape customers' behavior more meaningfully. That's not going to be for a while. We're going to start beta testing that in the third quarter with a very limited number of customers.
We expect that that will really be more of a fourth quarter event when the Market Intelligence 1.0 platform is potentially ready for rolling out on a more broader basis. Just a slight different answer to your question, we're very pleased with the integration of SNL. It's been something that we made some very tough management decisions when we brought it on board in terms of how we're going to manage the organization of putting the businesses together, which was not necessarily something that was very natural for this organization. It's paid off by making those tough decisions right up front and having an excellent management team from SNL that came on board and incorporated some of the best management from the company that was already here.
Generally speaking, we've been ahead of our targets, and we've been able to execute in a way that we've had a very good financial performance, principally from expense management. We're now focusing more and more on revenues, and we have a few really good early wins. I don't want to promise that we're going to get the same kind of speed of execution on the revenue synergies that we did on the expense synergies. It's something we're tracking, we're watching, and I'm hopeful that we will, but it's a lot harder than getting the expense synergies.
Understood. That's helpful. One last one from me. As it relates to your mid-single-digit guidance on revenue, would it be fair to say you're incorporating the most conservatism on your ratings business versus the other ones? Hoping for some color on factors that drive you to the lower end versus upper end, given that a lot of the potential changes impacting issuance aren't really getting factored into your outlook at this stage. Thanks.
How you should see our guidance is really middle of the road. It is neither conservative nor aggressive. That is the philosophy we apply. We think the guidance we have provided for 2017 is strong guidance from all aspects, high growth, margin expansion, EPS growth, excluding the accounting change, somewhere in the range of 8.5%-12%. We think this is a very strong guidance we have provided. There is no particular conservatism in this. It is really considered middle of the road.
Just one little thing I would like to add, this is not to point, because your view is probably similar to other folks out there. January was a great month. If January was a horrible month, maybe that question wouldn't even come in. We cannot concern ourselves with one month out of 12 because we know that months, every single year, it is choppy from month to month. We cannot be swayed by one particular month as we think about our annual guidance.
That is helpful. Thank you.
Let me thank everyone for joining the call this morning. As you see, we had a very memorable year in 2016. There was a lot of uncertainty in the markets, a lot of change going on with things like the Brexit and U.S. elections. Many of those uncertainties continue into 2017. Some of the topics we just talked about on issuance trends, tax changes, Dodd-Frank, regulatory changes, et cetera. We have people all over those. Generally speaking, we have got our entire organization focused on growth and excellence, and we are very excited about the prospects of taking this reshaped, very cohesive portfolio of companies forward. We appreciate your interest.
For all of the shareholders on the line, we thank you for being shareholders in the company, we're excited about the prospects despite some of the uncertainty in the markets, we are very pleased you joined the call this morning, thank you very much.
That concludes this morning's call. A PDF version of the presenter slides is available now for downloading from investors.spglobal.com. A replay of this call, including the Q&A session, will be available in about two hours. The replay will be maintained on S&P Global's website for 12 months from today and for one month from today by telephone. On behalf of S&P Global, we thank you for participating and wish you a good day.