Moody’s Corp. (MCO) Q4 2020 Earnings Call Transcript

Moody’s Corp. (NYSE: MCO) Q4 2020 earnings call dated Feb. 12, 2021

Corporate Participants:

Shivani Kak — Head of Investor Relations

Robert Fauber — President and Chief Executive Officer

Mark Kaye — Chief Financial Officer

Analysts:

Judah Sokel — J.P. Morgan — Analyst

Alex Kramm — UBS — Analyst

Toni Kaplan — Morgan Stanley. — Analyst

Ashish Sabadra — Deutsche Bank — Analyst

Andrew Nicholas — William Blair & Company — Analyst

Manav Patnaik — Barclays — Analyst

George Tong — Goldman Sachs — Analyst

Owen Sum Lau — Oppenheimer & Co. Inc. — Analyst

Jeffrey Silber — BMO Capital Markets — Analyst

Craig Huber — Huber Research Partners — Analyst

Kevin McVeigh — Credit Suisse — Analyst

Shlomo Rosenbaum — Stifel — Analyst

Simon Clinch — Atlantic Equities — Analyst

Presentation:

Operator

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 and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions-and-answers following the presentation. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead.

Shivani Kak — Head of Investor Relations

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 the full year 2021. The earnings press release and the presentation to accompany this teleconference are both available on our website 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 31st, 2019, our quarterly report on Form 10-Q for the quarter ended March 31st, 2020 and in other SEC filings made by the company, which are available on our website and on the SEC’s website.

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 may be on the call this morning in a listen-only mode. I will now turn the call over to Rob Fauber.

Robert Fauber — President and Chief Executive Officer

Thanks, Shivani. Good morning and thanks to everybody for joining today’s call. We will 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 on 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 achieve record financial results in 2020 with revenue growth of 11% and an increase in adjusted diluted EPS of 22%. Against a backdrop of heightened credit market activity, Moody’s Investor 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. That’s driven by our expectation that strong growth from MA and a favorable issuance mix for MIS will offset an expected decline in global debt activity. Moody’s 2021 adjusted diluted EPS is forecast to be in the range of $10.30 to $10.70.

In 2021 and beyond, we’re going to continue to deliver solutions to meet our customers’ evolving needs by integrating and leveraging our data and analytic capabilities and investing in innovation. And in addition, recent acquisitions combined with organic investments position us well for the future and reinforce our long-term growth opportunity. Finally, we continue to emphasize our role as responsible stewards of our stockholders’ capital. While investing in the business remains our top priority, we’ll seek to return approximately $2 billion to our stockholders this year in the form of dividends and share repurchases.

Turning to full year results, Moody’s revenue grew an impressive 11% with record revenues from both MIS and MA that increased 15% and 6% respectively. On an organic constant currency basis, MA revenue increased 8%. Moody’s adjusted operating income rose 16% 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. In this past year, we launched a number of initiatives to further support diversity and inclusion both across our company as well as within the communities we operate including $2 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 CDP with A score for addressing climate change. In 2020, amidst the pandemic, we continue to invest in our business and position the company for ongoing growth. In 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 positions 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, leverage loan volumes remained modest for most of the year despite an uptick 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 continue 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 in the customer workflows that support strong customer retention rates. And as a result MA’s margin has grown 480 basis points over the past 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 through the development of software and analytics businesses. From 2017 to 2020 we’ve built out some very substantial data and analytics capabilities, starting with the acquisition of Bureau van Dijk, one of the world’s largest company databases, and then we complemented that by adding depth across people, properties, ESG and climate, just to name a few. And this strategy has positioned us well to serve 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. And COVID has accelerated the digitization of manual processes across the financial sector and it’s highlighted the importance of resilience and scenario of 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 how our customers’ needs are evolving and delivering solutions that can draw on the breadth and depth of our capabilities. Second, investing with intent to grow in 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 the Moody’s as an integrated risk assessment business. Today we serve a wide range of risk assessment use cases and end markets collectively worth north of $35 billion. Our largest risk assessment business of course is the rating agency that serves fixed income issuers and investors. And as Moody’s has evolved we now help customers with everything from customer onboarding to commercial lending to sustainable investing and a number of other areas as you can see around this 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 use cases in markets. And that’s what we mean by an integrated risk assessment business.

Earlier this week, we announced our intention to acquire a company called Cortera. We’re excited about the valuable assets that they are 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’s 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 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 an entity data and AI technology to serve a range of use cases, including among other things, KYC and compliance. In 2020 Moody’s Analytics generated approximately $525 million in annual sales of these solutions and we expect them to produce high-teens growth in 2021. The know-your-customer and compliance use 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 on Moody’s fourth quarter results as well as our outlook for 2021.

Mark Kaye — Chief Financial Officer

Thank you, Rob. In the fourth quarter Moody’s total revenue increased 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 was the largest contributor in the fourth quarter, growing 12%, double the 6% increase in issuance. This is driven by infrequent US bank issuers taking advantage of the low rate environment. Corporate finance revenue grew 2% despite a 9% decline in issuance. This was primarily the result of strong contributions from both US leverage loans and speculative grade bonds as issuers continued to opportunistically refinance debt and support M&A deals.

Revenue from public project and infrastructure finance declined 3% against a 12% increase in US 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 improvements 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 expanded 170 basis points to 59.7%.

Moving to MA. The fourth quarter revenue grew 8% or 5% on an organic basis. Continued robust demand for KYC and compliance solutions drove a 21% increase in RD&A revenue or 11% on an organic basis. This is fairly supported by sustained customer retention rates in the mid-90%s range and strong sales of research subscriptions and data feeds. In ERS, low-double digit recurring revenue growth driven by strong demand for our 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%.

Growth in ERS’s subscription products, the acquisition of RDC as well as the divestiture of MAKS in 2019, all contributed to a 5 percentage point increase in MA’s recurring revenue, now comprising 91% of its total, up from 86% in the prior year period. In the fourth quarter, MA’s adjusted operating margin increased 280 basis points benefiting from lower year-over-year incentive compensation accruals. For the full year, MA’s adjusted operating margin increased 160 basis points, supported by growth in recurring revenue as well as expense efficiency initiatives.

Turning now to Moody’s full year 2021 guidance. Moody’s outlook for 2021 is based on assumptions regarding many geopolitical conditions, macroeconomic, and capital market factors. These include, but are not limited to, the impact of the COVID-19 pandemic, responses by governments, regulators, businesses, and individuals as well as the effects on interest rates, foreign currency exchange rates, capital markets’ liquidity and activity in different sectors of the debt market. The outlook also reflects assumptions regarding general economic conditions, the company’s own operations and personnel, and additional items as detailed in the earnings release.

Our full year 2021 guidance is underpinned by the following macro assumptions: 2021 U.S. GDP will rise approximately 4% to 5% and 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 rate. 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’s margin 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 forecast to be in the range of $9.70 to $10.10 and $10.30 to $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’s adjusted operating margin will remain stable at approximately 60%. Disciplined cost management is enabling ongoing investment back into the rating agency, enhancing our offerings and delivering greater value to our customers.

For MA, we project 2021 revenue to increase in the low-double digit percent range supported by high-single digit constant dollar organic growth as well as recent M&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. This expansion is further reinforced by strong retention rates for our research and data feed products.

For ERS, we anticipate recurring revenue to continue growing at a double-digit rate. As we de-emphasize one-time sales, we expect that transaction based revenue will decline 20% to 30% year-over-year. MA’s adjusted operating margin is projected to be approximately 30% in 2021. Our outlook assumes continued positive margin expansion of approximately 50 basis points 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 opportunities 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. We’re 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.

Robert Fauber — President and Chief Executive Officer

Thanks, Mark, this concludes our prepared remarks and Mark and I would be pleased to take your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Alex Kramm with UBS. Please go ahead. And we’ll hear from Judah Sokel.

Judah Sokel — J.P. Morgan — Analyst

Hi, can you hear me all right?

Robert Fauber — President and Chief Executive Officer

Yeah, we sure can.

Judah Sokel — J.P. Morgan — Analyst

Okay, great, thank you for taking my question. 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 with reinvestment, I appreciate the color that you guys gave in the extra investment that you’re making, 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 of driving margin expansion using topline growth that you will have in 2021 especially in MA, coupled with the need to continue growth [Indecipherable]?

Mark Kaye — Chief Financial Officer

Thank you very much for the question. This is Mark here. We are constantly pushing to increase margins. And while ensuring to your point that we are balancing that against the need to invest in the business to maintain and accelerate topline growth, as we noted in the prepared remarks there are a number on exciting investment opportunity that we’ve identified for 2021 and we’re going to take advantage of those while preserving the margin at approximately 49% to 50% for the year. After having — you spoke about this expanded the margin by 230 basis points in 2020.

I’ll give a little bit more color in terms of how that’s broken down. It might also be helpful. If we think about creation of margin in 2021 through operating leverage that’s probably 50 basis points to 100 basis points and that’s going to come from things like scalable revenue growth, a little bit of a benefit from the reset of our incentive compensation accrual. And if I think about creation of additional margin from savings and efficiency, that’s probably between 140 basis points 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 locations, procurement efficiencies, real estate efficiencies etc. And those positive margin creations are going to be offset then by organic investments that we’re going to be making back into the business.

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 in the call, if you would like. And then around 50 basis points to 100 basis points from some of the recent M&A acquisitions that we’ve done and then of course there is that math element in terms of business mix where MA is forecasted 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 reinvesting for growth in the future.

Operator

And we’ll hear from Alex Kramm of UBS.

Alex Kramm — UBS — Analyst

Can you hear me now? Hello?

Robert Fauber — President and Chief Executive Officer

Yes, Alex. We can. Yeah.

Alex Kramm — UBS — Analyst

Hello. Hey. I don’t know what happened earlier. Anyways maybe starting off on MIS and sorry if I missed the last question, but can you perhaps attack the delta between your issuance forecast and then also how you get to the flat revenue forecast, particularly interested in the recurring revenue given the solid issuance that we had last year? And then also obviously pricing and mix, any comments there would be helpful as well. Thank you.

Robert Fauber — President and Chief Executive Officer

Yeah, Alex. So maybe let me talk to you a little bit about the 2021 issuance outlook. And as I said back in October, we still think issuance is going to be down modestly year-over-year and we’re guiding to being 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 the year before.

So our outlook assumes that these constructive market conditions continue largely into — for 2021, widespread distribution of 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 us of refinancing. That means we’re — 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 was an extraordinary issuance year last year and in particular US corporate investment grade issuance was up almost 80% in 2020. That was 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 and 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 US should improve after a relatively slower year in comparison to the US. And I think we’ll see that investor demand should remain quite strong in the ongoing search for yield. Thinking about leverage 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 whole asset securitizations even though you’ve got some parts of the commercial real estate market like hotels and retail that are experiencing some distress. And then as you know, as we think about CLOs we also look at what’s going on with the leveraged loan market. So we think there’ll be some growth in CLOs with just that stronger leverage loan supply and tightening spreads in the CLO market.

So — and maybe just one other thing I’d add, just in public finance very strong year, generally for public finance, so we’d expect that to remain but elevated but at levels consistent with last year.

Alex Kramm — UBS — Analyst

And if you care to talk about the recurring versus transactional pricing as a similar question? Sorry.

Robert Fauber — President and Chief Executive Officer

Yes, sorry. So from a recurring revenue standpoint, I think we’ll be looking at probably something in the low to mid single digits. We’ve got some questions about just kind of thinking about how we characterize recurring revenue versus others. And I think if we included our rating assessment service and excess issuance fees and Issuer rating fees, we’d be looking at something like a mid-single digit recurring revenue growth. And I think in general, when you look at it on a full year basis, pretty comparable outlook for recurring revenue.

Alex Kramm — UBS — Analyst

Okay. And then secondarily if that’s okay, a quick one, just on CCXI, I mean, definitely some headlines in December on China which is obviously an important topic for a lot of people. So can you just flesh out how you are feeling around that JV considering that being essentially out of the market for a few months and really highlighted that maybe the market is ready for a different rating agency arrangement over there. That’s the right word. Thank you.

Robert Fauber — President and Chief Executive Officer

Yeah, Alex, and maybe just to touch on that. Obviously the CCXI had a license suspension. It was a three-month suspension coming at the end of December and they are taking a number of actions to address that. I guess, as I think about the China strategy more broadly, we’ve got the MIS cross border rating business, we’ve got the MA business in China, really no impact to that. But in terms of the domestic rating market, I mean obviously it’s unfortunate that CCXI had this issue. But they do remain the leading domestic credit rating agency in China. And I think early signs from the Biden administration don’t lead us to think that US policy towards China is likely to soften meaningfully.

So I think for us looking at this — the environment for majority-owned US firms, I think in important sectors like credit ratings, I think, will remain challenging to be truly successful over the long term. So we’re going to continue to collaborate with CCXI like we have been on things like commercial engagement. And I guess I would also say, Alex, that given some of the challenges we’ve seen in the domestic credit rating industry, 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 MioTech and they are kind of a cutting-edge provider of alternative data and insight 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 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.

Alex Kramm — UBS — Analyst

All right. Very helpful. Thank you.

Operator

Toni Kaplan of Morgan Stanley.

Toni Kaplan — Morgan Stanley. — Analyst

Thank you. Rob, maybe you could help us understand your thoughts around M&A. Would you say you are 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?

Robert Fauber — President and Chief Executive Officer

Yeah. Toni, thanks for the question. So I’d say our M&A criteria remains 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, right, because there is 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, right. We bought 427 a couple of years ago, but that climate data is now being used in the rating agency and it’s being integrated into a wide range of risk offerings across MA in addition to the stand-alone 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 returns — return criteria that we have had for years.

Toni Kaplan — Morgan Stanley. — Analyst

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 our initiatives where — and where do you see just the most opportunity there?

Mark Kaye — Chief Financial Officer

Toni, good morning. This is Mark. In 2020 our ESG revenue was approximately $17 million. We’re looking to grow that by around 25% in 2021 really for discrete sales of — three discrete sales to external clients. The interesting piece about the ESG revenue for 2021 is probably 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 or ESG data and analytics to better inform MIS ratings and enrich the research that we produce and through MA where we can continue to pilot developing new products including distributing ESG through credit view and credit edge 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 those, for example, include integrating our climate and ESG content into credit view, updating, this is something we just did, our physical risk scores for over 5,000 listed companies and that’s leveraging of course BvD’s data and our enhanced methodology. Of course, increasing our coverage around transition risk. And then finally, of course, incorporating ESG within credit having ESG issue a profile score, ESG 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.

Toni Kaplan — Morgan Stanley. — Analyst

Thank you.

Operator

Ashish Sabadra of Deutsche Bank.

Ashish Sabadra — Deutsche Bank — Analyst

Thanks for taking my question. Rob, thanks for providing the color on the integrated risk assessment market and your focus on the KYC and compliance. Obviously very high growth areas. I was just wondering, if you think about your growth going forward in addition to KYC and compliance, are there other use cases or geographies which you think are pretty attractive from a growth perspective? Thanks.

Robert Fauber — President and Chief Executive Officer

Ashish, first of all welcome to the call. It’s great to have you. And just to clarify, you’re talking about kind of our portfolio more broadly. Is that right?

Ashish Sabadra — Deutsche Bank — Analyst

That’s right. And how do you think about —

Robert Fauber — President and Chief Executive Officer

Yeah.

Ashish Sabadra — Deutsche Bank — Analyst

— growing that business outside of even KYC and compliance. Thanks.

Robert Fauber — President and Chief Executive Officer

Yeah, yeah. So maybe a couple of things, I would say. First I’m going to talk about kind of a broad portfolio of RD&A in MA. That’s where we obviously — where we have that business today. There is 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 is also just a lot of demand for data and analytics on private companies. That’s the 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’ve got a lot of demand there from our core customer base around analytics and workflow tools for lenders and investors. And we’re also seeing some good demand for our economics content. You think about that that is being used to support scenario analysis and market planning and stress testing.

Ashish Sabadra — Deutsche Bank — Analyst

That’s very helpful color, Rob. And maybe a quick question on the organic growth in the MA — 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, Mark, you talked about some of the headwinds from shift to the subscription model. But any incremental color that you could provide on the individual pieces there that will be helpful. Thanks.

Mark Kaye — Chief Financial Officer

Absolutely. I think forward to 2021 specifically in terms of the growth here, we see the majority of growth is likely to be driven through our RD&A segment. Rob spoke earlier, we spoke in part of the prepared remarks around ERS and the ongoing transition of that business to more of a recurring revenue basis. And that will offset some of the decline in one-time sales in the ERS space. So if you’re thinking about attributing some of that low double digit guidance, the majority will come through RD&A in 2021 and then we’ll see a smaller growth but still growth within ERS over the year.

Ashish Sabadra — Deutsche Bank — Analyst

That’s very helpful. Thanks, Mark.

Operator

Andrew Nicholas from William Blair.

Andrew Nicholas — William Blair & Company — Analyst

Hi. Good morning. I was hoping you could provide a bit more detail on the different strategic investments you outlined on slide 23. Maybe some examples of investments you’re making that you’re particularly excited about. And then also wondering, is there any single initiative there that’s outside relative to the others in terms of both investment spend and total opportunity?

Robert Fauber — President and Chief Executive Officer

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

Yeah. And then 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, both organic and inorganic. And we are now three-plus years out from the Bureau van Dijk acquisition. You remember that puzzle page there in the webcast and we’re now thinking about this business more holistically inside of MA and collectively, our company in reference data business is growing sales at 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 orders 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.

Ashish Sabadra — Deutsche Bank — Analyst

Great, that’s helpful. And then maybe a follow-up to that KYC discussion. Obviously, it’s among the faster growing opportunity that Moody’s from a margin perspective, as that becomes a bigger part of M&A, is that accretive to kind of the long-term margins for that business are pretty consistent with the segment as a whole?

Mark Kaye — Chief Financial Officer

So, 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 as we build out and integrate that business, we’re very focused on ensuring that margin profile approaches something like the BvD margin profile over the medium-term. That really gives you a sense of sort of how we’re balancing that revenue growth versus margin profile over the next 12 to 18 months.

Robert Fauber — President and Chief Executive Officer

Overall, big scale business and generally it’s a attractive margin profile.

Ashish Sabadra — Deutsche Bank — Analyst

Great, thanks a lot.

Operator

Manav Patnaik of Barclays.

Manav Patnaik — Barclays — Analyst

Thank you. I just wanted to focus on Cortera as my first question, if that’s okay? I was hoping you could give us a little bit more on how big that asset is, you know what it’s growing in the year. You have already partnered with them, I believe. And just tied to that also just wanted to see how much of a gap is that so for kind of the U.S. coverage that BvD is going to have I suppose.

Robert Fauber — President and Chief Executive Officer

Manav, good to hear from you. Look, I think the acquisition of Cortera, it’s not a big acquisition, but it’s important, it’s an important next step in enhancing this data business that I’ve been talking about, particularly in the U.S. and Canadian market and they’re already an important data contributor to our Orbis database. We’ve known 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 they’re already — their data is already contained in the 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, the 36 [Phonetic] million companies with something like a 1.5 trillion 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 there are contributory accounts receivable network and that gives great insights on the company’s 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 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 in analytics. We’ve got a global sales force, a big sales force in the United States to better serve, Cortera’s core market and our shared customers.

Manav Patnaik — Barclays — Analyst

Okay, got it. And then these — I guess there’s the little data puzzle you’re putting together all across Moody’s Analytics, if I can call it that, it seemed pretty exciting. I was just wondering how you see ERS sitting with this puzzle within Moody’s Analytics?

Robert Fauber — President and Chief Executive Officer

Yeah, I guess the way I might think about it, Manav is, we’ve got an enormous content engine, right and as you’re getting a sense this company and reference data that we talked about that kind of puzzle piece that’s a big part of it. Now we’ve got other content engines, right. The rating agency is producing an enormous amount of content. We’ve got commercial real estate capabilities and then we have, I think there’s kind of several ways to distribute that. One of them is through ERS, right.

ERS is effectively software that is being used and embedded into customer workflows and banks all across the world and it gives us an opportunity, I always think of it as kind of risk as a service, maybe that’s the term I’m going to coin on this call, but we’re putting a lot of that content. You can imagine the data and analytics, we’re putting that content through those software as a service solutions, right. We’re also leveraging that content in our research business and then we’re looking for other ways to be able to distribute that content whether it’s through APIs, whether it’s 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.

Manav Patnaik — Barclays — Analyst

I see. Thanks for that Rob.

Operator

George Tong of Goldman Sachs has the next question.

George Tong — Goldman Sachs — Analyst

Hi, thanks, good morning. I wanted to dive deeper into your operating margin expectations by segment. Holistically, you’re expecting margins to be relatively flat this year. Assuming MA margins continue to increase, how are you thinking about MIS margins and the sustainability as the issuance levels begin to normalize.

Mark Kaye — Chief Financial Officer

George, good morning, this is Mark. Maybe I’ll step back for a minute and I’ll talk a little bit about fourth quarter and then I’ll talk a little bit about expectations for 2021 after that and I think where we are based on our press release this morning that the fourth quarter margins for both MIS and MA themselves 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% were really attributable to what I think of as unlikely to reoccur factors. So 5 percentage points of that 16% was restructuring and severance expenses on our efficiency programs, 3 percentage points of that would relate to sort of incentives, stock and commissions on strong sales performance, and then around 3 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.

George Tong — Goldman Sachs — Analyst

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

Robert Fauber — President and Chief Executive Officer

Yeah, 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, I think that could provide some upside. We could see some things coming out of the Biden the 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 would. And that would provide some upside also to the — specifically to leverage finance market, right. Leveraged finance — leveraged loans, M&A activity, sponsor activity would be very positive to the leveraged finance market.

Maybe from what could be a headwind, you’ve got a lot of companies that have a lot of liquidity. So we have to see what the companies are going to do with all of that liquidity. Whether they’re going to use that to pay down debt, whether they are going to use that to make acquisitions, invest in their — 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.

George Tong — Goldman Sachs — Analyst

Very helpful. Thank you.

Operator

Owen Lau of Oppenheimer.

Owen Sum Lau — Oppenheimer & Co. Inc. — Analyst

Good afternoon and thank you for taking my questions. So 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 or any charges related to real estate or reorganization? What are the key drivers of these expense growth? Thank you.

Mark Kaye — Chief Financial Officer

Owen, good afternoon. If I think about the attribution of the 2020 actual expenses to our 2021 outlook of mid single growth it’s probably — it’s going to four primary categories. The first category is where you’ve got savings and efficiency. The $80 million to $100 million that we anticipate creating, that’s probably 3% to 3.5% of that expense base. And the whole point of those savings and efficiency is that it’s going to 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 efficiency and the reinvestment back into the businesses washing itself out. Then we 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, dollars depreciated over — or expected to depreciate over 2021 vis-a-vis 2020 and that’s probably another 2% to 2.5%. And then of course we don’t expect to have sort of that same degree of restructuring and impairment charges. So that will give you sort of sense of the breakdown in terms of our thinking in coming up with that mid-single digit guidance.

One specific question on T&E expenses and we certainly have modeled an increased 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 it would become more efficient and more effective in communicating with our customers and our workforce.

Owen Sum Lau — Oppenheimer & Co. Inc. — Analyst

That’s very helpful, Mark. So my follow-up is — thank you for the color on Slide 15. I think it’s very helpful. Could you please talk about maybe the pace of the integration in terms of these offerings? How long do you expect you can fully realize the synergy of these four great assets in twice additional growth and penetration instead of just a sum of its parts? Thank you.

Robert Fauber — President and Chief Executive Officer

Yeah. 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 those. So we feel very good about the integration of Bureau van Dijk into the business. Then RDC is the other kind of big asset. RDC has performed very well in line with our expectations since we acquired it. And the example I gave to you earlier on the call that integration of RDC’s grid database into the Orbit’s [Phonetic] 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 of RDC 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. We wanted to make sure that we’re able to get out the business value as quickly as we can and yet get these corporate integrations done as quickly as we can to achieve — realize really the full potential of what we’re acquiring.

Owen Sum Lau — Oppenheimer & Co. Inc. — Analyst

Got it. Thank you very much.

Operator

Jeff Silber of BMO Capital Markets.

Jeffrey Silber — BMO Capital Markets — Analyst

Thanks so much. 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. Would we expect going forward most of the acquisitions would be in the MA area as opposed to MIS? Is there anything in MIS that might look attractive to you?

Robert Fauber — President and Chief Executive Officer

Yeah. I mean historically that has been the case. There just aren’t that many scaled opportunities to build out the rating business. Now you did see us make an investment last year in a Malaysian rating agency. That was important for us because it’s one of the largest sukuk Islamic finance markets in the world. And so that was — we thought that that was an important opportunity to kind of augment their global rating capabilities around Islamic finance. But the — as you look — kind of look around the globe, there just aren’t that many sizable domestic markets and we’re in them. We’re in India, we’re in China.

The other thing I might say is we — I mean I think we highlighted in the webcast deck, we have been building out a platform in Latin America. We call it Moody’s Local and that’s — basically think of that as kind of a pan-regional approach to domestic markets in Latin America so that we can provide locally tailored products with local analysts to meet local market needs. And we’ve been getting some good traction with that.

But again, I just — there just aren’t that many sizable opportunities. And then you look over to 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 will continue to build out our presence in these risk assessment markets in MA.

Jeffrey Silber — BMO Capital Markets — Analyst

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 would be in 2021. Thanks.

Mark Kaye — Chief Financial Officer

Sure. And good afternoon to you. I think about MIS, for 2021 we are looking at organic growth as we — organic growth consistent with our overall outlook of approximately flat for the year. Inorganic acquisitions would be relatively immaterial to our overall MIS outlook for 2021.

Jeffrey Silber — BMO Capital Markets — Analyst

Forgive me, I meant in MA. Sorry about that.

Mark Kaye — Chief Financial Officer

Jeff, I had assumed that I wasn’t 100% sure. I just ignored it. And just give you —

Jeffrey Silber — BMO Capital Markets — Analyst

It’s a long list.

Mark Kaye — Chief Financial Officer

No problem at all. In terms of M&A on MA. we’re looking at around 2 to 3 percentage points of growth from the inorganic acquisitions that we’ve completed over the last several months.

Jeffrey Silber — BMO Capital Markets — Analyst

All right. Thanks again.

Operator

Craig Huber from Huber Research Partners has our next question.

Craig Huber — Huber Research Partners — Analyst

Thank you. Mark, I wanted to get a little more clarity if I could. On the costs for the fourth quarter what was the incentive comp there, please, what was it for the full year? And more importantly, can you quantify for us how much of the costs in the fourth quarter would you think are non-recurring? I know you guys call out this $30 million restructuring charge in your presentation packet and in the press release, but what else is in there that can quantify that’s so-called non-recurring? I have a follow-up.

Mark Kaye — Chief Financial Officer

Good afternoon Craig. Let me start with the 2020 full year incentive compensation number. That was approximately $246 million. It’s very consistent with the 2019 numbers you’ll recall of $237 million. If I think 4Q of 2021, 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 ramp that we anticipate in 2021 addressing your question. 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 increase in T&E to some extent and then really other costs that support an overriding revenue growth line. The expense numbers from the fourth quarter, just to close out complete this for your question, really restructuring, severance is probably the biggest one there that was around $36-ish million and then really that incentive compensation, stock and commission, that was above our normal run rate. That’s probably another $23-ish million. Those are the ones that I suggest you adjust out.

Craig Huber — Huber Research Partners — Analyst

Thank you for that. Rob if I could just ask you with the new Biden administration here, outlook seems to be with higher corporate tax rates potentially perhaps we get increased regulations out there. So if you can maybe just touch on that, we do basically a reversal of the prior administration, what that potentially could be for debt issuance once we get to that stage and also without regulations on the rating agencies in general, would love your thoughts on that. Will that change impact the ESG perhaps favorably. Thank you.

Robert Fauber — President and Chief Executive Officer

Yeah, Craig, happy to do that. In regards to a potential increase in corporate taxes, I don’t think it’s the first priority of the Biden administration. I mean I think the COVID recovery and then the economic recovery are really the near-term focus. So we may see discussions in the back half of this year for potentially something in 2022 and in terms of how it could impact issuance, maybe we’ll roll the clock back to when there were all these questions about what would happen from a decrease in corporate tax rates and remember all the concern about the reduction of the value of the tax shield, right and was that going to reduce negatively impact debt issuance and our answer at the time was, well, it’s certainly a factor, but it’s just one factor that drives debt issuance and I guess I would say, kind of looking the other way that in theory, the tax shield is going to be increased, but it could also be limiting to some extent the free cash flow of issuers, but I think in general I would expect this to be pretty modest.

I mean they are 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 are going to be more impactful than what looks like a relatively modest change in the corporate tax rate. You mentioned ESG. Certainly the Biden administration is very focused on climate change. They’ve already announced the 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 is 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 will be good for the market, that’ll be good for us as a provider of ESG data data and analytics. I think we’re very well positioned to capitalize on the increased focus on ESG.

Craig Huber — Huber Research Partners — Analyst

Great, thank you.

Operator

From Kevin McVeigh of Credit Suisse.

Kevin McVeigh — Credit Suisse — Analyst

Great, thanks. Hey, 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?

Mark Kaye — Chief Financial Officer

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?

Kevin McVeigh — Credit Suisse — Analyst

Nope, that’s right, Mark.

Mark Kaye — Chief Financial Officer

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.

Kevin McVeigh — Credit Suisse — Analyst

That’s super helpful. And then with the issues that was [Technical Issues].

Robert Fauber — President and Chief Executive Officer

Yeah, 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.

Kevin McVeigh — Credit Suisse — Analyst

Thank you so much.

Operator

Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum — Stifel — Analyst

Hi, thank you for taking my questions. I just want to hone in a little bit on that Cortera acquisition, just 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?

Robert Fauber — President and Chief Executive Officer

Yeah, 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 supply chain — 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 also — we have a lot of content, right. Obviously, through not only Orbis, but all of our credit capabilities and so we think there’s some opportunities to enhance their core offering. We have a big sales force here in the United States and better serve their core market. okay.

Shlomo Rosenbaum — Stifel — Analyst

So is that a, yeah, 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?

Robert Fauber — President and Chief Executive Officer

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

Shlomo Rosenbaum — Stifel — Analyst

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

Mark Kaye — Chief Financial Officer

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 [Phonetic], 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.

Shlomo Rosenbaum — Stifel — Analyst

Thank you. Great. Thank you.

Operator

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

Simon Clinch — Atlantic Equities — Analyst

Hi, guys. Thanks for taking my questions. I was wondering if you could cycle back to what you’re building within RD&A. And really I’m interested in how competitive the environment is for acquiring these sort of little — these data assets that you’re hoping to continue doing because obviously it’s not 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?

Robert Fauber — President and Chief Executive Officer

Simon, great question. It’s a very competitive market. It’s a frothy market. You see the valuations are quite expensive. And we have always had a very disciplined approach to M&A, which I think puts a real premium on the industrial logic of these acquisitions, right, because we want to make sure that we are the natural owner for these assets and that the industrial logic gives us ways to really enhance and monetize what we’re buying. You go back to Cortera as a good example, right. I talked about the value of the data, putting it through multiple of our product offerings. We viewed — 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’re on-boarding 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 then that then allows us to be competitive in our process where there is other — there are other parties that are looking at these assets. You’ve seen other — certainly other companies are investing in anti-financial crime and know your customer because it 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.

Simon Clinch — Atlantic Equities — Analyst

Okay. Understood. Thank you. 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?

Robert Fauber — President and Chief Executive Officer

Through the total revenue line. Yeah. And, Simon, you’ve got it exactly — you’ve got it exactly right. Mark touched on it earlier. We’ve got low double digit recurring revenue growth. That is the focus for us, right. 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 US 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 it’s the next couple of years as that as that one-time line continues to decline.

Simon Clinch — Atlantic Equities — Analyst

Okay. That’s very useful. Thank you very much.

Operator

[Operator Instructions] And it appears there are no further questions at this time. I’d like to turn the call over to our presenters for any closing or additional comments.

Robert Fauber — President and Chief Executive Officer

Yeah, I guess, I would just say thank you for joining today’s call. I hope you all are wells and we look forward to speaking with you again in the spring. Thank you very much.

Operator

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 website. Thank you. You may now disconnect.