Good day, everyone, and welcome to the Moody's Corporation Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions] I would now like to turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead.

Thank you. Good morning and thank you for joining us to discuss Moody's fourth quarter 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 fourth quarter of 2020 as well as our outlook for full year 2021. The earnings press release and a presentation to accompany this teleconference are both available on our Web site at ir.moodys.com. Rob Fauber, Moody's President and Chief Executive Officer, will lead this morning's conference call. 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 a reconciliation 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-K for the year ended December 31, 2019, our quarterly report form on 10-Q for the quarter ended March 31, 2020, and in other SEC filings made by the company, which are available on our Web site and on the SEC's Web site. These, together with the Safe Harbor statement set forth 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 maybe on the call this morning in a listen-only mode. I will now turn the call over to Rob Fauber.

Thanks, Shivani, and 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 fourth quarter 2020 results, as well as our outlook for 2021. After our prepared remarks, we'll be happy to 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 is key to our continued success. And we're really proud of your accomplishments. Thank you. Our employees helped Moody's achieved record financial 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 Investors Service generated $3.3 billion in revenue. That was up 15% from the prior year. Moody's Analytics also performed well with revenue totaling $2.1 billion, up 6% and demonstrating the strong value of our products and 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 at strong growth from MA and favorable issuance mix for MIS will offset and expect to 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 to meet our customers evolving needs by integrating and leveraging our data and analytic capabilities, and investing in innovation. In addition, recent acquisitions combined with organic investments, position as 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 the return approximately $2 billion to our stockholders, this year in the form of dividends and share repurchases. During the 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% to $2.7 billion and the adjusted operating margin expanded 230 basis points to 49.7%, 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 billion and $2 billion respectively with MIS having rated more than $5.5 trillion in global issuance. We also made significant progress in delivering for our stakeholders. During 2020, we made an $11 million 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 of a strong commitment to diversity and inclusion, both internally and externally. And 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 million 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 CDPA with an A score for addressing climate change. In 2020, amidst the pandemic, we continued to invest in our business and position the company for ongoing growth. In addition to 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 positioned us to meet the needs of the market. Turning to MIS, credit market activity reached record levels in 2020 and especially for non-financial corporate issuance, which grew over 16% from its previous high in 2017 and was 34% above its prior five year average. Both investment grade and speculative grade debt benefited from a favorable environment as issuers fortified their balance sheets and opportunistically refinanced debt. However, leveraged loan volumes remain modest for most of the year despite an up tick in M&A activity in the fourth quarter and Mark is going to provide some details on MIS' 2021 issuance expectations when he discusses our guidance. Now pivoting to MA, we continued to see significant growth in 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 into customer workflows that support strong customer retention rates. And as a result, MA’s margin has grown 480 basis points over the past three 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, there was a development of software and analytics businesses. 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 is positioned as well to serve a wide range of risk assessment markets, where we can integrate data and analytics and deliver insights, all enabled by technology. 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 it's highlighted the importance of resilience in scenario planning. Organizations are managing a variety of risks that just weren't on the radar screen years ago, ranging from ESG to climate, to cyber, to financial crime. They're seeking a more holistic, 360 degree view of risk of who they're connecting to, and who they're doing business with. To do this, companies are increasingly incorporating alternative datasets 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 are some significant financial and reputational impacts for not managing these risks effectively. And with this as a backdrop, customers are looking for trusted partners who have the scale, the rigor, the capabilities to help them make better decisions about a wider range of risks. As CEO, I'm focused on three key areas to meet these market needs and to realize the full potential we have as an integrated risk assessment business. First, sharpening our understanding of our customers needs are evolving, delivering solutions that can draw on the breadth and depth of our capabilities. Second, 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've referred to Moody's as an integrated risk assessment business. Today, we serve a wide range of risk assessment used cases and end markets collectively worth north of $35 billion. Our largest risk assessment business, of course, is the rating agency, it serves fixed income issuers and investors. And as Moody's has evolved, we now help customers with everything from customer onboarding, commercial lending to 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, measure and manage risk. 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 data sets and analytic capabilities, as they're all increasingly important across a growing number of risk assessment used cases in 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 going to add to the Moody's portfolio including a world-class database on private companies in North America and one of the most comprehensive databases of commercial credit information, featuring data and analytics on over 36 million companies. And we plan to integrate Cortera data into our offerings to better serve several markets, including commercial lending, customer onboarding, supply chain management. And by combining the data from Cortera with Moody's proprietary analytics, we look forward to helping our shared customer base make better decisions about their business relationships. Cortera builds on several acquisitions we've made over the past few years, beginning with the Bureau of van Dijk business in 2017 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 used cases, including among other things, KYC and compliance. In 2020, Moody's Analytics generated approximately $525 million in annual sales of these solutions and we expect them to produce high teens growth in 2021. The know your customer and compliance used case in particular, is generating over $200 million 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 in Moody's fourth quarter results as well as our outlook for 2021.

Thank you, Rob. In the fourth quarter Moody's total revenue increased to 5% with MA and MIS contributing 8% and 2% of growth respectively. Moody's adjusted operating income of $531 million was down 5% from the prior year period. Solid revenue growth in the quarter was outpaced by increased operating expenses, including non-recurring items such as severance and incentive compensation. This resulted in a 410 basis point decline in the adjusted operating margin. Fourth quarter adjusted diluted EPS was $1.91 down 5%. For MIS, fourth quarter 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 with the largest contributor in the fourth 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 at 9% decline in issuance. This was primarily the result of strong contributions from both U.S. leveraged loans and speculative grade bonds as issuers continue to opportunistically refinance debt and support M&A deals. Revenue from public project and infrastructure finance declined 3% against a 12% increase in U.S. public finance activity, as many issuers addressed refunding needs earlier in the year to avoid potential election-related volatility. In structured finance revenue decreased 11% compared to a 31% decrease in issuance. This is primarily due to lower CMBS activity, despite signs of improvement in CLO. In the fourth 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, MIS' adjusted operating margin expense is 170 basis points to 59.7%. Moving to MA, fourth quarter revenue grew 8% or 5% on an organic basis, continued robust demand for KYC and compliance solutions drove 21% increase in RD&A revenue, 11% in non-organic basis. This is further supported by sustained customer retention rates in the mid 90s percent range and strong sales of research subscriptions and data feed. In ERS, low double digit recurring revenue growth, driven by strong demand for insurance products was offset by an expected decline in comparable year-over-year one-time software licensing fees and implementation services, resulting in an overall growth rate of 1%. Further ERS' subscription products, the acquisition of RDC, as well as the divestiture of MAKS in 2019 all contributed to a five percentage point increase in MAs returning revenue, now comprising 91% of its total up from 86% in the prior period. In the fourth quarter, MAs adjusted operating margin increased 280 basis points benefiting from lower year-over-year incentive compensation accruals for the full year MAs 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, macro economic and capital market factors. These include but are not limited to the impact of the COVID-19 pandemic responses by governments, regulators, businesses and individuals, as well as the effects of interest rates, foreign currency exchange rate, capital markets liquidity and activity in different sectors of this market. The outlook reflect 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 Euro area GDP will increase in the range of approximately 3.5% to 4.5%. The U.S. unemployment rate will gradually decline to between 5% and 6% by year-end, and benchmark interest rates will remain low, with high yield spreads falling below approximately 450 basis points. 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 pound of $1.37 and $1.22 for the euro. These assumptions are subject to uncertainty and results for the year could differ materially from our current outlook. In 2021, we project that Moody's revenue will increase in the mid-single digit percent range given our approximately 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 and savings generated from our cost efficiency programs are reinvested in key strategic initiatives. I'll provide more detail on these shortly. After expanding Moody's adjusted operating margin in 2020 by 230 basis points to 49.7%, we are projecting 2021 margins to remain in the range of 49% to 50%. We estimate net interest expense to be in the range of $190 million to $210 million. The full year 2021 effective tax rate is anticipated to be between 20% and 22%. Diluted EPS and adjusted diluted EPS are forecasted in the range of $9.70 to $10.10 and $10.30 and $10.70 respectively. Free cash flow is expected to be in the range of $1.9 billion to $2.1 billion and we plan to return approximately $1.5 billion through share repurchases, subject to available cash market 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 billion. For a 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 leveraged loan issuance to grow by approximately 10% supported by increased M&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 for new CLO creation. In 2021, we expect 700 to 750 first-time mandates with the strongest contribution from leveraged finance activity. First-time mandates contribute both to the current year's transaction revenue base and to recurring monitoring fees. MIS' adjusted operating margins will remain stable and approximately 60%. Discipline 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&A activity and favorable movements in foreign exchange rates. Robust customer demand for KYC and compliance solutions, including contributions from the recent Cortera, RDC and Acquire Media acquisitions support future RD&A revenue growth. These expansions further reinforced by strong retention rates for our research and data feed products. While ERS 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. MAs 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 million to $100 million of cost savings from our expense management initiatives that we would 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 attractive opportunity to invest in our business, before returning capital to our stockholders in the form of 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 that actively supporting our employees, customers and communities, we are able to demonstrate our commitment to sustainable stewardship and create enduring value for our 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?

[Operator Instructions] Alex Kramm with UBS. Please go ahead. We'll hear from Judah Sokel.

The first question I wanted to ask was about margins, and specifically the margin outlook for 2021, thinking about balancing operating leverage from the top-line between investments, appreciate the color that you guys gave in the extra investment that you're making in emerging markets and taking some of the cost savings. Generally, you guys have done great with margin expansion over time. 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 using top-line growth that you will have in 2021, especially in MA, coupled with the need to continue to reinvestment further?

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 and accelerate top-line growth. As we noted in the prepared remarks, there are a number of exciting investment opportunities 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 and we spoke about this expanded the margin by 230 basis points in 2020. I gave 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 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 an incentive compensation accrual. If I think about even creation of additional margin from savings and efficiency, that's probably between 140 and maybe 180 basis points to the positive and that's going to come from things like our restructuring program, which we can speak about later in the call increased automation, utilization of lower cost, location, procurement efficiencies, real estate, efficiencies, et cetera. And those positive margin creations are going to be offset and by organic investments that we're going to be making back into the business. And we spoke last quarter about that 80 million to 100 million 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&A acquisitions that we've done. And then of course, there's that math element in terms of business mix, where MA is forecast to grow faster than MIS in 2021 and 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 invest in growth in the future.

And we will hear from Alex Kramm with UBS.

Anyways, maybe you're starting off on MIS and sorry if I missed the last question, but can you perhaps attack the delta between your issuance forecasts and then also how you get to the flat revenue forecasts, 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 will be helpful as well. Thank you

So maybe let me talk to you a little bit about the 2021 issuance outlook. And now, as I said back in October, we still think issuance is going to be down modestly year-over-year, and we're guiding 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 challenges that the year-over-year growth is, we've got some very tough comparables after two very strong issuance years between last year and year before. So our outlook assumes that these constructive market conditions continue largely for 2021, widespread distribution of a vaccine and improving economic growth. Certainly, we're seeing continued recovery in M&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 I think we're going to see growth in some areas like, we have a rating assessment service that supports M&A activity, leveraged 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 is an extraordinary issuance year last year, in particular, U.S. corporate investment grade issuance was up almost 80% 2020. That's just 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 amidst all the -- as I said, kind of ongoing low rates, tight spreads, and M&A activity. Leveraged 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%. I 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&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 seeing 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 hold 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 leveraged loan market. So we think there'll be some growth in CLOs with just that stronger leveraged loan supply and tightening spreads in the CLO market. So 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 you care to talk about the recurring versus transaction and pricing.

From our recurring revenue standpoint, I think we'll be looking at probably something in the low to mid single digits. We've gotten some questions about just kind of thinking about our how we characterize recurring revenue versus others and I think if we included our rating assessment service and access 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.

Okay. And then secondarily if that's okay, 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 flesh out how you are feeling around that JV considering that, essentially out of the market for a few months really highlighted that maybe the market is ready for a different rating agency and arrangement over there? That's the right word. Thank you.

Yes, Alex, so maybe just to touch on that, obviously, CCXI had a license suspension, it was a three month suspension 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's 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-ready 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, 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 on 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, 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. So, 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 NEO tech. And they're a kind of a cutting-edge provider of alternative data and insights serving the ESG and KYC markets in Greater China. And then the last thing I'd say is, given the importance of sustainability and green finance in China, we'd also made an investment in a company called SynTao Green Finance, and we're very excited about that and helping to support the growth of that market.

Toni Kaplan of Morgan Stanley.

Rob, maybe you could help us understand your thoughts around M&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&A target? And what return thresholds do you look for?

So I'd say our M&A criteria remained 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 Cortera is an interesting example. 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, Toni would be what we did with climate, we bought 427, a couple years ago, but that climate data is now being used in the rating agency has been integrated into a wide range of risk offerings across MA 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 Cortera. 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 million to $20 million. Can you just update us on where that stands now and how fast it's growing? And then what particular areas of focus within ESG are you looking at in '21 relative to like initiatives and where do you see just the most opportunity there?

In 2020, our ESG revenue is approximately $17 million. We're looking to grow that by around 25% in 2021, through discrete sales to an external client. The interesting piece about ESG revenue for 2021 is, in addition to that, looking at another $5 million to $10 million for revenue that will be earned through either MIS using their data and analytics to inform ESG data and analytics to better inform can MIS ratings and enrich the research that we produce. And through MA, where we can continue to pilot and develop new products, including distributing ESG through CreditView and CreditEdge and 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 and that is, for example, include integrating our climate and ESG content into CreditView updating, this is something we just did. Our physical risk score is for over 5000s of the companies and that's leveraging the course BvD's data and methodology, of course, increasing our coverage around the transition risk. And then finally, of course, incorporating ESG within credit and having ESG issuer profile scores is credit impact frameworks. And so there's a lot of opportunity that we're capitalizing on this space. And so it's not just about the isolated ESG business, but how it integrates more holistically across the MCO.

Ashish Sabadra of Deutsche Bank.

Rob, thanks for providing the color on the integrated risk assessment market. And you're focused on the KYC and compliance obviously very high growth areas. I was just wondering as you think about your group going forward, in addition to KYC and compliance, are there other use cases or geographies which you think are pretty attractive from a growth perspective? Thanks

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 outside of even KYC 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&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 crime solutions is one 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&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 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 it's 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 for the MA business, the high single-digit growth. If you could help parse the growth from RD&A, the recurring growth in ERS and then obviously, March, you talked about some of the headwinds from shift to the subscription model, but any incremental thunder that you put pieces there, that'll be helpful. Thanks.

Absolutely, I think forward to 2021, specifically, in terms of the growth here. We'll see the majority of growth is likely to be driven throughout RD&A segments. Rob spoke earlier, we spoken part of the prepared remarks around ERS and the ongoing transmission of that business towards more of a recurring revenue basis. That will offset some of the declining one-time sales in the ERS space. So if you're thinking about actually getting some of that low double-digit guidance, the majority will come through RD&A in 2021. And then we'll see a small growth but still growth within ERS over the year.

Andrew Nicholas with William Blair.

Let's hope you can provide a bit more detail on the different strategic investments in outlines 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 that's outsized relative to the others in terms of both investment standard and total opportunity?

We certainly feel very positive about some of the areas that we're investing that $80 million to $100 million of cost efficiencies into, just to give you a sense, maybe we can start in the commercial real estate side, both growth through our recent business, and then the integration, obviously, of some of the data sets that we producing and many of our adjacencies into that those commercial real estate products. I think just simply adopting a KYC and compliance, it's about that further integration of the Acquire Media, RDC, BvD, Cortera type data sets that really didn't begin to allow us to create synergistic opportunities. And then, of course, on the ESG side here, how we're beginning to build through this, we spoke a minute ago to one of Tony's question of the creation of new products and opportunities that give a holistic integrated recipe out to the market.

Yes. And maybe let me add to that Mark, just specifically focusing on KYC and compliance and the company and reference data, because we've made a lot of investment there. And we're continuing to make investments there. But organic and inorganic and we're now three plus years out from the Bureau van Dijk acquisition. You remember that that puzzle page they are on the webcast and we're now thinking about this business more holistically, inside of them. And collectively, our company in reference data business, is growing sales is 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 you'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 of Bureau van Dijk and RDC. We just completed the first commercial release where we're bringing together the Orbis 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 of RDC, 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, it's among the faster growing opportunities at Moody's from a margin perspective, is that becomes a bigger part of M&A, is that accretive to kind of the long-term margins for that business or pretty consistent with the segment as a whole?

Absolutely. So as we think about longer term 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 was in bolt-on and integrate that business, we're very focused on ensuring that margin protocol approaches something like the BvD margin profile over the medium term. And 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 generally attractive margin profile.

Manav Patnaik of Barclays.

I just wanted to focus on Cortera. So my first question is, I was hoping you could give us a little bit more on how big that asset is, what is going in -- already again, I believe in, just guide us through that also. Just wanted to see how much of a gap, let's say for income of the U.S., call it BvD is in tact, I suppose.

Okay. 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 Cortera 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, their data already contained Orbis database. But by owning Cortera, we now unlock the access to really their full suite of reference and trade credit data, as I said, 36 million companies with something like a trillion and a half data points, it's just an enormous amount of data that we think is going to have real relevance across the Moody's franchise and a key part of that is -- they're contributed towards accounts receivable network and that gives great insights on the company spending and commercial credit. And you asked about growth. I mean, frankly, Manav, I think they've really been focused on building out this data asset, rather than really focusing on growth, they have a very small sales force. So you 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 in our shared customers.

Okay. Got it. And then, I guess a little data puzzle that you are putting together all across Moody's Analytics which I think all of that seemed pretty exciting. I was just wondering, how do you see ERS this puzzle within Moody's Analytics?

Yes. I guess the way I might think about Manav is, we've got an enormous content engine. And as you're getting a sense, this company in reference data that we talked about it 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 that is kind of several ways to distribute that. One of them is through ERS. ERS is effectively a software that is being used and embedded into customer workflows to banks all across the world. And it gives us an opportunity, I always think of this kind of risk as a service. Maybe that's the term I'm going to coin on this call but there's -- we're putting a lot of that content, you can imagine the data, the analytics, we're putting that content through those software as a service solutions. 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 through partnerships with third 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.

George Tong of Goldman Sachs has our next question.

I want 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 that issuance levels begin to normalize?

Maybe I'll step back for a minute to talk a little bit about fourth quarter and then I'll talk a little bit about expectations for 2021 after that. And we are very aware based on our press release this morning at the first quarter margins for both MIS and MA even sales were down. And if I look at MCO in total, it's really the primary driver for that, fourth quarter expenses grew by 16%. But the primary drivers of that -- call that 11% of the 16% will really attribute to what I think of is unlikely to reoccur faster. So five percentage points of that 16 was restructuring and severance expenses. On our efficiency programs, three percentage points of that would relate to sort of incentive stock and commissions on strong sales performance. And then, around three percentage points of that would relate really to the M&A impact as we continue to invest for growth. The underlying core expense base, there was really salary increases and hiring, and that was probably only 2%. So very consistent, very disciplined, very controlled. So 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 give confidence in guiding towards that approximately 60% for that MIS margin outlook for 2021.

Got it. That's helpful. And then switching gears, if we look at your issuance expectations, you're looking for high yield issuance to be round about mid single-digit off of difficult comps. You also cited some factors that can be very conducive to high yield issuance, like low default rates, low spreads, improving equity environment, M&A activity, et cetera. So how would you handicap the potential upside or downside versus your base case expectations for high yield?

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 we're seeing in the market right now in leveraged 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, if 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&A is a wildcard we've expected M&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&A activity go beyond that. And that would provide some upside also to the specifically in a leveraged finance market. Leveraged loans, M&A activity, sponsor activity, would be very positive to the leveraged finance market. What could be a headwind; you've got a lot of companies that have a lot of liquidity. So, it, we have to see what the companies are going to do with all of that liquidity, where they're going to use that to pay down debt, whether you 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 second quarter of last year, because you still got companies that still have very healthy cash positions.

Owen Lau of Oppenheimer.

Just want to quickly go back to the expense guidance up mid single digit? Could you please talk about your assumption in terms of the T&E and marketing? Do you also include, for example, additional severance and an incentive or any charges related to real estate, or reorganization? What are the key drivers of these expense growth?

If I think about the attribution of the 2020 actual expenses to 2021, outlook as mid single, it probably be, let's quote four primary categories. The first category is really that savings and efficiency, the 80 million to 100 million that we anticipate and creating, that's probably 3% to 3.5% of that expense base. And the whole point of those savings and efficiencies is that it's kind of enable us to self fund many of 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%. So you could almost see the savings and efficiency and the reinvestment back into the businesses washing itself out. And you probably got around 2% to 2.5% of expenses related to that incremental M&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, the dollar has depreciated over or expected to depreciate over 2021 vis-à-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 thinking and coming up with that mid single-digit guidance. You had one specific question on T&E expenses. And we certainly have modeled an increase in T&E expenses, as we move through the year, we're probably going to return to a more normalized level, by the time we get to that third, maybe fourth quarter, but it's still going to be lower than those historical levels that we would have experienced, pre-pandemic as you become more efficient and more effective in communicating with our customers and workforce.

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 four great assets and drive additional growth and penetration instead of just some of its parts?

Yes, I guess I might start by, just going back to Bureau van Dijk and we have put some synergy targets out into the market at the time of the acquisition. And we've effectively achieved that. 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 RDCs grid database into the Orbis database to create a one stop shop is -- 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. It was getting all that content that's relevant for our customers in one easy place for them to use. So our integration have already seen, that's a big milestone for us. So we feel very good about that. And we just bought Acquire Media 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 of the business value as quickly as we can and get these corporate integrations done as quickly as we can to achieve that realize really the full potential of what we're acquiring.

Jeff Silber of BMO Capital Markets.

You might have answered this earlier. I just wanted to get a little bit of clarification. I think Toni had asked about your M&A strategy, 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 look attractive 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 making investment last year in a Malaysian rating agency, that was important for us, because it's one of the largest Islamic finance markets in the world. And so that was that we thought that was an important opportunity to kind of augment the global rating capabilities around Islamic finance. As you 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 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, just, it 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. So I think you'll see that trend continue that will 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 acquisitions that would be in 2021?

I think about MIS for 2021, we are looking at organic growth consistent with our overall outlook of approximately flat for the year, organic acquisitions would be relatively immaterial to overall MIS after 2021. All right, if I had seen the MA, that I wasn't 100% sure, I should ignore and… And in terms of the M&A on MA, we're looking at around two to three percentage points of growth, from the inorganic acquisitions that we've completed over the last say four months.

Craig Huber from Huber Research Partners.

I just want to get a little more clarity if I could, on the cost for the fourth quarter, what was 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 fourth quarter do you think are non-recurring and you guys call out this $30 million restructuring charge in your presentation packet and press release. But what else does is in there that can quantify that so called non-recurring? Have a follow up.

Good afternoon, great. Let me start with the 2020 full year incentive compensation number, and that was approximately $246 million. It's very consistent with the 2019 numbers, you'll recall 237. If I think forward to 2021, and the incentive compensation is expected to be between $50 million to $60 million per quarter. It's a little higher than what we had in 2020 really, as we bring on and align the incentive compensation plans of those inorganic acquisitions into our business, I thought it might also be helpful to touch on the expense, rent, that we anticipate in 2021, addressing the equation, and from Q1 to Q4, would look to guide to between $45 million and $55 million primarily driven by selective growth in some of the investments, additional salaries and benefits and increasing team to some extent, and then really other costs, that support overwriting a revenue growth line. The expense numbers from the fourth quarter just to close out completeness for your question, really restructuring severance is probably the biggest one there that was around 36-ish million dollars. And then, really that incentive, compensation stock information and that was above our normal run rate, that's probably another 23-ish. And those are the ones that I'd suggest adjust done.

And, Rob, it's like each ask you, with the new Biden administration here in outlook seems to be with higher corporate tax rates, potentially, perhaps we'll get increased regulations out there. So if you maybe just touch on that to be a good patient reversal of the prior administration, what they potentially could need for debt issuance, once we get to that stage and also, without 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?

In regards to a potential increase in corporate taxes, I don't think it's the first priority of the Biden ministration. And I think, you know, 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 insurance, maybe we'll roll the clock back to when there were all these questions about what would happen when the decrease in corporate tax rates, and remember all the concern about the reduction of the value of the of the tax shield and was that going to reduce negatively impact the 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 shield is going to be increased. But we, 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 the EGA, certainly, the Biden administration is very focused on climate change. They've already announced an incentive 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 one 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.

From Kevin McVeigh of Credit Suisse.

Just a follow-up on ESG. Just any thoughts as to the restructuring of how that relates to agreeable business as part of the restructuring and how it's going to impact the rest of Moody's?

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 something different?

Nope, that's right, Mark.

So, Kevin, in late December, we approved a new restructuring program that we estimate is going to result in annualized savings of something between $25 million and $30 million 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-19 pandemic and that was around the rationalization and the exit of certain real estate leases. So if I put those two together, total restructuring charges in 2020 were around $50 million and we expect that those 2020 actions are going to generate a little bit more than maybe $30 million in run rate savings. Now if I broaden the lens just for a second and I step back and I think in total since mid-2018 and including our expectations for 2021, our rationalization and efficiency initiatives will have created almost $180 million in run rate savings and we probably 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 to support future growth.

That's super helpful. And then with the issues that was -- does that factor any of the 1.1 trillion [Technical Difficulty].

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 that 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 and ratings.

Shlomo Rosenbaum with Stifel.

I just want to hone in a little bit on that Cortera acquisition. Rob, Cortera besides focusing on banks and providing some of the information for your scores and stuff like that, their trade credit is actually pretty interesting and have been kind of a 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 and that part of their business?

Yes. So maybe I'll go back to -- you're right, that trade credit data is really interesting valuable data, was part of the appeal of that acquisition and as we've said, I think you're going to see us thread that through our offerings ranging from know your customer. We've got a procurement catalyst that supports supply chain risk management. It will be useful there. You can imagine us we're thinking about integrating that into our commercial lending solutions. So a number of ways that we see monetizing that trade credit content and I mentioned earlier, we have a lot of content. Obviously, through not only Orbis, but all of our credit capabilities and so we think there is 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 of your business?

There are multiple ways to win here, would be my answer.

Okay. And then just, Mark, is Cortera part of your guidance as well in terms of the growth or not?

Shlomo, we have incorporated Cortera into our guidance for 2021. And maybe if I just step back and I think about both Acquire Media, VM Financial, Cortera and Catalyst just in aggregate this might be helpful, the relative adjusted EPS impact for our 2021 guidance is relatively small, probably around $0.05 or so. The margin impact, as we spoke a little bit earlier on the call is a bit more impactful. We see around 130-ish basis points impact to the MA adjusted margin and around 60 basis points negative impact obviously to the MCO 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.

[Operator Instructions] And we'll now hear from Simon Clinch of Atlantic Equities.

I was wondering if you could cycle back to what you are building within RD&A. And really I'm interested in how competitive the environment is for acquiring these data assets that you are hoping to continue doing because obviously it's not our notice that this is a very desirable part of the market. And so I'm just wondering how you think about that competitive environment and how and why Moody's should win in sort of getting the assets that you need and want?

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&A, which I think puts a real premium on the industrial logic of these acquisitions, 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 Cortera as a good example. I talked about the value of the data, putting it through multiple of our product offerings. When we looked at Cortera and 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 are onboarding as customers and monitoring those 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 that then allows us to be competitive in our process where there are other parties that are looking at these assets. Certainly other companies are investing in anti-financial crime and know your customer because it is very high-growth space, 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.

And then just following up on ERS, I just want to make sure I understand this right. There is some fantastic growth in the recurring revenue line. But you're effectively winding down the sort of one-time transactional side of that business. So I just wanted to make sure I understood sort of 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 flows 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. It's building up the recurring revenue, the subscription part of the business and as you saw in the fourth quarter 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 de-emphasizing. There are some customers who still only want an offering through a licensed solution and 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 Simon maybe to give you also just a little bit of insights into what is driving that low double-digit revenue growth for recurring revenue. There are really three main things I would say. One is insurers, they're seeking our help in getting compliant. You've heard us talking about IFRS 17 regulatory requirement. 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. That's a great story. Second, we've got ongoing demand from U.S. financial institutions to comply with the credit loss reporting requirements. And then third, you've heard us talk about credit lends, 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 that we launched an automated spreading tool called QUIQspread that came out of our accelerator. It's really an employee-driven innovation that worked its way through the accelerator and that's now -- we're selling that alongside credit lends and it's in use at 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 in the next couple of years as that as that one-time line continues to decline.

[Operator Instructions] And it appears there are no further questions at this time. I would 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 in the spring. Thank you very much.

And this does conclude Moody's fourth quarter and full year 2020 earnings call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown under the fourth quarter and full year 2020 earnings section at the Moody's IR homepage. Additionally, a replay of this call will be available after 3:30 PM Eastern Time Today on Moody's IR Web site. Thank you. You may now disconnect.