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Q4 2023 S&P Global Inc Earnings Call

Participants

Adam J. Kansler; President; S&P Global Market Intelligence Inc.

Douglas L. Peterson; President, CEO & Executive Director; S&P Global Inc.

Ewout Lucien Steenbergen; Executive VP & CFO; S&P Global Inc.

Mark Grant; SVP of IR; S&P Global Inc.

Martina L. Cheung; President of S&P Global Ratings, Inc. & Executive Sponsor of S&P Global Sustainable1; S&P Global Inc.

Adam Parrington; Associate Analyst; Stifel, Nicolaus & Company, Incorporated, Research Division

Alexander Kramm; Executive Director and Equity Research Analyst of Exchanges, Ebrokers; UBS Investment Bank, Research Division

Alexander Eduard Maria Hess; Analyst; JPMorgan Chase & Co, Research Division

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Ashish Sabadra; Analyst; RBC Capital Markets, Research Division

Craig Anthony Huber; CEO, MD & Research Analyst; Huber Research Partners, LLC

Emily Marzo; Research Analyst; BofA Securities, Research Division

Faiza Alwy; Research Analyst; Deutsche Bank AG, Research Division

Gregory Scott Parrish; Research Associate; Morgan Stanley, Research Division

Jeffrey Marc Silber; MD & Senior Equity Analyst; BMO Capital Markets Equity Research

Jeffrey P. Meuler; Senior Research Analyst; Robert W. Baird & Co. Incorporated, Research Division

John Peter Bonner Mazzoni; Associate Equity Analyst; Wells Fargo Securities, LLC, Research Division

Keen Fai Tong; Research Analyst; Goldman Sachs Group, Inc., Research Division

Manav Shiv Patnaik; MD, Business & Information Services Equity Research Analyst.; Barclays Bank PLC, Research Division

Owen Lau; Associate; Oppenheimer & Co. Inc., Research Division

Russell Quelch; Partner of Financials Research; Redburn (Europe) Limited, Research Division

Scott Darren Wurtzel; Research Analyst; Wolfe Research, LLC

Thomas Colton Roesch; Research Analyst; William Blair & Company L.L.C., Research Division

Presentation

Operator

Good morning, and welcome to S&P Global's Fourth Quarter and Full Year 2023 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. (Operator Instructions) To access the webcast and slides, go to investor.spglobal.com. (Operator Instructions)
I would now like to introduce Mr. Mark Grant, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Mark Grant

Good morning, and thank you for joining today's S&P Global Fourth Quarter and Full Year 2023 Earnings Call. Presenting on today's call are: Doug Peterson, President and Chief Executive Officer; and Ewout Steenbergen, Executive Vice President and Chief Financial Officer. For the Q&A portion of today's call, we will also be joined by Adam Kansler, President of S&P Global Market Intelligence; and Martina Cheung, President of S&P Global Ratings.
We issued a press release with our results earlier today. In addition, we have posted a supplemental slide deck with additional information on our results and guidance. If you need a copy of the release and financial schedules or the supplemental deck, they can be downloaded at investor.spglobal.com.
The matters discussed in today's conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission.
In today's earnings release and during the conference call, we're providing non-GAAP adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as management. The earnings release contains financial measures calculated in accordance with GAAP that corresponds to the non-GAAP measures we're providing and contains reconciliations of such GAAP and non-GAAP measures. The financial metrics we'll be discussing today refer to non-GAAP adjusted metrics unless explicitly noted otherwise.
I would also like to call your attention to certain European regulations. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should contact Investor Relations to better understand the potential impact of this legislation on the investor and the company.
We are aware that we have some media representatives with us on the call. However, this call is intended for investors, and we would ask that questions from the media be directed to our Media Relations team, whose contact information can be found in the release.
At this time, I would like to turn the call over to Doug Peterson. Doug?

Douglas L. Peterson

Thank you, Mark. 2023 was an exciting year for S&P Global, a year of innovation and growth. Our results in 2023 serve as a testament to strong execution and S&P Global's unique position at the center of the global markets.
Excluding Engineering Solutions, which was divested in the second quarter of last year, revenue increased 8% year-over-year. We expanded adjusted operating margins by almost 300 basis points year-over-year in the fourth quarter to finish the year with approximately 100 basis points of margin expansion. And we surpassed our $600 million target for cost synergies by $19 million. We delivered adjusted EPS growth of 13% to come in at the high end of our guidance range as we continued to benefit from strong revenue growth, disciplined expense management and a commitment to strong capital returns.
On the topic of capital returns, 2023 marked the 50th consecutive year that S&P Global has increased its cash dividend. And we've already announced the Board approval to make 2024 the 51st. In 2023, we returned $4.4 billion to shareholders through dividends and buybacks, representing more than 100% of our adjusted free cash flow.
In addition to strong financial performance, we created a formal artificial intelligence leadership team in 2023, which we'll discuss in more detail shortly. We also delivered double-digit growth and significant innovation in key strategic investment areas.
Private Market Solutions and Sustainability & Energy Transition both delivered double-digit growth in 2023. And we're well positioned to continue growing in these important areas in 2024. Our Vitality Index, which we target to remain at or above 10% of company revenue, actually exceeded 11% in 2023 and also increased at a double-digit rate.
In 2023, we delivered key wins in each of the five strategic pillars we introduced at the end of 2022. We look forward to accelerating that success in 2024 and continuing our track record of creating value for our customers and our shareholders. We know that our success depends on creating value for our customers, and we delivered for them in 2023.
We improved customer retention rates in several of our divisions last year while continuing to introduce new products and features more quickly and more frequently. Through deep engagement with customers around the world, tens of thousands of customer touch points, we saw continued adoption of enterprise contracts in Market Intelligence and acceleration of enterprise agreements in Commodity Insights.
We know that certain customer verticals, particularly financial services and regional banks, had unique challenges in 2023. While we discussed longer sales cycles through 2023, we were able to keep our sales pipeline moving and continued to demonstrate value for our customers even in challenging times.
As we look to 2024, we continue to see macroeconomic market and geopolitical challenges. Our customers need unique and differentiated datasets and key insights for the markets they serve, which means our role as a trusted and strategic partner is more important than ever.
Now nearly 2 years after the merger, we've put the work of operational integration behind us, and we have fully turned to the exciting work of growth, innovation and execution. We remain committed to balancing margin expansion with strategic initiatives and long-term growth.
We will also look for ways to optimize our portfolio of products and services. With the merger integration behind us, we plan to continue reviewing and optimizing our portfolio of assets to meet our customers' needs either through tuck-in acquisitions or potentially further divestitures as you've seen us do historically.
Turning to the 2023 issuance environment. We saw strong growth in billed issuance in 2023, particularly in the second half. In the fourth quarter, we continued to see issuers returning to the market with billed issuance growth driven primarily by strength in bank loans, structured finance and high yield. This contributed to a successful rebound for the full year 2023 with billed issuance increasing 8%.
Turning to Vitality. We're pleased to see the continued outperformance in our index to close out 2023. As we shared with you when we introduced this metric a little over a year ago, our goal is to make sure at least 10% of our revenue comes from new or enhanced products each year. As products mature, they'll naturally age out of the Vitality Index even if they continue to grow rapidly. But we remain committed to that 10% target as a steady stream of innovation takes the place of any products that graduate from the index.
We view the Vitality Index as a direct measure of the value our customers are realizing from the improvements we're making in our products and services each year. With 18% growth in revenue from Vitality products in 2023, we ended the year with more than 11% of our total revenue coming from these new offerings. This is an incredible achievement by our product development and commercial teams as they not only built great products and features in 2023 but also made sure our customers were aware and equipped to benefit from the innovation we are bringing to the table.
Across divisions, we've seen new products in 2023 that demonstrate our commitment to Powering Global Markets in a world of rapidly evolving technology. First, in another compelling example of our cross-divisional development between Market Intelligence and Commodity Insights, we launched our Power Evaluator tool. It's already received great feedback from power utility market participants.
Additionally, in Commodity Insights, we combined the most powerful features of two leading commodity platforms, Platts Dimensions Pro and IHS Connect to create Platts Connect, which we believe is the market's most holistic source of data, insights and tools custom-built for commodity market participants.
In Market Intelligence, we also significantly enhanced Capital IQ Pro. June saw the release of one of the largest and most important updates in years. And we're thrilled with the preliminary release of our new generative AI solution, ChatIQ, to a set of pilot customers in December. We're excited for more customers to get access to these proprietary tools as 2024 progresses. We also launched powerful new tools with our new Supplier Risk Indicator and Entity Insights offerings.
In Ratings, we continue to deliver assessments and insights to help market participants evaluate different assets. And we leveraged our expertise in blockchain technology and cryptocurrencies to launch the first Stablecoin Stability Assessment in late 2023. 2023 saw the launch of several new indices as well, including the S&P/B3 Corporate Bond Index in Brazil, multiple cross-asset indices and new sector, factor and thematic indices that we believe will contribute to strong growth in the years to come.
As we mentioned last quarter, we want to provide an update on our AI strategy. We've elevated the focus on artificial intelligence to make sure we have executive leadership, governance and sponsorship at the enterprise level. In late 2023, we announced internally that our former Chief Information Officer, Swamy Kocherlakota, would take on the new role as Chief Digital Solutions Officer, including executive sponsorship of AI and Kensho. Bhavesh Dayalji, CEO of Kensho, has expanded his role to now lead cross-divisional AI initiatives as our first Chief Artificial Intelligence Officer.
These changes to our leadership structure around technology, and especially around AI, are the next logical steps in the commitment to AI that began with our initial investment in Kensho nearly 7 years ago. As part of this strategy, we've developed an AI accelerator to fast-track high-priority AI initiatives and build common capabilities that can be deployed and used by teams across the enterprise.
There are four important ways that we expect our AI to impact our performance: first, through the development of new products and services; second, leveraging Kensho to accelerate and automate manual processes and data operations; third, amplifying the productivity of our internal experts, freeing up more capacity for higher order of work; and fourth, embedding AI functionality in existing products to increase customer value and improve user experience. We're committed to keeping you informed about these initiatives. So we've launched a new AI page on our public website, spglobal.ai, which includes important research, our key thought leadership and insights into our developments.
At S&P Global, we have a strategic vision of the importance of AI to our industry and the world going forward as we believe that AI will quickly become embedded in everything we do. And we have a framework to deliver the best capabilities in as many products as we can and, by extension, into the hands of as many customers as we can as fast as we can. Fortunately, S&P Global starts with some of the most powerful proprietary datasets in the world sourced from all five divisions. Our proprietary data layer is a key differentiator that we believe sets us apart.
As we've outlined for you in the past, we remain committed to sound governance, protecting this proprietary data and preventing third parties from monetizing or commercializing our data independently. A challenge that even data-rich companies will face is that much of this data isn't ready to be ingested or used by large language models. The data requires traditional machine learning preprocessing, things like data cleaning, data transformation, data reduction and data integration, but it also requires tokenization and tagging, which can be very resource-intensive.
This is the Kensho layer. The proprietary tools developed over the last several years by the teams at Kensho automate much of the preprocessing work for both structured data like financial reports but also unstructured data like the transcript from this very earnings call. Tools like Scribe, NERD, Link, Extract and Classify do much of this heavy lifting and allow our proprietary data to be leveraged more easily and updated more quickly and frequently.
This leads to the third element of our framework, the open ecosystem. As we've shared with you before, we aren't dependent on any individual technology partner. Having so much AI expertise in-house means that we can leverage infrastructure and compute platforms from multiple hyperscale cloud providers, third-party LLMs, our own proprietary LLMs and a wide array of other vendors without having to lock ourselves in or cede economics to one ecosystem or another.
Ultimately, the goal is to have generative and traditional AI capabilities embedded everywhere that makes sense. We'll track our progress through improving customer win rates, retention rates, price and ultimately growth. It should also show up in our own workflows to improve productivity and efficiency, improving our unit economics and our operating margins over time. We're excited about the significant progress we've made in 2023 and even more excited about what this company will accomplish in 2024 and beyond.
Our innovation also extends to the efforts we make to develop our people and improve our communities. In 2023, we held an internal event called Accelerate Progress LIVE to reinforce our commitment to our teams around the world and highlight our purpose and values as a global employer of choice. We provide dedicated time for our people to pursue volunteer opportunities. We saw an 89% increase in the number of S&P Global people who took advantage of these programs in 2023. And as more of our people return to our offices around the world, our global People Resource Groups saw a nearly 50% increase in engagement.
We also demonstrated our commitment to continuously improve our reporting and transparency around our sustainability and related initiatives. In 2023, we published our 12th annual Impact Report and our fifth annual TCFD Report. We also published our first-ever Diversity, Equity and Inclusion Report, taking much of the information that we have been reporting for years, enhancing our disclosures and making that information more accessible in a dedicated report.
We're very pleased that our efforts have been recognized by many external organizations in the last year. S&P Global has iconic global brands and is well-known as a desirable destination for highly skilled professionals around the world. We look forward to building upon that hard-won reputation in 2024.
Turning to our financial results. Ewout will walk through the fourth quarter results in more detail in a moment. But the headline numbers tell a strong story for 2023. We're pleased to see accelerating growth and margin expansion in almost every division in 2023. The 2023 results and the 2024 guidance we're introducing today give us confidence in our trajectory towards the growth and margin targets we introduced at our 2022 Investor Day.
As we approach the 2-year anniversary of the merger, we can definitively say it has been a success. In the last 2 years, not only have we brought together two world-class organizations, but we've delivered through a challenging period against our aspirational and ambitious targets. We integrated major software systems in record time and consolidated our offices around the world.
We're able to close many of our data centers due in part to a transformational partnership with AWS. We've maintained a disciplined approach to managing our product portfolio. And we demonstrated this commitment through the divestiture of Engineering Solutions and the aftersales business in our Mobility division and also through the decommissioning of a number of low-margin or slower-growth products.
Lastly, since the merger closed, we've returned $17.5 billion to shareholders through share repurchases and dividends. We initially set a target of $480 million in cost synergies, then raised that target to $600 million and have now exceeded that higher target by $19 million. We're ahead of schedule on our revenue synergies to date, and we'll continue to report our progress there.
Lastly, we told you when the merger closed that we believed it would be accretive to adjusted EPS by 2023. And I'm pleased to confirm that we have delivered. Both our internal analysis and independent external analysis indicate that in 2023, we delivered higher adjusted EPS than we likely would have generated with S&P Global as a stand-alone company. I'm thrilled to be able to call the merger a success and to move forward to Powering Global Markets as one company.
Now I'll turn to Ewout to review the financial results. Ewout?

Ewout Lucien Steenbergen

Thank you, Doug. We closed the year with strong fourth quarter performance overall as we saw growth across all five of our divisions. Adjusted earnings per share increased 23% year-over-year. Reported revenue grew 7% in the fourth quarter. But excluding the impact of the Engineering Solutions divestiture and the small tuck-ins done earlier this year, revenue growth was 11%. We also expanded adjusted margins by nearly 300 basis points and reduced our fully diluted share count by 3%.
Moving to our strategic investment areas. I'm pleased to report we saw growth across all categories. Sustainability & Energy Transition revenue grew 17% to $84 million in the quarter, driven by strong demand for our energy transition products and benchmark offerings. Sustainability & Energy Transition's full year revenue grew 24% to approximately $301 million. As we introduce more products and continue to innovate in the space, we remain committed to this important growth driver for the business.
Moving to Private Market Solutions. We saw revenue increase by 18% year-over-year to $113 million, driven by strong growth in Ratings private market revenue, improved market conditions, increased bank loan issuance, private credit estimates and MI's software solutions. As we progress towards our goal of $600 million of Private Market Solutions revenue by 2026, I'm pleased to report full year revenue grew 10% to $430 million for 2023.
Vitality revenue, which is the revenue generated by innovation through new or enhanced products from across the organization, was $380 million in the fourth quarter, representing a 19% increase compared to the prior year. Importantly, Vitality revenue represented 12% of our total revenue in the quarter, again surpassing our index target of at least 10%.
Now turning to synergies. As Doug mentioned earlier, we have completed our cost synergy program associated with the merger and outperformed our stated targets. In the fourth quarter of 2023, we recognized $156 million of expense savings due to cost synergies. And our annualized run rate exiting the year was $619 million, exceeding our goal of $600 million.
For the full year, we recognized $581 million in cost savings from synergies. We had been targeting 85% of total cost synergies realized in 2023. And I'm pleased to see that we not only achieved that target, but that we surpassed it by more than $70 million. We continue to make progress on our revenue synergies as well with $40 million in synergies achieved in the fourth quarter and an annualized run rate of $152 million exiting the year.
Now turning to expenses. Our total expenses grew approximately 2% in the fourth quarter, primarily driven by increases in our core and investment growth areas and compensation expenses, which were partially offset by benefits associated with the Engineering Solutions divestiture and cost synergies. On core and investment growth, we continue to make the necessary investments in our strategic initiatives, which includes hiring the right people for key roles and investing in new and existing avenues of growth for our businesses.
Within compensation, there are two factors I would like to call out. First, our salary expenses remained elevated due to hiring activity and inflationary pressures throughout 2023. Second, our benefit costs were higher due to finalization of benefits realignment of IHS Markit employees in the fourth quarter.
As we go through the divisions, you will see these factors impacting expenses and margins this quarter, particularly in Market Intelligence and Mobility. This drove slightly higher expense growth than we were expecting. But total adjusted expenses still grew only 2% year-over-year in the fourth quarter while revenue increased 7%.
Now let's turn to the division results. Market Intelligence revenue increased 9%, driven by strong growth in Data & Advisory Solutions and Enterprise Solutions. Desktop accelerated to 7% growth in the fourth quarter as continued product innovation, introduction of new content sets and improvements to speed and performance supported strong subscription growth.
Data & Advisory Solutions and Enterprise Solutions grew 8% and 10%, respectively. Both benefited from double-digit growth in subscription-based offerings. Credit & Risk Solutions grew 10% in the fourth quarter, supported by strong new sales and price realization.
While renewal rates remained strong overall for MI, we did see slightly elevated cancellations in the fourth quarter as customers, particularly in the financial services vertical, continued to see some budgetary constraints. Combined with the modest softness in nonrecurring revenue, this resulted in total revenue for MI slightly below our expectations, though we continue to see accelerating growth for the division in the fourth quarter.
Adjusted expenses increased 4% year-over-year primarily due to higher compensation expense, an increase in royalties and data costs, partially offset by cost synergies. Operating profit increased 18% and the operating margin increased 280 basis points to 34.2%. For full year 2023, margins improved by 120 basis points to 33%. The margin results are below our guidance range and are a result of a combination of an admittedly strong top line falling short of our expectations and expenses being slightly higher due to the reasons I mentioned.
Now turning to Ratings. In the fourth quarter, we saw refinancing activity drive issuance as improving market conditions reduced borrowing costs and macroeconomic indicators gave issuers comfort coming to the market even in December, which is historically a very quiet month for debt issuance.
Revenue increased 19% year-over-year, exceeding our internal expectations. Transaction revenue grew 35% in the fourth quarter as heightened refinancing activity increased bank loan and high-yield issuance. Non-transaction revenue increased 10%, primarily due to an increase in annual and program fees and growth at CRISIL.
Adjusted expenses increased 6%, driven by higher compensation, which includes hiring associated with growth initiatives at CRISIL and higher incentives due to financial performance. This resulted in a 32% increase in operating profit and an impressive 540 basis point increase in operating margin to 53.4%. For the full year 2023, margins increased by 60 basis points to 56.5%.
And now turning to Commodity Insights. Revenue growth increased 10% following a third consecutive quarter of double-digit growth in both Price Assessments and Energy & Resources Data & Insights. Upstream Data & Insights revenue grew by approximately 3% year-over-year, benefiting from strong demand for software product offerings as well as significant improvement in retention rates. The business line continues to prioritize growth in its subscription base.
Price Assessments and Energy & Resources Data & Insights grew 12% and 13%, respectively. Growth was driven by continued strength in our benchmark data and insights products. Both business lines continue to see robust subscription sales driven by strong commercial momentum and enhanced value being delivered to customers.
Advisory & Transactional Services revenue grew 8%, driven by strong trading volumes across all sectors in Global Trading Services and strength in energy transition-related product offerings. These market-driven volumes helped GTS deliver its strongest quarter of 2023.
Adjusted expenses increased 10%, primarily driven by higher compensation and continued investment in growth initiatives, partially offset by cost synergies. Operating profit for Commodity Insights increased 10% and operating margin contracted 20 basis points to 44.4%.
There are a few factors I would like to call out that contributed to CI's very modest margin contraction in the fourth quarter. In addition to the compensation drivers I mentioned earlier, we saw an increase in performance-related compensation due to the top line outperformance.
We remain very confident in the growth opportunities for Commodity Insights and also wanted to make sure we continue to adequately invest to capture those opportunities. Trailing 12-month margin, which we believe is the best way to assess the performance of our divisions, increased by 180 basis points to 46.1% in 2023.
In our Mobility division, revenue increased 9% year-over-year. The dealer segment marked its fourth consecutive quarter of double-digit growth while manufacturing and financials and other continued to deliver solid results. Dealer revenue increased 14% year-over-year, driven by the continued benefit of price realization within the last year and new store growth, particularly in CARFAX for Life as well as the addition of Market Scan. Manufacturing grew 2% year-over-year, driven by Planning Solutions and Marketing Solutions. Financials and other increased 5% as the business line benefited from strong underwriting volumes and price increases.
Adjusted expenses increased 10%, driven primarily by higher compensation due to the benefits alignment already mentioned and also due in part to higher commissions related to revenue outperformance in our OEM and dealer businesses. We also incurred some inorganic expense growth on the Market Scan acquisition. In aggregate, these drivers resulted in an 8% increase in adjusted operating profit and 30 basis points of operating margin contraction year-over-year in the fourth quarter. For full year 2023, margins contracted 20 basis points to 38.8%.
Now turning to S&P Dow Jones Indices. Revenue increased 5% primarily due to strong growth in Exchange-Traded Derivatives revenue and new business activities within Data & Custom Subscriptions. Revenue associated with Asset-Linked Fees were relatively flat in the fourth quarter. This was driven by higher ETF AUM, which benefits from both market appreciation and net inflows, leading to higher ETF fees and declines in OTC products.
Exchange-Traded Derivatives revenue grew 22%, primarily driven by strong volumes in SPACs and fixed products and strong price realization. Data & Custom Subscriptions increased 4% year-over-year, driven by continued strength in end-of-day contract growth. During the quarter, expenses decreased 6% year-over-year, primarily driven by lower outside services and incentive expenses. Operating profit in Indices increased 11% and the operating margin increased 390 basis points to 66.1%. For the full year 2023, margins expanded 50 basis points to 68.9%.
As we reflect on 2023 as a whole, I'm incredibly proud about the many things we're able to accomplish. We returned more than 100% of adjusted free cash flow to shareholders. We also continued to make the right investments in our strategy, allocating approximately $140 million to the enterprise initiatives that we have discussed with you. And we are encouraged by the fact that approximately 10% of the company's revenue growth came from those initiatives in 2023.
On an inorganic basis, we executed a disciplined M&A strategy with tactical acquisitions immediately adding value to the enterprise. The optimization of our capital and liquidity structure completed earlier in the year provided $750 million of capital. Due to the prudent and strategic application of rate swaps, we're able to execute the debt issuance in a rising rate environment while avoiding an increase in our average cost of capital.
With a team that can deliver impressive accomplishments like these in 2023, I'm confident this will continue under the leadership of the future CFO of S&P Global. Now I'll turn it back to Doug to cover the 2024 outlook.

Douglas L. Peterson

Thank you, Ewout. We're updating our outlook to reflect our economists' view of the most important economic and market factors that will impact 2024. While this isn't meant to be an exhaustive list, these are some of the key factors we'll be tracking this year.
We're currently expecting a soft landing scenario with a base case assumption that we avoid a global recession, though we expect geopolitical uncertainty to persist. We also expect energy transition and higher interest rates to remain factors.
For the equity markets, we expect the secular tailwind that flows from active to passive management to continue. Though changes to market volatility can impact our ETD business in Indices and fluctuations in asset prices will have a lagged but potentially meaningful impact on our Asset-Linked Fees revenue.
Early signs in 2024 indicate market optimism with the market currently pricing in multiple rate cuts in 2024. The timing of these potential cuts is unpredictable. But we expect the issuance environment to be stronger in the first half of the year than the back half. We expect continued focus on energy transition in the commodity markets with volatility in the evolving regulatory landscape having the potential to impact our results this year.
Our financial guidance assumes global GDP growth of 2.8%, U.S. inflation of 2.4% and an average price for Brent crude of $83 per barrel. We're also forecasting billed issuance growth in the range of 3% to 7% in 2024 with stronger growth expected in the first half. While we've included a market issuance forecast in the past, we will only report on billed issuance going forward when discussing our outlook for our financial performance as it historically has been a better indicator of our revenue growth and aligns with our monthly disclosures.
Turning to our most recent refinancing study. When we compare these refinancing walls to last year's study, we see that current year maturities, meaning 2024 maturities now, compared to 2023 maturities measured at this time last year are more than 10% higher than they were at this point last year. The maturities expected over the next 2- and 3-year periods are more than 12% higher. While we can't be certain how the higher rate environment will impact these maturities or issuers' likelihood to delever, we're confident that this puts us in a strong position to achieve the Ratings revenue targets we're outlining today for 2024.
Now turning to our initial guidance for 2024. This slide illustrates our initial guidance for GAAP results. For adjusted guidance, we're expecting revenue growth in the range of 5.5% to 7.5%, driven by strong growth in all 5 divisions. We expect organic revenue growth, excluding the impact of 2023 divestitures, in the range of 7% to 9%. We expect to deliver at least 100 basis points of adjusted operating margin expansion in 2024. This will require us to maintain discipline around expenses and productivity while ensuring that we are making the necessary investments to drive growth and innovation in vital strategic areas like generative AI, sustainability, energy transition and private markets.
We expect to deliver adjusted EPS for the full year in the range of $13.75 to $14, which represents double-digit growth at the midpoint. It's important to note that our expected adjusted tax rate is nearly 2 percentage points higher in 2024 than in 2023. If our tax rate were to remain unchanged from 2023, we would expect adjusted EPS growth approximately 2 to 3 percentage points higher, consistent with the low to mid-teens growth rate we pointed to for 2025/2026 at our Investor Day.
As you saw in our supplemental materials earlier this morning, we also expect adjusted free cash flow, excluding certain items, of approximately $4.4 billion. We expect growth in adjusted free cash flow to be driven primarily by strong growth in revenue and profitability, though free cash flow growth will be tempered somewhat by the timing of working capital items and the full year impact of the $750 million debt offering completed in the third quarter of 2023.
With the geopolitical, macroeconomic and market risk and opportunities we've discussed on this call, we expect that the financial outlook we've provided today likely has more upside risk than downside. And you can count on our focus, determination and discipline over the coming year.
Our outlook for 2024 calls for further acceleration in revenue growth compared to 2023 and continued margin expansion, even though we will no longer have the benefit of the vast majority of our cost synergy actions going forward. Our financial outlook for 2024 illustrates our continued progress toward the targets we outlined at our Investor Day just over a year ago. And we remain committed to those targets.
Moving to our division outlook. For Market Intelligence, we expect revenue growth in the range of 6% to 7.5% with expected growth to be slightly higher in the back half than in the first half of the year. We expect adjusted operating margins in the range of 33.5% to 34.5% as we continue to invest in key growth initiatives while maintaining rigorous discipline around expenses.
For Ratings, we expect revenue growth in the range of 6% to 8%, driven by billed issuance growth of 3% to 7%. We expect revenue growth rates to be stronger in the first half of the year than the second half as comparisons are easier in the first half and we expect some level of pull-forward, given the uncertainty around the timing of any potential rate actions by central banks. We expect adjusted operating margins in the range of 57.5% to 58.5%.
For Commodity Insights, we expect revenue growth in the range of 8% to 9.5% and adjusted operating margins of 46.5% to 47.5%. For Mobility, we expect revenue growth in the range of 8.5% to 10% and adjusted operating margins of 39% to 40%. Lastly, for S&P Dow Jones Indices, we expect revenue growth in the range of 7% to 9% and adjusted operating margins in the range of 68.5% to 69.5%. As you saw in the press release earlier this morning, our Board has authorized a repurchase of shares totaling up to $2.4 billion, which we expect to execute throughout the year.
And with that, I'd like to invite Adam Kansler, President of S&P Global Market Intelligence; and Martina Cheung, President of S&P Global Ratings and Executive Lead for Sustainable1, to join us. And I will turn the call back over to Mark for your questions.

Mark Grant

Thank you, Doug. (Operator Instructions) Operator, we will now take our first question.

Question and Answer Session

Operator

Our first question comes from Faiza Alwy with Deutsche Bank.

Faiza Alwy

So I wanted to start with a big-picture question on Ratings, take advantage of Martina on the call. Maybe you can talk a little bit about the drivers behind the Ratings top line outlook. Doug mentioned 3% to 7% billed issuance growth. But give us a bit more color around transaction versus non-transaction growth and the various components, whether it's corporate, structured. You mentioned greater private assessment. So just a bit more color around what's underlying the revenue outlook.

Martina L. Cheung

Thanks very much for the question. So as Doug mentioned in his remarks, we do expect a stronger first half of this year, 2024, compared to the back half of the year. And I'll break it down a little bit. First, on the transaction revenue and our billed issuance estimate in the 3% to 7%, we're expecting to see continued refinancing activity that we saw build up in the back half of last year with high-yield and bank loans. And we saw that consistent in January. So we would expect to see that continue throughout the first half of this year.
We would also expect to see some investment grade, although not as robust as last year. And part of that is just because so many investment-grade issuers tapped the market last year. Another potential factor there is the fact that we would see some investment-grade issuers being able to wait until the rates come down.
Now some of the factors driving first half versus the second half, I would say anecdotally, we're hearing that issuers are looking to come to market to take advantage of strong investor appetite to lock in rates once they're higher and before the rates come down and ahead of potential volatility in the back half of the year.
On transaction revenue, we would actually expect to see stronger frequent issuer program issuance this year than we saw last year. You won't see that in our billed issuance estimate, for example. And we would also expect to see continued strong performance in our surveillance book across CRISIL, our royalty and other products such as RES, or Ratings Evaluation Service.
Overall though, as Doug said, we do expect stronger first half compared to second half. All of these factors that we take into consideration, including pace and timing of rate cuts, volatility, et cetera, these are all baked into our overall outlook. It is early in the year. And we will definitely seek to become more precise as we go throughout the year. But that's, I think, a good summary of where we're at.

Operator

Our next question comes from Manav Patnaik with Barclays.

Manav Shiv Patnaik

I just wanted to touch on the revenue synergies. You said I think it was $152 million annualized exiting the year. I think that's a number higher than what we would have thought of. I was just hoping you could give us some color on where -- what kind of areas those are coming from, what you've kind of baked into 2024 also perhaps.

Douglas L. Peterson

Thank you, Manav. This is Doug. Well, we're really excited about what we've been able to achieve with the merger. And you've heard us talk about the power of the merger, the capital return that we had, the accretion to EPS, the cost synergies, which we now have delivered $619 million. And going forward, we're going to keep talking about the revenue synergies. When we look at the revenue synergies, they started off traditionally with cross-sell, cross-sell within divisions.
This is where we were selling Commodity Insights products from the Platts customers to the IHS Markit customers and vice versa, same in the Market Intelligence business, where we're selling financial services products to corporate customers for Market Intelligence. But now we're starting to deliver the new products as well. And a combination of both of these has allowed us to be ahead of the schedule. We're very excited about the new products coming out.
Let me give you one example from the Commodity Insights division, something called Platts Connect. Platts Connect is a product that took the platform of Platts Dimensions Pro and took the IHS Markit Connect platform, we put them together. We now have a very unique, single, holistic platform for prices, for research, for forecasting. But let me hand it over to Adam since he's on the call, and he can give us some more color for Market Intelligence.

Adam J. Kansler

Great. Thanks, Doug. The revenue synergy is obviously one of the most exciting parts of the combination of businesses. As Doug mentioned, the early successes have been in going to our customers with combined product capabilities that strengthen what we were already providing to those customers. We've seen outsized performance there even against our own expectations.
What's really exciting as we get now into the years where we've landed those early merger synergies is the launch of new products. Doug mentioned a few. Over the course of 2023, we launched 7 new products just within Market Intelligence. We have 14 new products set to come to market across 2024. These will increasingly become part of what we're offering out to customers.
Whether it's just putting our bond pricing in together with our credit analytics capability, looking at our economics and country risk data across our Desktop, incorporating sustainability data into our private markets portfolio management capabilities, these are all exciting areas that will continue to add to the growth of the business. You'll also see us announce some increasing generative AI capabilities across broader datasets of the combined businesses. I'm sure we'll talk a little bit more about that later on the call.

Operator

Our next question comes from Toni Kaplan with Morgan Stanley.

Gregory Scott Parrish

This is Greg Parrish on for Toni. Adam, just want to go back to you, talk about Market Intelligence, 6% to 7.5% revenue growth guide, similar to last year. Is, a, selling environment, has that improved at all? Or is that still a bit of a headwind? And then on the capital markets piece of the business, I think some of the Ipreo assets seeing some increased activity to start the year. So is there upside from that? Or are you still a little bit cautious?

Adam J. Kansler

Okay. Thank you for the call. We're very optimistic about continued growth in the business. And you've seen that progression from '22 to '23 and you see our guidance for 2024. Our end markets have had a pretty challenged period through '22 and '23, right? You've seen 30-plus percent declines in M&A activity, 34% decline in private equity investment activity. But even through that period, we've been able to deliver the solutions that our customers want. I think that will continue into '24. We do see some early activity in capital markets. But I think the way the full year will play out is yet to be seen.
For us, going into the first quarter, we see more challenging comps. So we'll see a little bit slower start to year than we'll see towards the back half of the year. I am cautiously optimistic that as markets stabilize, that presents opportunity for us. But we want to be careful because our largest customer sets continue to be under pressure. You see that in the news every day. As we go into the beginning part of this year, we want to see how that ultimately plays out. But we feel pretty good about the guidance range we've put out.

Operator

Our next question comes from Andrew Nicholas with William Blair.

Thomas Colton Roesch

This is Tom on for Andrew. I wanted to ask about ChatIQ. You mentioned you started piloting that in December. I was wondering what kind of customer feedback you're getting so far and what kind of benefits you can expect. Can it help increase pricing on the Cap IQ platform or any other benefits you're seeing there?

Adam J. Kansler

Tom, thanks for the question. We're very excited about the early responses on ChatIQ. That's a tool that lets our customers get into our Desktop and get back actionable insights, lets them actually click through directly down to the source documents on what's one of the most robust datasets available to financial markets and corporate participants in the world. ChatIQ, very exciting, we are out with a few pilot customers. We'll start to release that out more broadly to our customer set over the course of 2024.
But it's also not the only thing that we're doing with generative AI. You may have seen a press release in the last couple of days. We've actually launched now widely available to customers the ability to use generative AI to search in the S&P Global Marketplace, which is the place where you can go and look at all the datasets available across all of S&P Global. We're using generative AI to allow people to query into those datasets to get broader understanding of what's actually available through our company. We're pretty excited about that. And early responses have been positive.
You'll also see releases from us during the year, things we're calling RegGPT, some other tools around our Ratings-related data that we deliver through Market Intelligence to allow our customers to probe into that data and get quick responses that help increase the speed within their own workflows. You'll continue to see this across the course of 2024. We're very focused on making sure we release things that are actually useful to our customers, enhance the value proposition of what we're delivering to them and ultimately embed our solutions more deeply into their workflows.

Operator

Our next question comes from Andrew Steinerman with JPMorgan.

Alexander Eduard Maria Hess

This is Alex Hess on for Andrew Steinerman. I was hoping you guys could walk us through a little bit of the incremental margin outlooks embedded in your guide, especially for Market Intelligence, Commodity Insights, sort of -- and maybe Mobility, just sort of helpful to know sort of in those higher subscription businesses, what the puts and takes are on expenses and how we should see that flowing through to operating income.

Douglas L. Peterson

Thanks, Alex. This is Doug. Let me start by saying that we always start our year with looking at how we're going to be able to grow our margins. We always build a budget that begins with top line growth. And we want to make sure that we can build our business through investment for innovation but also continue to deliver margin expansion. So you asked about each of the divisions. And each of the divisions has different characteristics for how we're moving forward. We have technology and productivity plans in place. But let me start with a couple of the divisions and then hand it over to Adam.
So within the Commodity Insights division, we're looking at, as you saw, 8% growth to 9.5% growth with a margin expansion in the 46.5% to 47.5% range. We have growth in that area, in particular in energy transition products. We see high demand coming for new sorts of products that relate to carbon, to carbon intensity, to carbon markets, to different types of metals, which are going to be important for the energy transition. So we see a lot of growth in the area coming from energy transition on top of what are the regular markets there. We do have some investments taking place in the Commodity Insights division both for some regional expansion as well as some new products.
When it comes to Mobility, we're making some investments in some new products in Mobility so that we will be able to grow our top line. As you see, we have an 8.5% to 10% revenue guide and a 39% to 40% margin guide. But we always operate all of our businesses beginning with top line with discipline to deliver growth. Just to mention before I hand it over to Adam, as you know, we've delivered 1,200 basis points of margin expansion over the last 10 years. So it's something that's in our DNA. But let me hand it over to Adam.

Adam J. Kansler

Sure. Just commenting briefly on margins within Market Intelligence. We do expect to continue to see expansion as we go into 2024. It's important for us to keep balancing the need for continued efficiency, looking for where we can operate more effectively and continue to drive margin expansion. We expect to do that on course to the levels that we laid out in the 2022 Investor Day but also balancing that with making the right investments to drive the increased top line growth that we also expect to deliver as we get towards those target dates that we laid out in the Investor Day as well.

Operator

Our next question comes from Alex Kramm with UBS.

Alexander Kramm

Just, I guess, continuing that last point, Adam, that you made. When I look at the revenue targets that you laid out at the Investor Day across the company, I think you're making good progress everywhere. But in Market Intelligence, I think it appears that if it's a steady path with the most behind.
So maybe just coming back to the comments you made earlier in terms of the environment, is it the environment that needs to improve? Is it the revenue synergies that need to click more? Or what needs to happen to get to that 7% to 9% in 2025. Yes, and what are the biggest factors that get you there? And what's your confidence level, sorry?

Adam J. Kansler

Thanks, Alex. Confidence level, high. We set those targets for 2025/2026. I think we're well on track to get there. Even in this current year, while coming in behind our goal, we're still right near the very bottom of that 7% to 9% growth range, right? We delivered a 6.9-or-so percent year. You've seen in our guidance, like we'll continue to push towards that. You identified actually a couple of the important factors.
That synergy growth will continue to build. And we always said we'd start to see the real impact of that in years 3 through 5. And that's the period that we're just starting to enter. So you will see that continue to be a factor. The second biggest factor is we've gone through in 2022 and 2023 one of the toughest macro environments that we've seen, particularly for our customers over the last, certainly, 5 to 10 years.
So as that macro environment improves, especially conditions for that customer set improves for us, it also sets us up to continue to accelerate towards those growth levels. Even through that challenging period, as I mentioned, we're delivering actually pretty close to that range and on a pretty straight line path into it and have pretty high confidence that we'll get there.

Operator

Our next question comes from Ashish Sabadra with RBC Capital Markets.

Ashish Sabadra

I just wanted to focus or drill down further on the index business. There was a mention of declines in OTC products. I was wondering if you could provide some color on that front. And then as we get into 2024, I was wondering if you could provide some color on what are your assumptions around AUM growth. And then fees, which were a headwind this year, how should we think about those potentially becoming a tailwind in '24?

Ewout Lucien Steenbergen

Ashish, this is Ewout. Thank you for giving me an opportunity to answer a question during my last call. Coming back to your point about OTC, obviously, if you look at AUM fees in the fourth quarter, you say, "Hey, that's strange. Why is it flat when markets are up so much?" And we see two underlying dynamics that go in opposite direction. So as we have always said, in AUM fees, there's many things that go there into the mix. There is mutual funds, there's OTCs and others.
Actually, if we zoom in on ETFs, it's up about 8% in terms of fees. And that is helped by market depreciation as well as very strong inflows that we have seen into the ETF area but offset by OTC volumes that were down period-over-period. OTC volumes can always be a bit lumpy quarter-to-quarter. So I wouldn't read too much into it. This can really change again the following quarter. So overall, I would say this is a normal trend that we are seeing here.
With respect to the assumptions for 2024, first of all, the assumption is that AUM is up at mid-single-digit level; the ETD volumes, low single-digit increase; and then the subscription growth at a double-digit level for the index business for 2024. Those are the assumptions. Thank you, Ashish.

Operator

Our next question comes from Scott Wurtzel with Wolfe Research.

Scott Darren Wurtzel

Just moving back to the Ratings segment, and I'm thinking about the results and guidance here, sort of looking at that Slide 32 and seeing the decline in expected maturities for 2024. I was just wondering if you guys saw any pull-forward activity into the fourth quarter, given the decline in rates and tightening spreads that we saw and how that may have informed your outlook for 2024 here.

Martina L. Cheung

Scott, thanks for the question. We did see some pull-forwards more for '24, a little bit of '25 into 2023, not just in Q4, I would say. I mean, I think the sort of the repricing and other refinancing activity started to pick up momentum in the back half overall. And we've certainly seen that continue into this year. But I would maybe take a step back and perhaps sort of characterize how we build our outlook for the year.
So absolutely, refinancing is very important. And as Doug mentioned in his remarks, the refinancing wall continues to grow nicely, which is a very healthy indicator for us. But we also look at a number of other factors, including the overall macro picture, whether it's GDP growth, pace and timing of interest rate cuts. We also look at opportunistic issuance. We know that's been historically very hard to predict. And that's become even more difficult in the last 2 years.
And candidly, M&A, we don't have historic or heroic assumptions around M&A. As Adam mentioned earlier, it was down quite a bit last year. And while we're hearing a little bit of positive market sentiment, we need to see how that plays out throughout the course of the year. We also look at investor appetite, fund flows and how that could impact issuance across different asset classes. So for example, as I mentioned earlier, we would expect to see higher frequent issuer issuance this year than we did last year. And then we keep an eye on this throughout the course of the year, a lot of contacts with investors.
I think we did -- we increased our investor meeting frequency quite a bit last year, so we're between the 25,000, 30,000 range of meetings with investors. So a lot of work goes into building up the bottom-up. It's not just the refinancing piece of it, although, of course, that's a good long-term indicator for us. And then just to kind of recap or draw a line under it, as Doug said, we would expect slightly faster first half than second half. And as we go throughout the year, we can come back to you with greater precision.

Operator

Our next question comes from Jeff Silber with BMO Capital Markets.

Jeffrey Marc Silber

In your prepared remarks, I think you had said you're constantly reviewing and optimizing your portfolio. Can we just kind of step back, maybe you can tell us what you're looking for, whether it's in tuck-in acquisitions or maybe more importantly, potential divestitures? Would it be possible to see a large divestiture in the future?

Douglas L. Peterson

Thank you, Jeff. As you know, we always apply a discipline to looking at our portfolio, looking at top line growth, looking at the margin expansion, also looking at how it fits across the portfolio. During the year last year, we didn't make a lot of noise about it, but we did shut down some very small products. We shut down 8,000 indices that were subpar, sub-sized across the businesses within Commodity Insights, Market Intelligence, some small products that we moved on. We also had a couple of small divestitures.
But when you ask the question to us, we're constantly looking at the portfolio, trying to understand what fits best. We have different themes. You've heard us talk about the key themes, private market, sustainability, supply chain analytics, risk and credit. These are the sorts of areas that we're always looking to expand our presence to make sure we have the best capabilities possible to meet the needs of our clients. But within looking at the needs of clients, we look at the shareholders. We look at how we're going to put this portfolio together with the best way to leverage our technology. We will always apply the discipline as well to how we're going to look at the portfolio in the future.

Operator

Our next question comes from George Tong with Goldman Sachs.

Keen Fai Tong

I'd like to better understand your guidance for Ratings revenue growth in 2024. Do you expect billed debt issuance growth of 3% to 7% but Ratings revenue growth of only 6% to 8% in 2024, which would reflect little to no pricing benefit or mix headwinds? Can you help bridge the gap there?

Martina L. Cheung

George, thanks for the question. So maybe I could start with transaction versus non-transaction and how we think about both of those. And as you know, transaction is a somewhat lower proportion of our revenues compared to, let's say, pre pandemic. On the transaction front and specific to billed issuance, as I said in my last response, we look at a variety of factors.
Refinancing is a critical one, covered that in my last response, as well as the key macro drivers, when rate cuts could start, for example, what the exit rate on those looks like this year, the potential challenge in predicting opportunistic issuance. And there, we really do not have heroic assumptions around opportunistic issuance for this year. So we're being cautious on that. And then I would say, as I mentioned as well, that we would expect to see more frequent issuer issuance this year, which wouldn't show up in our billed issuance estimate of 3% to 7%.
So I think with all of that, you have to take into consideration the potential wide range of outcomes, whether it's rates, whether it's almost half the world's population voting in elections and potential for greater volatility in the back half of the year. So that informs both the overall outlook of 3% to 7% billed issuance but also the timing that Doug has mentioned, which is a stronger first half versus second half.
On the transaction side, we see strong performance across all key areas there. So that would include our surveillance book. It would include the RES portions of the book, for example, CRISIL as well as the royalty payment that we get from Market Intelligence. So maybe again, I would just reiterate, strong first half and tapering off in the back half. And then as Doug mentioned, it is early in the year. There is potential for upside in the range. And we will look to get more precise on this as we go throughout the year.

Operator

Our next question comes from Craig Huber with Huber Research Partners.

Craig Anthony Huber

Maybe just talk a little bit further about your guidance for the year about where potentially you could be conservative in your mind, whether it be on the cost side of things or you're baking in too much assumption for cost there or on the top line, what segments potentially coming ahead of your outlook at this stage of the game.

Douglas L. Peterson

Thanks, Craig. As you saw when we put together our information we put in our slides, what are the key factors that we look at? And when you take a step back, we know that GDP growth is always the #1 driver. It's the highest correlated factor to our long-term revenue growth. We've looked over the years to see what are those factors that drive it the most. We see some potential slowdown in the economy in the U.S. and in EU. We're planning for what we call -- we're planning against what we call a soft landing, which means that there could be some sort of slowdown in the economy.
As you heard, we've seen some slowness and a little bit of longer sales cycles in certain segments. But that's -- those are some of the downside factors. What would happen with the geopolitical factors, how long will it take before central banks begin to cut rates, we've taken those into account as we built our guidance with some conservatism. So if we saw a much quicker return to lower interest rates, if we saw much quicker -- a geopolitical environment that was more stable, these are the kinds of things that create some upside for the company.
We also look at segment-by-segment. We know that the automotive segment is going through a lot of change. We know that the energy transition, which is changing the commodity cycle. So we've taken into account all of these different factors as we've looked at the -- overall at the guidance. So to your upside risk -- upside opportunities, we think that it could come if interest rates move down lower faster, if the interest rates -- if the economies grow faster than we think, et cetera. But these are all the factors we take into account across the divisions as we're setting up our guidance for 2024.

Operator

Our next question comes from John Mazzoni with Wells Fargo.

John Peter Bonner Mazzoni

Could you just help us understand how you're thinking about the longer-term generative AI monetization, specifically around cross-platforming as well as potential kind of upsell and cross-sell from kind of new products?

Douglas L. Peterson

Great. Thank you for that. And when we think about technology, when we think about AI, we start with the framework that we showed you in our prepared remarks today, which has the foundation of very strong proprietary data. We think that this is going to be one of the most important factors for AI becoming successful at any company, no matter where they are. And we think that this gives us a running start in addition to what we've already been developing with Kensho over the last 5 years.
But turning that into earnings and turning that into growth is something that we're starting to build. We think that the AI opportunities we have, Adam talked earlier about ChatIQ, is an example of something that gives customers the opportunity to dig much, much deeper into our data. We think that it's going to create stickiness. We're starting with metrics that look at, for example, our Net Promoter Scores.
We're looking at retention. We're looking at how people, how -- what kind of feedback we get from calls from customers that are calling in to see how we're doing. We also believe that right now, we're going to be able to continue to meet our guidance that we gave you for our -- in our Investor Day in 2022. We'll be able to continue along that track. And then we'll be able to come out with much more precise guidance for the impact of AI across our portfolio in the future.
But we see this as something that's going to be a game changer for all of our businesses. It's going to be embedded in everything we do. And we're just now learning how we're going to measure those impacts. But let me hand it over to Adam because he's very close to a couple of the end market opportunities that we have right now.

Adam J. Kansler

Great. Thanks, Doug, and thank you for the question. As Doug mentioned, we do think generative AI has a transformative potential across almost all of our products. Remember, we are one of the largest data providers in the world. And the one thing we have is a highly trusted, highly developed, accurate set of data across our businesses, whether that's in Market Intelligence or the other divisions of our business. We're also deeply embedded in the workflows of our customers.
The combination of those two, and when you really understand the power behind generative AI to unlock the potential in massive datasets that may correlate to each other, may have unique insights and the ability to process through that in a very rapid time frame, for us, thinking about portfolio monitoring workflows, research and insights, credit assessments, risk assessment, looking across broad sets of data for insights and what's developing in various sectors or regions or how it could impact the portfolio. Those are all opportunities for us for making the datasets and workflows that we already provide today to our customers all the more powerful.
When we look at the opportunity set in front of us and even just our product launch sheet for 2024, we're pretty encouraged that we're well positioned to take advantage of the technology, increase the penetration we have with our customers and expand the kinds of services and insights we're able to give them efficiently. That also increases the efficiency of their own internal workflows, which obviously comes with significant value. We'll see how that all materializes and how we're able to monetize that. But we do think it's a tailwind for us.

Operator

Our next question comes from Jeff Meuler with Baird.

Jeffrey P. Meuler

Ewout, when you described some of the costs that were higher than expected, things like the heritage IHS Markit employee benefit cost, it wasn't clear to me. Was there a true-up that was specific to Q4? Or was there a greater-than-expected step-up in the expense baseline that's happening now? And then on '24 tax rate, what drives the step-up? And is the new rate kind of like a good steady-state rate for the portfolio?

Ewout Lucien Steenbergen

Yes, thanks, Jeff. So let me explain what is benefits realignment. So benefits realignment is that we brought, as of January 1, 2023, all of our employees across the world to the same benefits package. Because we think it is fair that we should treat everyone the same in every country around the world, so think about the medical plans, think about the retirement plans. We have made estimates about the expenses for 2023.
And for the first 3 quarters, the expenses came in exactly in line with our expectations. But they exceeded the expectations in the fourth quarter. And benefits costs are always not 100% certain. Because just to give an example, the medical costs in the U.S. were self-insured. So they can be higher if we have higher medical claims or the matching for 401(k) contributions can be higher. So we're seeing this more as a one-time step-up cost. And that should be in our baseline going forward from 2024 onwards.
Your second part of your question about the tax rate, we saw in 2023 a bit of a benefit in the tax rate in the third quarter and the fourth quarter. And then we are seeing some upward pressure in the tax rate in 2024. So to expand on that, on the third quarter of 2023, we had some favorable new guidance with respect to the utilization of foreign tax credits. And then in the fourth quarter, we had the conclusion of certain state tax audits that led to some reserve releases. So it brought the effective tax rate a little bit down in 2023 compared to a normalized level.
And what we're seeing in 2024, the implementation of Pillar 2 global minimum tax in several jurisdictions as well as the U.K. statutory tax rate is going up. So 2024 is, I think, the right level to think about this. Where tax rate will go from a longer-term perspective is really hard to say because it really depends on government finances and where that will go around the world in the future.

Operator

Our next question comes from Russell Quelch with Redburn Atlantic.

Russell Quelch

Sorry to go back to this, but on the Ratings business, your macro forecast are implying what I think is a soft landing conducive for rate cuts. And as I understand that the maturity walls built throughout the year, I appreciate some of that could be pulled forward into the front end. But I'm still struggling to square this sort of front-end loaded observation when you discuss revenues relative to your macro guidance. So maybe you could explain that again, please, and also what you're assuming for the non-transaction revenue growth in '24, sorry if I missed that.

Martina L. Cheung

Thanks so much, Russell, for the question. Just a quick one on the non-transaction, we don't separate out our guidance between transaction and non-transaction. But as I said, we do expect robust performance in our non-transaction part of the book this year. The picture is a little counterintuitive, in fact, for the timing piece. Because you would, in fact, expect, given our kind of predictions of three rate cuts, for example, by the Feds starting in the middle of the year this year that you might see a more even result with issuance throughout the year.
What we're actually hearing from the market is a little bit different. So for bank loans and high yield, for example, we're seeing and hearing a couple of things. Number one, issuers have accepted the higher for longer. But more importantly, number two, there's a good, really good, strong investor appetite for these asset classes. And pricing is much more constructive this year, for example, than it was same time last year. So these issuers are coming to market. There's a high volume of repricing into that. So for example, the bank loan, January volumes for repricing was actually around, if not a little bit higher than, the full year 2023 repricing that we saw in bank loans.
And then on investment grade, some of that -- we see that taper a little bit this year compared to last year. The reason for that is that there were so many issuers that came to market last year. But also, those that are sitting waiting for rate cuts can afford to actually absorb what they're sitting on today, whether it's using commercial paper or otherwise to wait for some of those rate cuts to play out. Hopefully, that answers your question. As I said, it's early. We're in the first half of February. And this is our base case. There's a pretty wide range of possibilities here. And we'll look to get much more precise as we go throughout the year.

Operator

Our next question comes from Shlomo Rosenbaum with Stifel.

Adam Parrington

This is Adam on for Shlomo. Can you discuss the level of incentive compensation in the quarter and what is implied in 2024 versus 2023? And how much does this impact the margin guidance for 2024 as well?

Ewout Lucien Steenbergen

Yes, we brought up incentive compensation accruals in the fourth quarter. And that was driven by the strong top line performance from both the Ratings and Commodity Insights. So for the total year 2023, our cash bonus incentive accruals are now ending up at a level above 100%. What we always do when we do planning is to reset cash bonus incentives back to 100% from a planning perspective for the next year. So for 2024 in the plan is embedded a 100% payout of our cash bonuses.

Operator

Our next question comes from Heather Balsky with Bank of America.

Emily Marzo

This is Emily Marzo on for Heather Balsky. You talked about elevated cancellations in Market Intelligence. Could you give us some details on what type and maybe size of customers you're seeing cancel? And what kind of discussions you've had so far this year?

Adam J. Kansler

Heather, it's Adam. Thank you for the question. So through the fourth quarter, in particular, the places where we saw cancellations were actually in our smallest customers, right, customers under relatively low threshold. Our larger customers, while under pressure due to a range of macro reasons, those are places where we have opportunity in a vendor consolidation initiative, where those customers are looking to consolidate the number of vendors they work with. Given the scale and scope of relationship that they have with S&P Global, that often presents opportunity for us.
And accordingly, we saw much stronger renewal rates in that group of customers than we did amongst our smallest customers. I think the other places where we see pressure is discretionary spend, where customers have a decision whether to undertake a consulting project or a new initiative. Those are places where customers have been a little bit more hesitant into the fourth quarter. And we're hopeful that will continue to stabilize as we get into 2024.

Operator

We will now take our final question from Owen Lau with Oppenheimer.

Owen Lau

I just want to go back to AI. And I think AI, it's great and there are lots of potential. But it looks like whether clients will actually pay extra for it, it's still uncertain. I'm just wondering what makes you confident that you can develop a killer app that people will use it and pay for it.

Douglas L. Peterson

Thank you, Owen. Well, we take a view that AI is going to be embedded in everything we do. And we don't think there's going to be a killer app. It would be great if there were, but that's not our plan. Our plan is to look at AI to see how it can improve our productivity, how we can use it with our developers, our data management, data linking, et cetera, up into how we're going to improve our products and build products and link them over time.
As you heard from Adam, we've got a few very exciting products that are already being tested in the market. We've launched one recently and then we've got some more coming. We also have the capabilities of Kensho, which are available on the Marketplace. So we don't think of it as a killer app. We think of it as continuous improvement. And we think that if you look at it over time, it's going to be something that's going to change the way we work and the way that our people work. So we're really excited about it.
We're also excited that we have such a strong internal team that we're one of the first companies who was able to name a Chief Artificial Intelligence Officer, somebody who has the experience of Kensho, of being the CEO there with the expertise. We have an open model in terms of the ecosystem we're going to be working with. So we're not looking for a killer app, but we're looking to see every single way we can use it and how it's going to improve the way we serve our customers as well to manage the business. So thank you, Owen.
Let me make a couple of closing remarks. And first of all, I want to thank all of you as usual for being on the call and for your excellent questions. And it was great to have Adam and Martina on the call today. And I'm really excited about everything that we're able to deliver in 2023.
We delivered what we think is the promise of the merger. As you know, we've paid back over $17.5 billion of capital over the last 2 years since the merger. We've been delivering innovation. We delivered on our synergies. So we're excited about taking that energy and all of the incredible work that our people have done and turning that now into growth into the future.
I also want to thank our people as always for their incredible work. It's what made 2023 what it is and it's what makes me very confident about the foundation we have for going forward and especially our leadership team, who is focused on growth, innovation and execution.
This is our last earnings call with Ewout. He's been with us for 7 years of remarkable service, and I want to thank him. He's helped shape our financial strategy. I know that everybody is very pleased with our margin and as well as our capital return. And that's something that Ewout has been instrumental in. He's helped us lead with our accelerated growth with our innovation.
And he's had a tremendous impact. He partnered with us on all of the major strategic transactions. He's been the sponsor of Kensho for the last 5 years, which we now talked about many times on this call, the importance that brings to the company, as well as one of the initial architects as well as executors of the IHS Markit merger. So he's done a fantastic job building a world-class finance organization.
As we previously announced, our current Chief Accounting Officer, Chris Craig, will be named as the interim CFO on Monday. And he has done a fantastic job here for the last 13 years. And he's going to continue to evaluate the businesses and as we look both internally and externally for candidates for the permanent role, and I look forward to working with Chris in his role. But again, thank you, Ewout. We wish you the best in your new role and continued success in your career. And please keep making the world a better place with your leadership with UNICEF.
So again, thank you, everyone, for joining the call. Great questions, and we're very excited about the future. Thank you very much.

Operator

Thank you. That concludes this morning's call. A PDF version of the presenter slides is available for downloading from investor.spglobal.com. Replays of the entire call will be available in about 2 hours. The webcast with audio and slides will be maintained on S&P Global's website for 1 year. The audio-only telephone replay will be maintained for 1 month. On behalf of S&P Global, we thank you for participating, and wish you a good day.