Moody’s - Q2 2023
July 25, 2023
Transcript
Operator (participant)
Good day, everyone, and welcome to the Moody's Corporation Second Quarter 2023 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 afternoon, and thank you for joining us today. I'm Shivani Kak, Head of Investor Relations. This morning, Moody's released its results for this second quarter of 2023, as well as our revised outlook for select metrics for full year 2023. The earnings press release and the presentation to accompany this teleconference are both available on our website at ir.moodys.com. 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 in US GAAP. I call your attention to the Safe Harbor language, which can be found toward the end of our earnings release. Today's remarks may contain forward-looking statements within the meanings 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, 2022, 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. Rob Fauber, Moody's President and Chief Executive Officer, will provide an overview of our results, key business high-highlights and outlook, after which he'll be joined by Mark Kaye, Moody's Chief Financial Officer, to answer your questions.
I'll now turn the call over to Rob.
Rob Fauber (President and CEO)
Thanks, Shivani. Good afternoon, and thanks to everybody for joining today's call. As we typically do, I'm going to touch on a few key takeaways from our second quarter results and provide some insights into what's supporting our growth outlook. I also want to continue to highlight some of the exciting growth opportunities within the Decision Solutions line of business. This quarter, I'm going to spotlight our insurance business. I'm going to talk about how we are positioning ourselves for what I tend to think of as a generational opportunity provided by Generative AI. As always, Mark and I will be happy to take your questions. We delivered strong performance across the firm this quarter. MIS achieved its first quarter of revenue growth in six quarters amidst a steady improvement in issuance.
In fact, revenue growth, revenue grew 6%, outpacing a 3% increase in issuance. The improvement in the issuance environment was led by a 54% increase in investment grade activity, and this, combined with the ongoing gradual recovery in high yield bonds, has led us to raise MIS's revenue guidance for the full year to high single-digit growth, up from our prior guidance of low to mid single-digit growth. We continue to sustain 10% AR growth in MA, and selling into strong demand for our suite of mission-critical data analytics and workflow tools. This quarter, we're introducing some additional top-line disclosures for our banking, insurance, and KYC businesses, so that we can provide you with more insight into the robust performance of Decision Solutions.
The stronger than expected revenue growth in MIS is driving the increase in our full-year adjusted diluted EPS guidance of $9.75 to $10.25. We continue to balance our expense control measures while furthering our investment in the business. We're capitalizing on our unique ability to integrate proprietary datasets and advanced capabilities from across our businesses into tailored cloud-based solutions. We're innovating and investing extensively across the company to build further on this momentum, with several key initiatives focused around Generative AI technology, turbocharged by our recent partnership with Microsoft. Over the past several months, as our businesses continue to scale, we've spent considerable time talking with investors about how to think about the Moody's of today.
I want to share that with you, because I think it's really useful context for understanding both our performance and our growth opportunity. We've got several great crown jewel businesses, and anchoring those businesses, of course, is MIS, the global agency of choice for issuers and investors. In MA, we have one of the world's premier subscription-based fixed income and economics research businesses, a data business powered by what we believe is the world's largest database on companies and credit, and three cloud-based SaaS businesses serving banking, insurance, and KYC workflows. At a high level, these businesses come together to help banks, insurers, corporates, and public sector entities really do one of three things. First, to help them commence a relationship or an exposure, so to issue, originate, select, or underwrite.
Second, during the life of that relationship, help them measure, monitor, and manage risk. Third, on the back end, help them verify, account, comply, plan, and report. To do this, we leverage a tremendous set of proprietary data analytics and domain expertise across a range of areas: credit, companies, properties, securities, people, economies, ESG, climate, and more. We think of that as our risk operating system, and we thread that content through our solutions, and that's what makes our customer value proposition both sticky and differentiated. With that backdrop, let me touch on MIS for the quarter. The headwinds of the first quarter have largely dissipated, and that has led to more constructive market conditions and a surge in investment-grade issuance.
In fact, May was one of the busiest months on record for investment-grade activity, as both corporate and infrastructure issuers came to the market opportunistically. I've said previously that investment-grade activity opens the door for issuance further down the rating scale, and that's exactly what we've seen with the ongoing recovery in high yield bonds. We saw the strongest issuance quarter since the beginning of 2022 in high yield, and that drove an almost 50% increase in our high yield revenue versus the prior year period. Primarily based on this stronger than expected performance in both investment grade and high yield, we're raising our issuance and revenue guidance for MIS for the full year. The backdrop to the market recovery, I would say, still remains fragile.
Of our first-time mandates signed in the second quarter, only 25% or so have issued, as some of those corporate treasurers and CFOs wait on the sidelines for more market certainty around the path of inflation and rates and the economy. Muted M&A activity is also contributing to a limited supply of leveraged loans, and that has negatively impacted CLO creation, since over 60% of these loans typically go on to be securitized. Within other structured finance asset classes, such as CMBS and RMBS, higher all-in funding costs are restricting asset creation, and that's resulting in fewer deals and leading us to take down our structured finance issuance forecast for the year. While we've had softer issuance markets over the past year, we've been strengthening our position in the markets of the future to reinforce MIS's position as the agency of choice.
We have strategically invested in our emerging markets footprint for many years, you've heard us talk about this at Investor Days and on earnings calls. That's because although emerging markets account for something like 50% of global GDP, they represent less than 10% of cross-border issuance. We recognize this opportunity for long-term growth. Our investment includes thought leadership, like our annual Emerging Markets Summit that we held in the second quarter. We attracted participants from over 90 countries to that conference. In the second quarter, we also closed on our acquisition of SCRiesgo, a domestic credit rating agency serving Central America, further strengthening our growing Moody's Local franchise all across Latin America. As the digitization of financial markets accelerates, we're positioning MIS as a leader in assessing a decentralized finance, digital bonds, and asset tokenization.
We've rated a number of firsts in this space, just this month, the European Investment Bank's first-ever digital green bond. We continue to grow our sustainable finance franchise within MIS with good momentum in second-party opinions. You may recall we relaunched our methodology in the fourth quarter of 2022. We have now completed over 90 second-party opinions through the first half of this year, and that includes for marquee issuers like Enel and the government of Mexico, and we have delivered 36% growth in SPO volumes versus the same prior year period. Moving to MA. Just a few minutes ago, I described Decision Solutions as primarily three cloud-based SaaS businesses serving banking, insurance, and KYC workflows. As these businesses scale, we want to offer some additional insights into their performance.
From this quarter onwards, we're going to be providing revenue and ARR metrics for each of them. As you can see here, each of these businesses achieved double-digit revenue growth in the second quarter, and together, they delivered 10% ARR growth, with KYC leading the way at nearly 20% ARR growth. Last quarter, we provided a spotlight on our banking business within Decision Solutions, and I thought this quarter, that I would touch on our insurance business. We got some good feedback from that spotlight last quarter. Our insurance business brings together the legacy MA insurance business, which mainly serves life insurers, with RMS, which caters primarily to the P&C market. Collectively, our insurance business delivers workflow solutions for underwriting, risk and capital management, and financial and regulatory reporting.
It generates in the neighborhood of $500 million of ARR. It makes it a very significant component of the broader MA portfolio. Like banks, insurers are undergoing a significant period of transformation as they work to digitize and automate manual and fragmented workflows in order to be both more effective and more efficient in underwriting and risk management and capital planning. This opens new opportunities for us to establish and expand our presence, offering new solutions and capabilities, much in the same way that we have successfully done with banks. At the heart of our insurance offerings are our AXIS and RMS risk engines.
AXIS provides the core actuarial and finance cash flow modeling that is widely used by life insurers, reinsurers, and consulting firms for functions that include pricing, reserving, asset liability management, financial modeling, capital calculations, and hedging. AXIS has proven to be a significant catalyst for growth, and this quarter was no exception. This quarter growth was fueled by increasing demand for our fully automated service, which enables insurers to send their actuarial modeling jobs to a cloud-based infrastructure for very efficient processing. Also contributing to growth in the second quarter is our RiskIntegrity offering, which seamlessly integrates with AXIS and provides a highly automated solution for calculating financial statement information in compliance with IFRS 17 regulations. On the property and casualty side, in May, we held our most successful global insurance conference ever, called Exceedance.
I was there with about 500 of our customers from around the world, we made several very important new product announcements. I have to say, I left the conference feeling very optimistic about the opportunities in front of us to serve the insurance industry. First, our cloud-based, what we call Intelligent Risk Platform or IRP, that is industrial strength, and it is differentiated in the market. We now have well north of 100 customers on the Intelligent Risk Platform in the cloud. This allows customers to run our new, more granular, what we call high-definition models, by leveraging cloud computing power on demand, and that gives our customers a competitive advantage for those of our customers who are using this cloud solution.
We also announced that we're partnering with NASDAQ, enabling our customers to seamlessly access a wide array of cat models available on the NASDAQ platform, in addition to our customers' own internal models. This collaboration significantly enhances the value and capabilities of our IRP as a broader industry workflow platform. With this very compelling set of capabilities and solutions across insurance, now let me talk a little bit about the customer expansion opportunity. We have over 900 insurance customers globally, and there is a significant opportunity for cross-selling and growing revenue per customer. We have very substantial relationships with our top 10 largest insurance customers, who purchase, on average, about six to seven product families from across all of MA.
Our next 90 largest insurers purchase, on average, about four to five product families, and our remaining 800 customers buy an average of just one to two products. You can really see the extent of the cross-sell opportunity. Let me give you an example of how we are growing our insurance relationships. Five years ago, one of the larger U.S. insurers was spending about $15 million annually with us across products spanning risk and capital management, finance and reporting workflow tools, and also some other products, including our MIS data feeds for risk management functions, like risk-adjusted capital calculations and portfolio construction. After the acquisition of RMS, this customer relationship grew substantially to north of $25 million, and this insurer is now a significant customer of both AXIS and RMS.
Given the breadth of business activities of a large insurer, that includes lending and investing, in addition to underwriting, they also subscribe to a number of our other solutions, like our CreditLens loan origination solution, our CreditView research platform, and our structured finance and commercial real estate data and analytics, and even our KYC tools. That has all together allowed us to expand the relationship to an ARR of over $30 million. KYC offers another compelling cross-sell opportunity with insurers as well as corporates. In fact, in 2021, less than 10% of our insurance customers subscribed to a KYC product. Just two years later, we're up to about 20%, and we are optimistic about further potential here.
Our ability to deliver unique and innovative solutions is also being recognized across the industry. Of the awards that are listed on this slide, I have to say I'm particularly proud of our recent recognition as the overall winner of Chartis' inaugural Insurance Analytics25 Award, because it highlights our innovative market-leading solutions that span climate, cat risk modeling, and economic and financial analysis. Speaking of innovation, as you heard, hopefully heard during our recent GenAI briefing, artificial intelligence is fundamental to many of our products, and frankly, it has been for years. I want to touch on three of those, and I'd start with QUIQspread, which is an AI machine learning tool that we have developed in-house that digitizes and spreads financial data.
It's been integrated into a number of our products, including our CreditLens loan origination offering. Today, it's used by hundreds of customers, including banks around the world. Our AI Review product is really at the heart of our KYC screening solutions. It's been trained on over 12 million actual KYC analyst decisions. It's currently used by over 500 customers, and so far this year, it's processed over 110 million names. This all helps further train the artificial intelligence engine that powers these insights, and it reduces the likelihood of false positives by up to 80%. That eliminates countless hours of manual work and reduces the time to screen for our customers from hours to literally just seconds. A huge value prop for our customers.
Finally, NewsEdge, where we've been leveraging deep learning combined with natural language processing, to enhance and optimize our data retrieval, enrichment, and sentiment generation over our multi-domain datasets, employing state-of-the-art big data techniques. To give you a sense of what this means in practical terms, our models are consuming, categorizing, and scoring nearly 1 million news stories from over 20,000 sources each and every day. These are just three of our over, I'd say, over a dozen AI-enabled products, which bring a global team of engineers and product specialists with distinct and deep skill sets around natural language processing and artificial intelligence. Our historical foundational AI experience uniquely positions us, I think, to capitalize on the immense opportunities presented by Generative AI.
GenAI is going to revolutionize how individuals and companies derive insights, how they participate in financial markets, and how they navigate an increasingly complex world. That's why we partnered with Microsoft. Combining Moody's vast proprietary data, analytics, and research with Microsoft's industry-leading GenAI technology and Azure OpenAI service, it's going to allow us to create new offerings that provide deeper, richer insights into risk than ever before. By applying machine learning algorithms and deep neural networks to large collections of data and insights, individuals and organizations will be able to drive greater efficiency, accuracy, insight, and innovation in financial processes. Earlier today, we published a, I'd call it a teaser demo of one of our first GenAI innovations, and we're calling it the Moody's Research Assistant.
It's an interactive chat feature that looks across Moody's vast datasets and research to provide customers with multifaceted and integrated perspectives of risks that few others can provide. The assistant will have the ability to access data and content across multiple domains, such as firmographic data, credit indicators, economic forecast, and risk and reputational profiles, and deliver results to users based on their own personalized needs. We're beginning to preview this innovation with customers to demonstrate the really, I think, extraordinary value that it's going to bring, powered by Microsoft's technology and anchored by Moody's proprietary data. Be sure to check it out on our IR website. Importantly, I do want to acknowledge that at Moody's, GenAI is a journey of human enablement, and we have deployed this technology to all of our 14,000-plus employees.
I call them our 14,000 innovators, so that we can innovate at scale and pilot new ways to enrich our jobs with powerful new insights and improve productivity, all at our fingertips. Before I close, I'd like to give a big shout-out to our employees. During the month of June, over 3,000 Moody's teammates, and I was with them, took part in 150 plus volunteer projects across 32 countries. Their efforts delivered over 8,600 volunteer hours dedicated to making a difference in our communities. Our people are living our values, and it's great stuff. That concludes my prepared remarks. Mark and I would be very happy to take your questions. Operator?
Operator (participant)
Thank you. If you would like to ask a question, please dial star one on your telephone keypad. If you are on a speakerphone, please pick up your handset and make sure your mute function is turned off so that your signal reaches our equipment. We will ask that you please limit yourself to one question. You will have a chance to rejoin the queue for a follow-up. Again, that is star one to ask a question. Our first question comes from the line of Owen Lau with Oppenheimer. Please go ahead.
Owen Lau (Senior Analyst)
Good afternoon, and thank you for taking my question. It looks like MA has more investments into a product development, such as AI, Rob talk about, but it dragged down the operating margin in the second quarter and also full year guidance. I think it would be great if you can maybe give us an update on the seasonality of your P&L by segment and how we should think about that. Thanks.
Mark Kaye (CFO)
Sure, Jay. Good afternoon, thanks for the question. Last quarter, we anticipated that near-term capital markets and activity would be constrained before progressively improving in the second half. While issuance was indeed lower in certain asset classes than expected, for example, structured, we did observe, and you heard this from Rob, higher than anticipated investment grade volumes, given strong investor demand for our high-quality credits. Taking that into account, and along with our expectation for relatively stable-ish market conditions for the remainder of the year, we are lifting our full year 2023 global MIS rated issuance to the mid-single-digit percentage range and our MIS revenue growth to the high single-digit percent range.
This, together with our better-than-expected year-to-date MIS revenue result, now implies MIS revenue growth in the range of low to mid 20% on average for the remainder of the year versus the relatively low year-to-date 2022 comparable period. That's really given the market disruption that we had in the prior year from geopolitical concerns and a deterioration of some macroeconomic conditions. This also means that we anticipate our MIS 2023 year to go revenue in absolute dollars to be comparable to the pre-pandemic levels we observed in the second half of 2019. On the MA side, our reaffirmed guidance for the full year 2023 MA revenue to grow approximately 10%, together with our mid-90s percent retention rates, then implies the second half revenue will be in the low double-digit percent range.
That's going to reflect the strong ongoing demand for our subscription-based products and solutions. You know, really, as customers continue to look to Moody's to deliver the tools they need to incorporate risk resiliency, evaluate exponential risk, etc., in their workflows and processes. That means that we forecast in the third quarter, MA adjusted operating margin to step up to this compared to the second quarter, and then sequentially improve again in the fourth quarter, very much in line with revenue and really as MA fully realizes the benefits of our restructuring program and additional cost-saving initiatives. Finally, our outlook for the full year 2023 total Moody's operating expense growth remains within that mid-single-digit percent range, albeit at the higher end.
This balances our expectation for higher incentive and stock-based compensation costs with the improvement in our issuance outlook and the introduction of new initiatives to accelerate the development and deployment of some of our AI solutions. If I was going to translate that at that full year 2023 operating expense guidance, and that really means along the lines of a low single-digit percentr decline in MIS and the higher end of high single-digit percent growth in MA. Oh, and I apologize, that answer was for you, not for George.
Owen Lau (Senior Analyst)
No problem. Thanks a lot. Very helpful, Mark.
Operator (participant)
Your next question comes from the line of George Tong with Goldman Sachs. Please go ahead.
George Tong (Senior Research Analyst)
Hi. Thanks. Good morning. 2Q debt issuance and ratings revenue performance was strong and led you to raise your full-year guidance for MIS. That said, the issuance in July so far has been relatively weak. How much of a pull forward in debt issuance into 2Q do you believe happened, and does your guidance reflect simply a flow-through of 2Q outperformance, or does it assume a stronger 3Q and 4Q than you previously expected?
Rob Fauber (President and CEO)
Hey, George, it's Rob. Yeah, this is probably a question on the minds of many, you know, thinking about first half, second half, and then triangulating to our full year guide. We certainly saw stronger investment-grade issuance in the first half than we expected. Yes, we do think that was likely due in part to some pull forward in advance of the debt ceiling. There's just also some investor preference for really the higher end of the rating spectrum. The stress in the U.S. banking sector, I'd say, probably dissipated a little bit faster than we had expected, and kind of a return of market confidence.
So as we're, you know, kind of looking at the, you know, the going into the second half of the year, when we look at leverage finance, and I'm talking about high yield and leverage loans, our general thinking is that the current run rate that we're seeing for high yield and leverage loans, I'd say the sequential run rate, if you will, that looks sustainable. Because we've got easier comps in the second half of the year, that implies some higher percent growth rates for leverage finance in particular, also we expect will contribute to a positive revenue mix.
To put a maybe a little bit finer point on it, our issuance outlook implies a low 20s% increase in issuance for the second half of 2023, and that, combined with what we saw in the first half, gets us to this mid-single-digit for the year.
George Tong (Senior Research Analyst)
Got it. Very helpful. Thank you.
Operator (participant)
Your next question comes from the line of Manav Patnaik with Barclays. Please go ahead.
Manav Patnaik (Managing Director and Equity Research Analyst)
Thank you. if I could just ask, you know, around all these GenAI initiatives and stuff you've highlighted so far, like, is that all, you know, incremental expenses? How are you thinking about in terms of, you know, spend and budget versus what, you know, I guess you were already doing before?
Mark Kaye (CFO)
Manav, good afternoon. We expect to realize meaningful productivity gains and efficiency as we progressively incorporate GenAI into our Moody's ecosystem, from technology and software development organizations to our customer support, shared service, and even research teams. I think we would say it's too early to provide estimates around the extent of these efficiencies, but initial pilots are promising. For example, you know, the deployment of our coding assistant to some of our software development teams has shown material productivity benefits through both error reduction and coding time acceleration. Another clear benefit, you know, is the opportunity that the technology brings to our rating analysts, where, you know, the use cases are vast. For example, you could think about using GenAI to transform, in part, our analytical workflow.
For example, analysts can shift their focus towards forming more valuable opinions, augmenting their capabilities, for example, through faster data processing, advanced data interpretation, spreading, etc. The point here is that, in total, if we step back for a minute, you can think about GenAI as really just reinforcing and increasing our confidence in achieving our annual and our medium-term expense and margin targets.
Rob Fauber (President and CEO)
Manav, hey, it's Rob. I'd also say, I think you were asking specifically also about just the extent of investment. Is it incremental? Is it significant investment? I would say that we're able to leverage a lot of the investment that we already have. You think about we have Most of our solutions are on the cloud. You know, it's one reason I highlighted on the call. We've got a lot of expertise already across the firm around AI. I think one of the costs, and it's too early for us to know what this looks like, we don't yet know exactly the pricing structure of our products, but, you know, there's going to be incremental compute costs, and running these models is not cheap.
It's still a little early for us because we're just now, Manav, going into preview mode with customers, getting feedback from customers, thinking about then what the product, pricing and packaging looks like, and then, you know, what the cost side will look like. I think, Manav, we're going to have a much better sense for this, you know, in another quarter or so.
Manav Patnaik (Managing Director and Equity Research Analyst)
Got it. Thank you.
Operator (participant)
Your next question comes from the line of Kevin McVeigh with Credit Suisse. Please go ahead.
Kevin McVeigh (Managing Director)
Great, thanks so much. Just to follow up on the Generative AI a little bit, is there any way to think about kind of where you are in the process in MA versus MIS, if there's a way? You know, one thing that gives me a lot of optimism is the potential efficiencies from a delivery perspective, given how regulated the industry is, you know, keeps a lot of your footprint onshore. Is there any way to think about what the potential longer-term impact is from a margin perspective, as maybe you leverage the AI across both MA and MIS in terms of, you know, not necessarily next quarter, but how we should think about that a little bit longer term as some of these efficiencies are brought to bear?
Rob Fauber (President and CEO)
Yeah, Kevin, hey, it's Rob. Look, I would be remiss if I don't talk about both sides of the equation here, because I promise you, I will touch on the efficiency opportunity. This really is, we think, a compelling opportunity for us in terms of how we deliver our content. We are very much approaching this in terms of opportunity first, and what is the opportunity to deliver unique value to our customers? As you heard me say to Manav, we're early days here. If you want to get a sense of what it looks like, I hope you get a chance to check out the video.
That is a very easy way to understand, you know, how we're thinking about deploying this and what the opportunity will be. I would also say that we have approached this from a one Moody's perspective, and that is really, really important because this was an opportunity for us to set up a firm-wide infrastructure, a co-pilot across the firm. obviously, have to think about entitlements and controls and other things, and risk management, all those things. There's an opportunity to use one infrastructure across the firm, and as we have innovations across the firm, people are able to deploy those innovations into our firm-wide ecosystem. Now, you mentioned, you know, MIS specifically.
The MIS teams are very engaged around this and very engaged with our AI enablement team we put together, looking at ways that they are going to be able to process more information, to get new insights, to be able to get through these things more quickly. I really think about it, Kevin, as essentially turbocharging our people. We have always heard from our issuers that we have the most experienced analysts, and they really value that. Now I think about, all right, now we have the most experienced analysts who are going to be armed with the capability of this co-pilot and everything that it brings, and being able to work together on the teams collaboration platform, we're really turbocharging the capabilities of our analysts.
I'm sure there will be productivity gains, but there will also be some real improvements to just the insights that we're able to deliver to our customers.
Kevin McVeigh (Managing Director)
Makes sense. Congratulations.
Operator (participant)
Your next question comes from the line of Alex Kramm with UBS. Please go ahead.
Alex Kramm (Managing Director)
Yes. Hello, everyone. Can't believe I'm asking another GenAI question, but I will. It's really on the revenue side, because, Rob, you obviously highlighted you actually have been utilizing some of these tools, I guess, already in some of your products. I think you had three on the slide, and you said something about a dozen. I guess the question really is: Can you already isolate some of the, I guess, AI-enabled revenues that you're getting today? Would obviously be great to have that number, but then more importantly, like, how long do you really think until this can really scale? I guess any ideas about the TAM?
I mean, is this just, "Hey, we're going to make our products better, and we're going to be better in the marketplace, and we're going to sell better," or do you actually think there's going to be a real unique revenue opportunity here that really wasn't there before?
Rob Fauber (President and CEO)
Alex, you know what? That first question is a great question. I have to be honest, I was thinking about that coming into the call and thinking: You know what? Somebody may ask that. I don't have that answer at my fingertips, but that's something I think that we can follow up on. It's a really good question. It's a natural question, given the fact that we're spotlighting, you know, those products. Let me talk for just a moment about how we're thinking about the monetization opportunity. Again, it's in early days. Just to give you a sense of where we are, we are just in the process of going into what I would call preview mode with a handful of our customers, who then can give us feedback on the product.
We're thinking about the, as I said, kind of the pricing and packaging. We're starting with what we're calling a Research Assistant that will serve our customer, investor-customer persona, right? This is the investor that is using our CreditView offering. We will likely make the Research Assistant available and integrated into the CreditView platform. We may. In that case, you could imagine it being an add-on to your CreditView subscription. We also have the ability to call the Research Assistant, right? That would allow us to deploy it through, for instance, a platform like Microsoft Teams.
And we, you know, Alex, the exciting thing there is, that's going to allow us, I think, to reach a whole new customer base of people who aren't using CreditView today, may not have the frequent, you know, the frequent need to use CreditView, but wanna get access to our insights and research. We're thinking about how do we, you know, how do we price, you know, how do we price that? You can then imagine that we go from that core investor persona to other core personas that we serve. In banking, it's credit officers and commercial lenders. In insurance, it might be chief risk officers and underwriting staff. We will be creating assistants that serve their those personas.
Those will be both integrated, as I said, with CreditView, likely integrated into our existing offerings. Over time, we would also expect that people would look to have additional content sets entitled with their assistants. You could imagine that our research assistant comes preloaded with certain content sets, and then, over time, if you want to add, say, a climate or ESG content set, that may be an additional entitlement and additional revenue opportunity. Again, Alex, these are great questions. We're working through these as fast as we can. I think, you know, towards the end of this year, we'll probably have more insight into, you know, what this looks like, what the size of the opportunity will be. That would be then incorporated into our 2024 outlook.
Alex Kramm (Managing Director)
Very helpful. Thank you.
Operator (participant)
Your next question comes from the line of Ashish Sabadra with RBC Capital Markets. Please go ahead.
Ashish Sabadra (Managing Director and Senior Equity Analyst)
Thanks for taking my question. I just wanted to focus on the free cash flow. That guidance was raised by almost $200 million, which was much better than the EPS guidance range. I was wondering if you could talk about that. Also from a capital allocation perspective, you've obviously raised the share repurchase guidance by from $250 million to $500 million, but how should we think about the rest of the cash and the focus on any particular focus on M&A? Thanks.
Mark Kaye (CFO)
Ashish, good day. Good afternoon. In the second quarter, our free cash flow result of $549 million was significantly higher, to your point, compared to the prior year period. That's primarily due to an improvement in working capital. As the prior year included, and you'll recall this, a tax-related working capital headwind. This quarter, of course, we also had stronger net income given the growth in MIS, combined with the solid execution in MA. That means for the second quarter, our free cash flow to GAAP net income conversion was almost 150%, compared to just 66% in the prior year. I would say we're forecasting that conversion rate really to moderate through the rest of the year as some of those first half working capital tailwinds normalize.
We're also very pleased to increase our share repurchase guidance to $500 million. That means we're going to return over $1 billion to our shareholders this year, $500 million through that share repo and approximately $550 million through dividends. The most important thing here is, as a management team, we continue to be committed to anchoring our financial leverage around that BBB+ rating. That's really because we believe that provides the appropriate balance between lowering the cost of capital and providing for ongoing financial flexibility.
Ashish Sabadra (Managing Director and Senior Equity Analyst)
That's it, yeah.
Operator (participant)
Our next question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead.
Toni Kaplan (Executive Director)
Thank you. Wanted to ask about slide 9. Thank you so much for the additional disclosures by, you know, customer type. I guess maybe one, on the insurance part of the business, are you seeing something in the more current, either pipeline or something, you know, that makes the ARR only 6%, whereas the revenue growth is coming in at 12%? Maybe it's timing. Also, if you could break down maybe a little bit of the KYC, you know, obviously very strong growth there. You know, just trying to figure out how much is like, from new customers versus upselling versus pricing. Any sort of granular drivers would be helpful. Thanks.
Rob Fauber (President and CEO)
Yeah. Toni, hey, it's Rob. The second part was on KYC, right?
Toni Kaplan (Executive Director)
Yep.
Rob Fauber (President and CEO)
You know, as you, as you know, and that is why you're asking the question, you know, this has been a strong growth engine for us for some time now. You know, there's a few things I think going on. We're adding both new logos, and we are adding and upselling as well. You know, an interesting, you know, couple of stats, the volume of what we call multi-product deals. If you think about the components of our KYC solution, it's really the company data that's in Orbis. It's the people data in what we call our Grid database. We've got our adverse media and AI screening, and then we wrap that in a workflow tool, right?
Those are all the components, and you can buy the data separately from the workflow, or you can buy the data integrated into the workflow. Where our cloud workflow platform is sold with other KYC products, that's up 91%. We're seeing a lot of customers wanting to opt into the kind of full solution with workflow and data. The volume of what we call multi-product sales, so where I'm buying multiple components of this solution, is up almost 50%. Where we have what we call sales, where we have something called company registration verification. You want to go back down to the source documents themselves. It's another important feature, actually, a company we acquired several years ago.
That's sales of that as part of our broader suite is up 53%. You know, that idea of packaging the content with the workflow is, has really proved to be, you know, quite compelling. I guess, Toni, the other thing, just in terms of what's driving, you know, overall demand, in the space, you've got, you know, ongoing, you know, changes to regulation, perpetual KYC. You've also got a broadening of demand beyond just KYC into, you know, companies who want to understand more about who they're doing business with and supply chain. Hopefully, that gives you some insight into KYC. The answer is really both new logos and upsells, and this bundling of product.
On insurance, you know, remember that this includes our insurance unit now is, as I said on the call, is both our legacy MA as well as RMS. What we don't reflect in that insurance ARR number is the cross-selling synergies that we've got with RMS, which are actually quite robust. Mark, you might even have a little bit of data on that.
Mark Kaye (CFO)
Yeah, I'd say collectively, Toni, you could think about Rob's remarks as leading us towards that high single digit ARR for insurance by year-end, and certainly for, high teens or even low twenties for the KYC space.
Toni Kaplan (Executive Director)
Thanks so much.
Operator (participant)
Your next question comes from the line of Andrew Nicholas with William Blair. Please go ahead.
Andrew Nicholas (Research Analyst)
Hi, good afternoon. From what we can gather, it seems like issuers, particularly within the high yield market, are opting for shorter maturities in this environment. My question is a two-parter. First, is this something that you're seeing across debt categories of late? Second, how should we think about the impact of this on MIS revenue? just curious if shorter maturities ultimately results in issuers coming back to market more frequently, which I would think drives stronger transactional revenue, or if there's some offsetting component within your fee structure that would offset this. Thank you.
Mark Kaye (CFO)
Andrew, I'll start off with some numbers, and then I'll turn it over to Rob for additional commentary. I'll do both investment grade and high yield, just so we got a complete picture here. Between 2020 and I call it year to date, 2023, the average duration of the MIS-rated IG bond issuance peaked in 2020 at about 15 years, and then it steadily reduced to just under 12 years in June, which is about where it was in the pre-COVID, 2018, 2019 years. Not a big move on the investment grade side. On high yield, the comparable numbers for the average duration for what we're rating was somewhere between 7.8 and about 8.3 years.
What we've seen, to your point, is that's been reduced to around 6 years through the first half of 2023.
Rob Fauber (President and CEO)
Yeah, in fact, I mean, Mark, you cited some of that data. We were getting the opposite questions a couple of years ago as the tenors were stretching out and people worried about whether that was going to lead to less frequent issuance. This is a happy issue to be contemplating. To answer your question, I think it just means the issuer is going to be coming to market more frequently. There's nothing in our commercial constructs that I think would offset that. It's unlikely, and most of these issuers, especially in high yield, are infrequent issuers, so it's unlikely that they're going to be on a more of a relationship-based construct. I think net-net, this is a modest positive.
Andrew Nicholas (Research Analyst)
Makes sense. Thank you.
Operator (participant)
Your next question comes from the line of Craig Huber with Huber Research Partners. Please go ahead.
Craig Huber (Equity Research Analyst)
Thank you. Can you just talk a little bit further about your debt issuance outlook for full year 23, but break it down a little bit further by category, high yield and bank loans and structured finance in particular? Can I just get the incentive comp number for the quarter on the new basis you guys are using and what it was a year ago? Thank you.
Mark Kaye (CFO)
Great. Good, good afternoon. I'll start with the incentive comp. In the second quarter, the incentive comp was $99 million, and that compared to a $66 million in the prior period. That brings up our year-to-date incentive comp accrual to $188 million, which is approximately $45 million above the first half. For the full year, we're expecting incentive comp to be between $370 million-$390 million, which is higher, about 25% higher than the comp we accrued for last year. That's really driven primarily by improved outlook for full year 2023 MIS revenue.
Rob Fauber (President and CEO)
Craig, just, I mean, I think you had a couple pieces to this. One was, you know, kind of leveraged finance. I would say that, you know, starting with high yield, would describe the environment as cautiously active in the first half of the year. You know, we did see some oil and gas issuers come back in the market. That's important because they historically have been big issuers in high yield. The leverage loan issuance was, you know, pretty soft. We had pretty muted, sponsor-driven M&A. We did see some refinancing activity and saw at least some supply coming from, you know, autos and telcos.
When you look at our full year outlook, we've taken high yield bonds up 15 percentage points to up 40% for the year, off of obviously what was a soft year last year. We've made a modest adjustment to leverage loans, mid-single digit up from flat. In terms of, you know, kind of what we're seeing in the market right now, Craig, you know, it was a holiday-shortened week to start in July. Things have picked up a little bit in the high yield market. I would say the tone for both high yield and leveraged loans is constructive. You know, there's, you know, good buyer risk, appetite and demand.
Then just touching on structured finance, you know, just the volatility and the rising funding costs have led to a slowdown in overall market activity. There's a lot going on. I would say the weakest areas are CMBS, not surprisingly, given some of the concerns in the commercial real estate sector, and CLOs, just given the lighter leverage loan supply. You know, we've kind of looked at that, what's going on in the space, and have, you know, decided to revise our outlook for structured finance down to, sorry, to down mid-teens percent for the year. Hopefully that gives you a little bit of a flavor.
Craig Huber (Equity Research Analyst)
Great. Thank you.
Operator (participant)
Your next question comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead.
Faiza Alwy (Managing Director)
Yes. Hi, thank you. I wanted to follow up on that point that you just made, Rob, around structured finance. I'm curious if the competitive environment is a little bit different in structured finance, other areas where, you know, maybe you're stronger in versus competition? Is that an area of, you know, investment focus for you at all?
Rob Fauber (President and CEO)
Yeah, that's a great question. structured finance, you know, has a number of agencies that are active in the market. It's a more transactional market than the fundamental market, which is much more relationship driven. We do see a more active, broader competitive landscape in structured finance. I would say in spaces like, you know, RMBS, excuse me, RMBS, ABS. CMBS has a number of active players. CLO, a bit fewer just because we tend to rate the underlying securities within a CLO. I would also note, just when you kind of are looking at what's going on in terms of our structured finance results, you know, if you think about, you know, CMBS is a sector where we're quite strong.
We have quite a good presence there. There's been a pretty sharp decline in issuance volumes, again, you know, due to concerns about, you know, the office and retail sector. You know, that decline may be felt more acutely by us, just given our, you know, kind of broader coverage of that space and of issuance than perhaps with some other agencies. The last thing I would say is, broadly, our coverage has remained pretty consistent. It does tend to ebb and flow between asset classes a bit from time to time, broadly, our coverage has remained pretty consistent over the last several years.
Faiza Alwy (Managing Director)
Great. Thank you so much.
Operator (participant)
Your next question comes from the line of Seth Weber with Wells Fargo. Please go ahead.
Seth Weber (Equity Research Analyst)
Hey, good afternoon, everybody. Thanks for taking the question. I was wondering if you could just drill down a little bit more on the FIG revenue, up 13% versus issuance, up five. Just kind of give us some more details on what's going on there. Thank you.
Rob Fauber (President and CEO)
Yeah, it's as we've broadened out the customer base for FIG over the years, and that's included a number of what I would say are alternative investment managers and investment managers. You know, we've gotten a little bit more volatility into the results than we have historically. For those who've been on this call for a long time, you probably remember me saying, oh, FIG is primarily relationship-based, and it doesn't move around. The revenue doesn't move around much. As we broaden that base out, it has. This quarter in particular, we saw some opportunistic issuance from the insurance sector, folks who are not typically on these relationship-based constructs, and that gave us a little bit higher revenue take than we might otherwise get on issuance in the FIG space.
Seth Weber (Equity Research Analyst)
Makes sense. Thank you. I appreciate it.
Operator (participant)
Your next question comes from the line of Heather Balsky with Bank of America. Please go ahead.
Heather Balsky (Equity Research Analyst)
Hi, thanks for taking my question. It's great to see the improvement in MIS. I'm just curious, though, as you kind of look out, and you think about the dynamics in the environment, the, you know, where rates are, you know, kind of where rates might go. What do you think is the biggest overhang right now? Do you think it's the actual rate itself, or do you think it's the uncertainty? And do you think kind of incremental certainty, kind of this quarter, helped with what you saw with regards to issuance?
Rob Fauber (President and CEO)
Hey, Heather. Welcome to the call, first of all. It's good to have you on.
Heather Balsky (Equity Research Analyst)
Thank you. Thanks, Heather.
Rob Fauber (President and CEO)
Yeah, great question. You know, I have typically said that it's uncertainty that is the most challenging thing, and we've said in the past that, you know, the market can absorb higher rates when they are, one, accompanied by economic growth, and two, when they are anticipated by the market. The market does not react well to surprises, and it doesn't react well to uncertainty and volatility. Volatility in the markets, both the equity markets and the fixed income markets and with spreads, creates really challenging issuance environment. You've seen, as the market has at least gotten more certainty around the trajectory of rate increases, you've seen issuance firm up.
you know, I think again, you know, there's still a little bit of headline risk in the remainder of the year, but certainly we've seen some of the firming in the market.
Mark Kaye (CFO)
Heather, if I just add some additional color to Rob's comments there. A few things we're watching. We obviously feel that rates are likely approaching their peaks. We're expecting the Fed to pause, not pivot, unless of course, there's a sudden increase in unemployment or a collapse in growth. The second thing we're expecting is that the second half recession risks are likely to linger amidst tighter financial conditions. We've incorporated a dip, not a severe downturn, into our outlook. That really means that we are expecting the global default rate to rise above the long-term average, but not up to the levels of the pandemic or even remotely close to the great financial crisis.
Thirdly, you know, we're watching a couple of key questions on macro thematics, which could include things like, you know, are we going to see more stimulus from the Chinese authorities? Because their post-COVID reopening growth has been pretty lackluster. Inflation there is low. We're also watching the U.S. dollar exchange rate. Finally, we're also watching the emerging market versus developing market growth rates and the relatives at differential there.
Heather Balsky (Equity Research Analyst)
Great. Really appreciate it. Thank you.
Operator (participant)
Your next question comes from the line of Andrew Steinerman with JPMorgan. Please go ahead.
Andrew Steinerman (Equity Research Analyst)
Hi, Mark. Could you just tell us the FX effect on second quarter revenues, both from MIS, MA and total? If I could ask a second question. Looking at slide 19, which is the MIS slide, it seems like the first-time mandate projection, which is now 500-600, came down from the projections given in April and given the more positive view on issuance. I was just hoping you could comment on that dynamic.
Mark Kaye (CFO)
absolutely. FX is a pretty pedestrian story, this quarter. The second quarter MA revenue was favorably impacted by 0.3%. The impact of foreign currency translation on MCO and MIS revenue is immaterial.
Andrew Steinerman (Equity Research Analyst)
Okay.
Rob Fauber (President and CEO)
Yeah. Andrew, hi. On the first-time mandates, you know, first-time mandates were down pretty meaningfully from the same period last year. I'd say we've seen, you know, relatively muted first-time mandate activity for probably the past four quarters or so. You know, when you look at, I'd call it 2019 and maybe the first half of 2020, so kind of a pre-pandemic period, this quarter's first-time mandates were something like two-thirds of that average.
This isn't really. To me, that's not surprising. Despite the fact that, yes, we're taking up the issuance outlook, the majority of first-time mandates tend to come from leveraged loans.As that has been softer, we just haven't seen the same activity around first-time mandates. I will say, though, it's interesting, Andrew, we've seen a very meaningful uptick in our private engagements.
You may have heard us talk about in the past, we have a suite of products, private monitor ratings, private ratings for investors. We have a rating assessment service. Those are up pretty meaningfully. You know, you heard me mention a number of these issuers have not come to market. Again, you know, we're seeing some kind of pent-up demand on people, you know, waiting for the right time to come to market.
Andrew Steinerman (Equity Research Analyst)
Perfect. Okay. Thank you very much.
Rob Fauber (President and CEO)
Yep.
Operator (participant)
Your next question comes from the line of Jeff Meuler with Baird. Please go ahead.
Jeff Meuler (Senior Research Analyst)
Yeah. Thank you. Hopefully not too much of a repeat of some prior questions, but as you think about the right pace of spend on AI and GenAI and the whole generational opportunity, I guess, what's the framework for how you think about if you're going fast enough or not fast enough? To what extent does it tie back to just the business performance? I guess what I'm wondering is, if there's upside, or outperformance in the core, just to what extent we should expect that to be reinvested and for you to go even faster on AI for the next couple of quarters. Thank you.
Rob Fauber (President and CEO)
Yeah, Jeff, it's Rob. I'm going to take this in two directions. First, you know, directly to your question. Which is, that we are starting to engage right now with customers, to understand the nature of customer demand with a prototype product or products. We are going to think about how much investment do we need to make? How much demand is there? What is the pricing and packaging look like, and how much investment do we need to make to support that? I mentioned, I think a good bit of that investment actually will end up just being compute.
Let me, let me take it back one, you know, to kind of pull the lens back for just a moment, because I think there's a broader question here around, you know, overall MA investment, and GenAI is MA part of that, but it's not the only part. You know, I hope you all, you know, get a very good sense from us that, you know, there are some very strong demand drivers for risk assessment, and that also that, you know, we believe we're very well positioned to monetize that demand. I think you see that translate to the very strong top line growth rates that we have relative to our peer group.
You know, in thinking about what is best for the long term of the business, as long as we see strong market demand, and we have a leading set of, you know, market-leading set of solutions, we're gonna favor investment to drive top line growth. There are really three areas that I wanna call out for you. One is product development. Increasingly, this means the integration of our content into workflow solutions, like you've heard us talk about, you know, commercial real estate into our loan origination offering, ESG into our underwriting offering, Orbis data into our KYC offering. It also includes, Jeff, these investments that we're making in GenAI-enabled products, which we would expect to start, you know, delivering revenue growth in 2024 and beyond.
This point about investing in an ongoing product pipeline is very important because it's critical to how we get both new customer acquisition and also upsell of customers. That's one. The second is sales deployment. We have made some big investments in our sales organization over the last 2 years. That includes relationship managers that are now organized by customer segment. That's helping us with new logos and drive AR growth. It also includes building out our functions, like what we call our industry practice leads, who can help us with more solutions-based selling and building out our customer success team, who helps with retention and upsell. That's the second area of investment. The third is we are platforming MA.
We have appointed a chief architect, with 20-plus years of experience at Microsoft, who is developing an overall technology architectural blueprint and he is building out our platform engineering layer. If you join us on our call on September 14th, I think you'll have an opportunity to meet with him in the future. This positions us better for GenAI enablement and commercialization. It enables faster speed to market and a better experience for our customers, who use multiple products. It also gives us better insight into customer behavior. Again, that is really important to cross-selling and upselling.
you know, the GenAI investments are one part of a broader set of investments that we're making to really drive and accelerate top-line growth at MA and capture the opportunity that's in front of us.
Jeff Meuler (Senior Research Analyst)
Very helpful. Thanks, Rob.
Operator (participant)
Your next question comes from the line of Russell Quelch with Redburn. Please go ahead.
Russell Quelch (Managing Director)
Yeah, Jeff, thanks for having me on. First question is on MIS, please. I was wondering if the revenues grow back to the levels we saw in 2021 by 2024 or 2025, as projected by consensus. Is there any reason why the adjusted operating margin for the business wouldn't move back up to the same level seen in that period too, please?
Mark Kaye (CFO)
Russell, good afternoon. Thanks for the question. I think maybe implicit in what you're asking is why is the MIS margin not higher than the 55%-56% that we're guiding to, at least for this year? The short answer here is, you know, the margin outlook includes the higher incentive compensation accruals, which are obviously or naturally gonna flex depending on the performance compared to the targets we set at the beginning of the year. As well as any incremental investments that we put through for in-flight initiatives, including the adoption of AI that we've spoken about this morning. If I think about it more broadly, though, the margin guide of 55% to 56% does imply around 370 basis points of uplift compared to our 2022 margin of 51.8%.
If I think about that could be attributed to around 350 BPS associated with increased operating leverage, and that's primarily tied to that first half issuance, and that's the part that, in theory, could carry forward well beyond 2023. Secondly, I'd say is approximately 400 BPS related to some of the expense benefits from some of the actions we've taken to lower and control costs. For example, those associated with our restructuring program that we spoke about in prior quarters or additional efficiency initiatives. Those two are offset by around 380 BPS from the incremental organic investments that we're putting through.
Some of that relates to Generative AI, and some of it relates to really ensuring that we maintain that best-in-class MIS ratings quality, as well as supporting appropriate hiring merits and promotion increases for our teams.
Russell Quelch (Managing Director)
Got you. Okay, that's comprehensive. Thanks, Mark. Just as a quick follow-up, in terms of research and insights, obviously saw a strong step-up in growth in recurring revenues there. Can I ask what drove that? How much of that was pricing? Is that new sales? Is that cross-sell and upsell? Just any detail you could give to that would be appreciated. Thanks.
Rob Fauber (President and CEO)
Yeah, sure. Hey, Russell. First of all, we continue to see very good retention and strong demand. Interestingly, when we had that period of particular stress in the U.S. banking sector, we saw utilization of our solutions really spike up. I'd say there are probably three areas that I would point to that are driving growth. One is that point around increased utilization. Interestingly, we have a suite of predictive analytics, economic forecasts and other kinds of models. There has been an uptick in demand for that. That's one. That increased utilization, it supports the retention rates, it supports new sales, and it also supports upgrades and price increases.
Second, we continue to make ongoing enhancements to CreditView. CreditView is our web-based research platform. That includes something called ESG View. We now have another view that we are able to either sell on an à la carte basis or to price behind. We're including more and more content on CreditView that we can use for pricing. ESG is one example. The Orbis content around corporate structure data is another example. Third, we've seen some very, you know, very good growth, again, for the suite of analytics in the research area.
Russell Quelch (Managing Director)
Great stuff. Thanks, Rob. Also that really welcoming this switch to adding in incremental color on product and strategy on these conference calls rather than just sort of reading back the results to us. Yeah, kudos for that, and thanks very much.
Rob Fauber (President and CEO)
Hey, thanks. I appreciate that feedback. We find that the most valuable way we can spend our time with you.
Operator (participant)
Your next question comes from the line of Jeff Silber with BMO Capital Markets. Please go ahead.
Jeff Silber (Senior Analyst)
Thanks so much. I know it's late. I apologize. I've got a two-part question on margins. First, on MA, in order to hit your margin goal, you're expecting some pretty sizable expansion in the second half. Are there any timing issues where there are expenses that you incurred in the first half, or maybe some efficiencies that you're incurring in the second half, if you can comment on that? Then on MIS margin, based on the mixed issuance, in terms of your new guidance, is there any impact on margins? You know, is there a difference if you have an IG debt versus structured finance, et cetera?
Mark Kaye (CFO)
Yes, good afternoon. Let me take the MA margin from the perspective of a year to date and year to go onset, because I think this will tie in with what you're looking for. The year to date, MA adjusted operating margin was 28.4%, and that was about 280 basis points lower than the prior period. There are two primary themes underlying this decrease, and they should be consistent with what we spoke about in the April earnings call. First, we opportunistically accelerated investment in product technology, innovation, and sales deployment, and that includes the reallocation of expense dollars into our Generative AI initiatives. That really is done with the purpose of allowing us to maximize our ability to meet ongoing customer demand for our solutions.
The second piece is really an element of seasonality, and that relates to both the MA revenue and expenses. We really try to balance our spending against a full year margin target, which for 2023, is still expanding, albeit slightly. If you take that into account, what we are thinking of for the second half of the year is really for margins to expand by, on average, 250-350 basis points, versus the comparable 2022 year-to-go period. That means we're going to incrementally step up in the third quarter, and then we'll have a pretty material step up again in the fourth quarter.
Rob Fauber (President and CEO)
Yeah, you know, maybe just some quick rules of thumb in terms of how to think about the relative margin or, you know, kind of economic profile of some of the issuance. I would say that if you're in the corporate sector, we tend to get the more revenue take on leverage finance than investment grade, because investment grade issuers tend to be on more frequent issuer programs. That's typically the same with FIG. You heard what I said about the infrequent insurance issuance. In structured, the more complex transactions, like CMBS and CLOs, typically have more favorable economics. If I'll take a different view on it, which is if you look at new issuers versus existing issuers.
In terms of the work required, there's more work that's required for a first-time issuer. First-time issuers, first-time mandates are great because they build the stock of monitored ratings, but they do take more work. It, rating an existing issuer is typically more margin-friendly. When you see a lot of refinancing activity, you know, that may be a little bit more margin-friendly than a lot of first-time issuance.sr
Jeff Silber (Senior Analyst)
All right. That's very helpful. Thanks so much.
Operator (participant)
Your next question comes from the line of Simon Clinch with Atlantic Equities. Please go ahead.
Simon Clinch (Research Analyst)
Hi, guys. Thanks for squeezing me in here. Rob, I wanted to ask a question about the competitive environment in MA, actually, and I'm conscious of, like, your partnership with Nasdaq and some of the consolidation that's going on there, and the number of different competitors that are sort of vying for different niches of that kind of the market that MA is playing in or the various markets. I was wondering if you could talk about what you're seeing from a competitive standpoint, who you're displacing, how fragmented the market is, and how you think that's going to really develop over the next, you know, 5 years or so?
Rob Fauber (President and CEO)
Sorry, I might have been on mute. I think the way that we talk about and disclose our businesses is a good way to think about the competitive landscape. In each of those businesses, there are some different players. For instance, in our research business, you know, we typically will compete against other rating agencies and a handful of, you know, kind of more boutique research providers. In the data space, we, you know, tend to, you know, compete against, you know, players like Dun & Bradstreet and others who have, you know, big corporate datasets. In our Decision Solutions, you know, there are different competitors. We have different competitors in the banking versus insurance versus KYC space.
I will say this, though, while I think we, you know, we compete with all of them, there is a, I think, an element of secret sauce to the way that we compete. I think it's two things. One is an increasingly interoperable suite of cloud-based solutions. Think about with a bank, you can buy our ALM solution, you can buy our loan origination solution, you can buy our regulatory reporting solution, Guess what? They all run on a connected dataset. Since they're cloud-based, they're easy to implement. That really makes it easier for us to kind of land and expand in these institutions. The second thing is, when I talk about, I mentioned it in my remarks, this idea of this risk operating system, right?
It's all of these datasets and analytics and insights that we have that go way beyond credit now, right? It's credit, it's companies, it's people, it's ESG, it's climate, it's commercial properties, and on and on. The reason that is so important is our customers say to us all the time, "Hey, I need to be able to integrate... you know, I need to be able to bring in property data, economic forecasts, credit data, ESG scores, physical risk scores relating to climate." If a customer has to do that themselves, it's very, very challenging, right? A collection of point solutions and disparate, you know, data and analytics providers. This idea that we can provide a multifaceted view of risk and integrate that and deliver that into our solutions, is a very powerful selling proposition with our customers.
It allows us...Increasingly, is allowing us to displace certain customers, and it's also creating a wonderful pathway for us to grow existing revenue per customer. That's why, you know, I try to draw that out in our remarks because it's a very important differentiator, we believe. An important reason, by the way, You know, I know sometimes people discount these awards, but it is the reason that we were ranked number 1 in the Chartis RiskTech100 awards. They think that is a winning strategy.
Simon Clinch (Research Analyst)
That's great color. Thank you.
Operator (participant)
This concludes Moody's second quarter 2023 earnings call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown and MA LOB historical revenue under the Investor Resources section of the Moody's IR homepage. A replay will be made available immediately after the call on the Moody's IR website. Thank you. You may now disconnect.