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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning and welcome to S&P Global's Third Quarter 2020 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation and instructions will follow at that time. To access the webcast and slides, go to investor.spglobal.com. [Operator Instructions]
I would now like to introduce Mr. Chip Merritt, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.
Great, thank you and thank you for joining us today for S&P Global's third quarter earnings call. Presenting on today's call are Doug Peterson, President and CEO and Ewout Steenbergen, Executive Vice President and Chief Financial Officer.
We issued a news release with our third quarter 2020 results earlier today. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com. In today's earnings release and during the conference call we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to review the corporations business from the same perspective as managements.
The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with US GAAP. This call, especially the discussion of our outlook and associated scenarios contains statements about expected future events that are forward-looking and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from expectations can be found in our filings with the SEC and on our website.
Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements.
In this regard we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs and other periodic reports filed with the US Securities and Exchange Commission. I would also like to call your attention to European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should give me a call to better understand the impact of this legislation on the investor and potentially the company.
We're aware that we do 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 Dave Guarino at (212) 438-1471.
At this time, I'd like to turn the call over to Doug Peterson. Doug?
Thank you, Chip. Good morning and welcome to today's earnings call. Before I talk about our third quarter financial highlights, I want to thank our people at S&P Global for their dedication and commitment in this extremely unusual and challenging times. Our people remained focus on supporting each other, our customers and our communities through this ongoing pandemic and I've been impressed that our people have been putting relative time and research [technical difficulty] navigate the uncertainty of the pandemic. We are fortunate that the vast majority of our employees can work remotely and continue to deliver highest value to our customers.
Now let me begin with our third quarter financial highlights. S&P Global continues to perform well in the current environment and all four businesses delivered revenue growth. Ratings once again delivered the strongest revenue growth in part due to 94% increase in US high yield issuance. During our first quarter earnings call, we explained the expense controls we're putting in place to manage through the pandemic, based on the strong performance we've delivered year-to-date. We've begun to unwind some of these controls. Most importantly, we begun hiring again and open position. In addition, our incentive accruals were increased substantially during the third quarter to reflect this strong performance and we're pleased to increase our full year 2020 guidance by $0.50 to $0.55 which Ewout will discuss in a moment.
I'd also like to share some additional highlights for the third quarter. Our investment and growth initiative continues to result new product launches, additional data sets and new technology enhancements. We've made great progress across all four divisions in ESG as our recently launched products are gaining traction in the market. We also continue to be committed to running our operations in the most cost-effective manner and we're introducing a new $120 million productivity program today which Ewout will discuss in a moment.
We've recently refinanced a portion of our outstanding debt extending maturities at lower rates and we continue to design and re-imagine the workplace of the future by incorporating technology solutions to transform how we serve our customers, where we work and how we work. The project is still underway and we hope to share the outcome with you on the fourth quarter earnings call.
To recap the financial results for the third quarter, revenue increased 9% to $1.8 billion. Our adjusted operating profit increased 11% and our adjusted operating profit margin increased 100 basis points to 52.9% and this was despite a catch up to our incentive compensation accrual of over $50 million. As you know, we measure and track adjusted operating profit margin on a trailing four-quarter basis which increased 370 basis points to 53.8%. In addition shares outstanding decreased 2% over the past year contributing to the 16% increase in adjusted diluted EPS.
Each quarter, we highlight a few key drivers to our business and important projects underway. This quarter let's start with ratings issuance trends. During the third quarter, global bond issuance increased 7%. If we also include bank loan ratings volume, total global issuance increased 4%.
Here's some key points regarding third quarter issuance. First; the further we get from the March credit sell off, the more investors have been purchasing weaker credits. Second, yields on US non-financial corporate debt are near all-time lows bringing issuers into the market. In fact, there were two large investment grade corporates that issued debt in September to replace that they just issued in March. And third, despite the strong US issuance that has occurred in the last two quarters. We've identified more than 60 issuers that have issued at least $5 billion between 2017 and 2019 that have not tapped the bond market this year. They're on the what we call are, what are you waiting for list.
Turning to the data, in the US bond issuance in aggregate increased 9% as investment grade decreased 5%, high yield increased 94%, public finance increased 25% reaching the highest third quarter issuance in the last 10 years and structured finance decreased 12% with large reductions in CLOs and CMBS partially offset by a gain in ABS.
European bond issuance decreased 8% as investment grade decreased 7%, high yield increased 3% and structured finance decreased 17% due to reductions in every asset class except RMBS which posted a large increase. In Asia, bond issuance increased 19% overall. During the quarter, ratings completed five domestic ratings in China, bringing the total to-date to 18. In addition the PBOC, CSRC and SAFE, jointly released a draft policy to attract international investors to the domestic bond market on September 2, which indicates another round of opening of China's capital markets.
The draft policy includes suggested actions to simplify the market access process integrate access to interbank bond market and exchange bond market and reduce foreign exchange control. There are two major bond markets in China; one is the interbank market where we received a license to operate from the PBOC in 2019. The other is the exchange market which is regulated by the China Securities Regulatory Commission just last week we successfully filed a registration with the CSRC to raise products on China's exchange bond market. This means we have the widest remit of any wholly foreign owned credit rating agency in the market and one that is on par with the domestic players.
Bank loan rating activities is not captured in issuance data since it's an important element of ratings revenue. We'd like to disclose this bank loan rating revenue each quarter. In the third quarter, it decreased 28% from the prior period to $58 million. High yield bonds were clearly the preferred options for issuers again this quarter. On this slide, we look at the total amount of global debt outstanding, as you can see it's been growing every year by an average of $884 billion or approximately 5%. In the first nine months of this year, the amount of global debt outstanding increased by over $1.2 billion clearly a significant increase.
This is a slide that we've shared with you in the past. What is noticeably different is that the duration of newly issued US investment grade high yield bonds have diverged in 2020 with investment grade duration extending out to almost 13 years and high yield contracting to close to seven years. While many companies would like to extend maturities to take advantage of historically low rates only the higher quality credits are able to do so. As the total amount of US investment grade debt outstanding has increased significantly in 2020 most of that increase has come from longer dated maturity. While the volume of debt outstanding of maturities have gone to five years is similar to what it was in early 2020.
Next, we analyze upcoming maturity data from different points in time. As you can see approximately 9% of 2021 maturities have been refinanced year-to-date while this is global data. If we look at the US data, we find that in the full year of 2019 maturities coming due to the following year in 2020 will reduce by 15%. While in the first nine months of 2020 maturities coming due in the following year in 2021 will reduce by 18%. So part of the flurry of issuance in the last two quarters has included a slight increase in the pull forward of near-term debt.
The big unknown is how much delayed pull forward exists. An example would be a company, that issued new debt to increase liquidity and sitting on the cash. There may be a point when a bond maturity comes due in the next year or two and they use this cash to pay it down. However, the real question is, will they still have the cash on hand? Will they have burned through the cash during the pandemic? That will depend on the individual company and the impact of the pandemic on that company.
So we conclude there has been a slight increase in pull forward activity of 2021 maturities. More pronounced is the surge of new issuance that has created an uptick in the growth of total global corporate debt.
Turning to our investments in growth initiative, let me start with ESG. We've been providing the market with data and insights on sustainability for over 20 years. But over the past few years and now during the pandemic, we see increasing and accelerating demand for clear, consistent and comprehensive ESG data and solutions. And we have an ESG strategy based off of leading products across all four divisions.
In Ratings in the second quarter, 15 ESG evaluations were completed or in progress. In the third quarter it was up to 61. In the second quarter we completed three green evaluations and in the third quarter, we completed 13. In Market Intelligence, we recently launched the S&P Global ESG Scores and have closed seven deals to-date. In Indices, we have $6.1 billion of ESG ETF AUM at the end of last year. As of the end of the third quarter, it was up over 50% to $9.5 billion.
In addition, let me highlight a few other new products. Last quarter we shared with you that our Trucost Climate data has been integrated into our portfolio analytics product. We've since integrated the full suite of Trucost data into the Market Intelligence platform. We have now successfully made all of our Trucost data available through all of our distribution avenues which include the Market Intelligence platform, Xpressfeed and the Cloud [ph].
If you'd like to better understand what content is available. It's showcased on the S&P Global marketplace. Now our clients can combine the Trucost data with other S&P Global data for a more integrated customer experience. In building a powerful benchmark, establishing a network effect [ph] is critical. To that end, we had two new launches of products based on S&P 500 ESG index, a State Street ETF and CBOE options. [Technical difficulty] 500 ESG ETF, futures and option and insurance product all reinforce each other to make the S&P 500 ESG index more relevant to the market.
Next to our launch, four new climate ETF's based on S&P Dow Jones Paris-aligned Climate Indices. The ETF's will integrate the greenhouse gas emissions of the entire value chain of any given company while also taking physical risk to business activity from extreme climate events into account. Platts launched the first European price assessment for sustainable aviation fuel. Sustainable aviation fuel is produced from used cooking oil and can be blended with conventional fossil-based aviation fuel.
The energy transition consolidated product that was launched on the platform is unique and expands across multiple commodities. Platts has been covering energy transition topics for over 15 years. Users who once had to navigate through numerous platforms and market report can now find this information in a single location. We've had an incredible year of innovation and product launches.
Let me highlight a few more that occurred this quarter. Market Intelligence launched ProSpread, this is a remarkable product that many of you might find valuable as it eliminates the time-consuming process of manual input of financial statement data into your workspace. ProSpread is a workflow tool that automates the extraction and spreading of financial data from PDF, JPEG and other image file. Optical character recognition, natural language processing and machine learning are combined to drive extraction from even poor quality PDFs or image files in nine languages, continuous learning, ensures manual adjustments are applied seamlessly to future filing.
Next, we've continued our expansion in the coverage of SMEs. This quarter we added data on 10 million European private company profiles with standardized financials to the Market Intelligence platform. On our first quarter, we featured the launch of the S&P Global marketplace our new open access platform where clients can browse and gain access to data sets from all four of our divisions as well as curated third-party data and solutions from Kensho. This quarter reached the milestone of 100 data sets and solutions. We have also completed sales contracts with approximately 50 clients.
During the quarter, we completed an enterprise-wide contract with Snowflake. Cloud-based delivery enabled customers to simplify their data management and work with multiple large data sets more efficiently. Since Snowflake is cloud agnostic, the data on the S&P Global marketplace is ready to query and is easily accessible via multiple cloud platforms. We released Beta version of China Credit Analytics Platform. This is an integrated desktop solution that generates credit insights in more than 30 million Chinese private companies using differentiated content and localized analytics aligned with S&P Global standard. The platform is available through dual language user interface that supports both Chinese and English.
The CME Group launched a cash-settled (Platts) South American soybean future contract which provides a risk management tool for market participants looking to hedge. The CME Group also launched new Long Grain White Rice future contract. As you know from earlier this year, we acquired Live Rice Index. One of the synergies of acquiring small price reporting agencies is that we are already IOSCO compliant this helps us with the CME Group's decision to list this new futures contract.
And finally, we're piloting a microgrid called Distro at the Port of Rotterdam for renewable energy. Distro is a marketplace that connects renewable energy and storage with energy users. It utilizes artificial intelligence and blockchain technology to solve the problem of intermittent renewable energy. It's great to be able to showcase how Platts is bringing its core capabilities and pricing and current energy markets the unique landscape being created by the energy transition.
Next, I'd like to provide additional information as we plan for 2021. Let me start with the issuance outlook from our ratings research group. The initial 2020 forecast was for increase of 5% excluding international public finance. It now calls for an increase of 13%, so after issuance go up to 15% in 2019 and a forecast of 13% in 2020. Our ratings research group anticipates that issuance will decrease 3% in 2021. While the forecast calls for 5% gain in financials, non-financial structure and US municipal issuance are expected to decrease 9%, 6% and 1% respectively. Please note that this is an issuance forecast not a revenue forecast.
As you see here, our economist forecast global GDP to resume growth in 2021 after decline in 2020. While the correlation between GDP and issuance was severed by the pandemic. We expect a long-term correlation to remain intact. Our economist acknowledged a high degree of uncertainty about the evolution of the Coronavirus pandemic. The current consensus among health experts is that COVID-19 will remain a threat until a vaccine or effective treatment that becomes widely available which could be around mid-2021. The forecast anticipates unevenness in recovery both by country and by industry.
As you've seen, we performed well during the pandemic and see business conditions in 2021 that should favor continued relevance of what we do across every business. But as I wrap up my remarks, I want to remind investors that despite the strong performance we've been delivering in the midst of the pandemic, we continue to monitor the macroeconomic and geopolitical landscape for risk and contingencies that could impact markets, our clients and possibly our company. These include the ongoing impact of the pandemic on business activity and the timing of approval and delivery of a vaccine.
The speed of economic recovery across national regional economies. The US policy environment after the election including bilateral and multilateral international relationships. Public sector economic support through fiscal stimulus and central bank liquidity and interest rate policies, credit market characteristics and commodity market supply, demand and prices.
I'll now the turn call over to Ewout Steenbergen, who's going to provide additional insights into our financial performance and outlook. Ewout.
Thank you, Doug and good morning to all of you on the call. Let me start with our third quarter financial results. Doug offered highlights of strong revenue and adjusted earnings per share growth. I will take a moment to cover a few other items.
Well some of the segments have a difference between reported and organic revenue growth, in aggregate they are the same at 9%. Adjusted total expenses increased 7% excluding the acquisitions of Greenwich Associates, 451 Research and RobecoSAM ESG Rating's business. Expenses increased 5%. Much of this increase was due to a $54 million sketch up [ph] to our incentive compensation accruals. Based on our strong performance this year. In addition, we contributed $4 million through the S&P Global Foundation and increased our legal related cost in indices.
At the management team we took precautionary steps early into pandemic to control expenses. Those actions were mostly no longer in place, demonstrated our ability to dramatically reduce expenses when necessary without employee layoffs. Adjusted operating profit margin improved 100 basis points based on strong revenue growth that outpaced higher expenses. The increase in the effective tax rate was primarily due to the timing of discrete tax adjustments. While the effective tax rate fluctuates from quarter-to-quarter due to the timing of discrete tax items, our full year tax rate guidance has been lowered.
During the quarter, changes in foreign exchange rates led a positive impact on adjusted EPS of $0.04. The only meaningful impacts were in ratings and Market Intelligence, where adjusted operating profit was positively impacted by $10 million and $5 million respectively. The non-GAAP adjustments this quarter collectively generated a net pretax loss of $311 million. That included $279 million associated with premiums and fees paid to tender, certain notes outstanding, $8 million in gains on depositions primarily from an office building in New Jersey and an IR web hosting business that was part of the SNL acquisition. $5 million associated with a technology impairment, $2 million for Kensho retention related expenses and $32 million in due related amortization.
This quarter all four divisions delivered increased revenue three of the four delivered increased adjusted operating profit, on the trailing four-quarter basis adjusted operating profit margin increased significantly in Ratings and Platts while Market Intelligence and Indices at small decreases. As we have discussed Market Intelligence, investment spending remains elevated. I'll provide color on the individual business results in a moment.
We recently took advantage of the low interest rate environment and refinanced portion of our outstanding higher interest rate bonds with new lower interest rate bonds. The net results were an increase of about [technical difficulty] $200 million [ph] in bonds after spending [ph] a decrease in annual bond interest expense of $26 million, a reduction in our weighted average cost of debt to 3.1% and an extension of our weighted average tenor to more than 18 years. In fact, our 40-year bond had the second lowest coupon ever for 40-year bond in the US, second only to Alphabet and our 10-year bond carries the same coupon as Apple's.
Now turning into the balance sheet, our balance sheet has low leverage and ample liquidity. We have cash and cash equivalents of $3.2 billion, debt of $4.1 billion after our recent refinancing and undrawn revolver capacity of $1.2 billion and no commercial paper outstanding. Our debt ratios remained unchanged despite the recent bonds refinancing due to EBITDA growth.
Free cash flow excluding certain items reached $2.2 billion in the first nine-month of the year, an increase of $593 million or 36% over the prior year period. We completed $11 million of share repurchases under the share repurchase program initiated in February 2020. In light of our strong liquidity and increased cash flow, we continue to monitor the status of our share repurchase program in consultation with our Board of Directors due to near term market uncertainty including the pending US election. We're not resuming share repurchases at this point in time however we maintain our long-term target of returning at least 75% of free cash flow to shareholders and we will continue to monitor the markets for the right time to resume share repurchases.
Now let's turn to the division results. Ratings revenue increased 13% and excluding the acquisition of the ESG Rating's business from RobecoSAM and CRISIL's acquisition of Greenwich Associates, organic revenue increased 12%. This revenue growth was driven by the increase in issuance, Doug already discussed. Adjusted expenses increased 9% excluding changes in foreign exchange rates adjusted expenses increased 11% due primarily to increase incentive compensation, merit increases and additional headcount primarily from the acquisition of the ESG Rating's business from RobecoSAM and CRISIL's acquisition of Greenwich Associates. In fact over one-third of the expense increase was related to these acquisitions. This resulted in a 16% increase in adjusted segment operating profit and a 130-basis point increase and adjusted segment operating profit margin. On the trailing four-quarter basis adjusted segment operating profit margin increased 600 basis points to 63.4%.
Non-transaction revenue increased 4%. Transaction revenue increased 22%, due to very strong high yield issuance in the US, gains in global sovereign debt and US public finance partially offset by weakness in bank loan ratings. This slide depicts Ratings revenue by its end markets, the largest contributor to the increase in Ratings revenue was the 16% increase in corporates. In addition, financial services revenue increased 6%, structured finance increased 4%, governments increased 35% and the CRISIL and other category increased 2%.
It is not often that we highlight sovereign rating's revenue, but it was considerable growth this quarter as a number of countries including Ecuador, the Dominican Republic, Croatia and Jordan [indiscernible] the debt markets. On the right side of the slide, you can see the changes in revenue within structured products. The largest changes were in RMBS and CMBS.
Turning to S&P Dow Jones Indices, the segment delivered 1% revenue growth due primarily to gains in AUM linked to our indices and data subscription partially offset by reduced exchange traded derivative activity. In the third quarter, we reported a $12 million increase in adjusted expenses due primarily to increased legal related cost, higher compensation from increased headcount and incentives as well as higher professional fees about $8 million of the $12 million is non-recurring. A 7% decrease in adjusted segment operating profit and an adjusted segment operating profit margin of 65.2%, a decrease of 510 basis points. From a trailing four-quarter basis, the adjusted segment operating profit margin decreased 40 basis points to 69%.
Revenue growth was subdued this quarter as of linked fees increased 2% with gains in ETFs and mutual funds partially offset by decreased over the counter derivative activity. Exchange rate of derivative revenue decreased 7% on reduced rating volumes. Data and Custom subscriptions increased 3% due to a modest increase in end of day and real-time AC fee partially offset by the timing of contract renewals.
For our Indices division over the past year, ETF net inflows were $84 billion and market appreciation was $92 billion. This resulted in quarter ending ETF AUM of $1.7 trillion which is 11% higher compared to one-year ago. Our ETF revenue was based on average AUM which increased 12% year-over-year. Sequentially first, second quarter of 2020. ETF net inflows associated with our Indices totaled $5 billion while market appreciation totaled $113 billion.
Activity at the CBOE decreased in the third quarter with S&P 500 Index options activity decreasing 22% and VIX futures and options activity decreasing 38%. This was in contrast to increased activity at the CME where the equity complex volume increased 38%. The majority of the gain at the CME was due to the successful launch of the Micro E-mini S&P 500 futures. Excluding this product, the volumes at the CME equity complex increased 4%.
Market Intelligence delivered reported revenue growth of 9% and organic growth of 7%. While the COVID-19 pandemic continues to lengthen sales cycles, usage of our key platforms increased 11% year-over-year. Adjusted expenses increased 6% due primarily to acquisitions, compensation and royalties in addition investment spending continues and is beginning to pay off with some of the new product launches that Doug discussed.
Adjusted segment operating profit increased 14% and the adjusted segment operating profit margin increased 160 basis points to 33.8%. On the trailing four-quarter basis adjusted segment operating profit margin decreased 10 basis points to 32.9%. Looking across the Market Intelligence components, desktop revenue grew 3%, excluding acquisitions and divestments. Data Management Solutions revenue grew 12% and Credit Risk Solutions revenue grew 11%.
And now turning to Platts, reported revenue increased 5% with core subscriptions increasing 7% and global trading services decreasing 6%. GTS revenue decreased mainly due to lower petroleum and gas volumes at ICE and CME. Although recession has reduced oil prices putting cost pressure on many of our customers. Bankruptcy filings are similar to recent years with 38 US exploration and production company filings year-to-date. This compares to 42 in full year 2019 and 28 in 2019 despite this pressure on the industry we have maintained overall renewal rates in the mid 90s.
Adjusted expenses decreased 2% due to the divestiture of RigData and management actions. Adjusted segment operating profit margin increased 280 basis points to 55.7%. The trailing four-quarter adjusted segment operating profit margin increased 300 basis points to 54.9%. The fastest growing markets during the quarter were Metals and Ag at 12% and Petrochemicals at 7%.
After completing our last productivity program in the second quarter, we have identified a number of additional opportunities to reduce future expenses. They can generally be grouped into four categories; real estate, procurement, T&E and IT infrastructure. We've already begun implementing the actions needed to realize these savings however it will take us two to three years to complete all of these items. When we have finished, we expect to realize approximately $120 million in annual savings for my 2019 baseline.
And now I would like to share our updated guidance with you, with only one quarter remaining in the year. There is no longer a need to share various scenarios. This slide depicts [ph] the new 2020 guidance and this slide takes our adjusted figures. The second column is our new 2020 adjusted guidance and all of the line items that changed are highlighted. Now let me review our new adjusted guidance.
We increased our revenue guidance to a high single-digit increase corporate unallocated expense has been decreased by $10 million to a range of $125 million to $135 million. Operating profit margin is increased by 100 basis points to a range of 52.5% to 53.5%. Interest expense net includes both interest income and interest expense. It has been reduced by $7 million due to the recent changes in our outstanding bonds. The tax rate has been reduced due to tax benefits from foreign operations. These items result in a new adjusted diluted EPS guidance range of $11.30 to $11.45. And finally, free cash flow generation has been increased to approximately $2.9 billion.
In conclusion, 2020 is a shaping up to be a very strong year for S&P Global. While the recession has crippled many industries and companies. Our unique collection of businesses has continued to thrive. In addition despite all of the hardships related to the pandemic, our employees have continued to deliver the highest quality ratings, benchmarks, research data and analytics and delivered an unprecedented number of new product launches. As always, we remain committed to providing transparency for our investors to deliver essential intelligence for our customers and to support sustainable development in our communities.
And with that, let me turn the call back over to Chip for your questions.
Thank you, Ewout. Just a couple of instructions for our phone participants. [Operator Instructions] operator, we'll now take our first question.
Thank you. Our first question comes from Toni Kaplan with Morgan Stanley. You may ask your question.
And Doug I love the, what are you waiting for list. I thought that was the funniest thing I've heard in a long time. Just wanted to ask about guidance, so last quarter you made a point to say that the guidance increase was partially due to the higher expectations for the rest of the year. This quarter, it seems like the raise is more reflecting the 3QB [ph], is that fair or have your expectations improved for the rest of the year as well?
Good morning, Toni. Thanks for your comments, particularly on some of the analytics and the issuance environment and what are you waiting for list. If we look at the guidance, I think it's both reflecting improved performance during the third quarter as well as also slight improved outlook for the fourth quarter. We're definitely are more optimistic with respect to our business performance for the remainder of the year. We think that all businesses are doing well. You see the subscription businesses showing quite good results with respect to their renewal rate, with respect to the overall book of business is going up and you see the [indiscernible] for Platts and Market Intelligence.
If we look at the issuance environment for October it has been quite reasonable in terms of continued activity and then also, we expect the index business that was facing certain particular more non-recurring items in the third quarter. We will see that coming back in the fourth quarter as well so overall slight improvement for the fourth quarter in our guidance. So overall therefore we're quite happy that we could raise our guidance for adjusted EPS by $0.50 to $0.55.
Great and on the international side. International ratings revenue performed really well in the quarter and you provided some of the issuance metrics with Europe down in - Asia up 19, growth up 22 in the quarter for the full international piece. Just hoping you could expand on what drove the revenue outperformance relative to issuance. Was it mix? Was it pricing? How do we think about that? And then I saw that in China you completed the registration in China's exchange bond market yesterday and I just wanted to understand how that increases the opportunity for you and China and how quickly that can sort of take shape. Thank you.
Toni, let me take the first part of your question. The 22% growth in international revenue for ratings. Three main drivers that are behind that. First, we saw investment grade corporate issuances very strong in Asia Pacific; we saw increased high yield issuance in Europe and then sovereign ratings was up in quite a strong way during the quarter. So those were the three drivers behind the international growth.
And Toni, let me give you some color on the China. As you know there's two bond markets in China. There's the interbank bond market, there's exchange bond market. The first one, the interbank market is approved the PBOC, we received license last year to operate issuing credit ratings there and then this week we received approval from the CSRC to also operate in exchange bond market. We're now the only wholly owned foreign rating agency that can operate in both markets. So we have a similar situation as any other rating agency in China. But what's also really important in the few weeks the regulators together the PBOC, CSRC and SAFE which is the State Agency for Foreign Exchange. They've issued some new guidelines about market access, access to both markets for foreign players, FX controls. In addition, over the last few months we've seen BlackRock, Fidelity, JPMorgan and others start getting more access to the Chinese market.
So when we look at this overall knowing that we've put in place a very strong team. We've started doing issuance of ratings in the markets. We built strong relationships with issuers as well as the investors as well as the banks that are involved in the debt markets. We think that we're very well positioned as the Chinese market continues to reform further in their credit and debt markets.
Thanks so much, congrats on the quarter.
Thank you. Our next question comes from Manav Patnaik with Barclays. You may ask your question.
I was just hoping the decline in 3% issuance [indiscernible] next year. If you could just walk through maybe some of the moving pieces particularly around maybe the assumptions around the elections outcome, if that's relevant between the two different policies out there?
Manav, this is Doug. Let me start with that. So when we look at the issuance forecast for next year. First of all, we're coming off of two really strong years of issuance. It was 15% last year, we're expecting up 13% this year and as always there's a lot of moving parts between financial institutions, corporate structured finance etc. So we're looking right now to forecast for next year of 5% up for financial institutions. This is the data coming from our ratings research team. Corporate is down 9%. Structured 6% down. Public finance down 1%. For an aggregate down 3%, that's what makes it up. But recall it, that's just an issuance forecast, that's not our revenue forecast and we're still working on that.
I don't think that we've necessarily taken into account what would be the factors that you would see from the election itself directly on that. But we're looking at, there's a lot of cash that's still outstanding. We see that there is an M&A pipeline which has started picking up. There has been a very high level of activity of non-investment grade high yield issuance and we see a lot in the pipeline there. So it's a combination of all of those different factors that we look at for this preliminary forecast for 2021.
Got it and if I could just ask on the Platts side. I mean I think numbers were fairly solid considering I guess what everyone presumed is a tough backdrop has been a wave of M&A in that market as well. Should we be expecting any drop off or any items to consider as we think about the growth going forward?
Well if you look, Manav at the different components of the Platts revenue growth, indeed we're quite pleased with what we saw this quarter, price reporting up approximately 6%, analytics up somewhere 10%, 11%. But then Global Trading Services is down but we know that can fluctuate period-over-period and the business is overcoming some headwinds. You might recall that last quarter we talked about very small conference business that saw its revenues evaporate in the current environment. So indeed, the Platts results are solid. We're quite pleased with it. If you think about the revenue outlook for the full year probably mid single-digit growth is the best assumption for the remainder of this year and therefore for the full year outlook.
Got it, thank you guys.
Thank you. Our next question comes from Andrew Nicholas from William Blair. You may ask your question.
As you think about the target to the goals for your ESG business, which I believe you outlined to be somewhere close to $270 million or so in 2024. I'm wondering what you think are the main factors that will determine whether or not you achieve that goal and maybe asked another way. If we fast forward to 2024 and your ESG business is well above target, why would that be and maybe the same question, if you were to underperform your expectations?
Thank you, Andrew. This is Doug. Well first of all we're very excited about the growth overall in the ESG landscape itself. This is something that's four or five years ago not a lot of - people are talking about and we're still trying to understand what the total addressable market is going to be and we think it's going to continue to get quite large and it will be expanding rapidly. We've seen that over last couple of years as expanded rapidly as more US companies start embracing ESG. In addition, you see that during the pandemic there's been more interest in the S part of ESG, so that's increasing which has brought more interest from ESG itself and in addition, there's a lot of interest on the climate aspect of ESG and climate on its own.
So when we look at the, where the growth is going to be coming from, we think that any type of investor whether you're an institutional investor within the insurance industry you might be looking at climate change, you might be looking at physical risk. If you're an endowment or a pension fund, you're starting to hear from the asset owners that they would like to know more about the purpose of the investments and the destination of the funds there and what we see through these types of investors that they're starting to demand more and more clear consistent information that they can build into their models.
And so we see as you've seen us present, we believe there's a whole set of product opportunities for us across every single division as well as cross divisional solutions. We have estimated as you know, 40% growth rate. We will be providing updates on that early next year. But we do see that we think that this market is going to grow very rapidly and that we'll be one of the main players in the ESG space.
Got it. Thank you and maybe just a follow-up to that. I mean where do you feel like you are or where you stand with respect to your data assets in the ESG. Obviously the RobecoSAM ratings business acquisition is a big piece of that piece. I'm just curios if there are gaps that you're still looking at filling in and whether or not you'd hope to do that organically or via tuck-in M&A and where might those areas of opportunity be? Thank you.
Thank you. First of all both Trucost and the RobecoSAM, the CSA capability that comes over SAM are both top notch, they're better than anybody else in the industry. So we have a great start with both of those in a foundational level. Where we need to continue to add to our portfolio which is more likely organically is more and more data that comes from issuers themselves as example what we're doing with the ESG evaluation product that's in the ratings business. There needs to be a much broader set of data that is going to be used as evaluation. We see the green bond market starting to grow that's not something you can go out and acquire, that's something that you need to build the expertise and start building the data sets. But what's very important also is linking the data, where we find that there's a lot of data set whether it's internal, external and it's lot of our investors and clients want to learn how they can link it better into their own needs.
Finally, what I would say is that there are not clear standards yet outside in the market. If you look at what are the disclosure requirements around the world, they are very iffy, spotty, if there are even any at all with ESG and so we're incredibly active across all of the different groups that are setting standards whether it's SASB, Task Force for Climate-Related Financial Disclosures. Ewout is one the founding members of Accounting for Sustainability in the US branch and so we're very active in all of those groups. So we can be at the stable as the standards are set and ensure that then what we're delivering is going to meet all those standards.
Got it, thanks a lot.
Thank you. Our next question comes from Kevin McVeigh from Credit Suisse. You may ask your question.
Follow-up on the 3% issuance decline, the comment versus the revenue. Just any puts and takes on, obviously I don't want to get specific on revenue. But just any puts and takes to think about given the component to the issuance in 2019 and 2020 being so strong, just would you expect kind of the normal delta between issuance relative to revenue or just anything to call out of the way.
Well first of all just related to that, I gave some of the components about the forecast from our ratings research team for next year. But just to give you a couple of examples, in the third quarter there was issuance which was as high as up 94% for high yield in the US and then if you look at another category like covered bonds in worldwide. It was down 40% structured credit or CLOs were down 40% globally. So you saw some really big swings around the globe of different type of issuance.
What we're seeing right now between credit conditions themselves between rates with spreads there is a lot of movement across the different asset classes around the world and different regions and so we're trying to balance all of those as we make our forward-looking approach to this. But Ewout is going to add some other comments.
And Kevin, let me build on what Doug just said, the bridge between bond issuance and revenue growth. There are many elements that go into the mix. But you have to think for example is bank loan volumes that come from relatively low base in 2020. We had non-transaction revenue that definitely is going up as you know in a modest pace year-over-year and for example you have to think about the surveillance over the large bump issuance that has been done this year. There's an M&A environment, our new product launches, our commercial conditions. So there's many of those elements that go into the mix in order to bridge from bonds issuance outlook to ultimately ratings revenue growth.
It's very helpful and then just a quick follow-up. Are you starting and I'm sure you're - kind of the structural changes and just the data consumption within Market Intelligence and Platts just post-COVID? It just seems like there is definitely more increased frequency of data, query and things like that. Anything to call out?
The only thing to call out right now that we've seen a dramatic increase in usage over the last six months of across every different type of platform we have as you know, we have not been doing conferences. But all of our webinars are up 300%, 400%. There's huge increases in our conference attendees. We see increase in the visits to all of our websites. We had a free COVID micro site that is every single day there's a lot of visits, that with research that we have around COVID. But one of the most important questions that I hear myself and we pick up from our clients really goes to the core of what you started your question with and that is, how do I link my data with your data? How do I link data across different sources so I can use it in my modeling to make decisions? And that's something that we're spending a lot of time one and you can see some of the tools that we've launched over the last six months or last year or so.
We've been looking at this very carefully. This goes back to why we bought Kensho and some of the things that they've been delivering. Why today we talked about ProSpread which is a new tool that allows analyst to extract data from JPEGs and PDFs and put into their modeling. So we see that the data modeling, data linking is really a critical need for our clients and we're trying to make sure that we can be at the forefront of that.
Thank you.
Thank you. Our next question comes from Hamzah Mazari from Jefferies. You may ask your question.
My first question is just around issuance specifically what is your market share today in structured finance? And maybe how is that changed overtime and where do you think that can go?
Well let me start, I don't necessarily really track market share and structured finance or any of the different products. What I could say is that across different products there's something like covered bonds is a product that we are very inactive in around the different markets around the world. But things like ABS, CMBS those are areas that we are very active in, there might be some quarter where the type of activity of CMBS doesn't necessarily favor the type of expertise that we have, so sometimes we might not see the same level of market share. But what we're always looking for is that investors are looking at the highest quality criteria and outcomes of ratings. And in fact, one of the things that we're measuring very closely during the pandemic is the quality of the performance of our ratings.
We had made a major overhaul of our criteria after the financial crisis and since then we're watching the performance and this is a place it's being tested in and our criteria is holding up and that's one of the reasons you'll see investors asking issuers to ensure that there's an S&P rating on the debt, when it's issued.
Got it and just my follow-up question. I know you outlined the $120 million savings plan and we can see the breakdown between realistic, procurement, T&E and IT infrastructure. But maybe just two questions on that, one how is this different versus the prior $100 million or $120 million savings plan that you achieved. And then it seems like every two to three years you have this $120 million bucket. Is there more to go after this as well, after another two to three years?
Good morning, Hamzah, this is Ewout. First on your question how does this differ from the last productivity program? There are a couple of overlaps and a couple of areas that are different. Area where we see an overlap is technology infrastructure. We're still working through older infrastructure that was very Federated technology debt and to clean up all of the debt, so that was the part of the last program and is continued to be a part of the current program. Real estate was the part of the last program but I think that was more reducing real estate where we had excess real estate at certain locations that were not used. Here we see that we're going to be far more searchable with respect to real estate going forward.
We're thinking about new models, how we'll operate, how we'll interact, new structured hybrid working models going forward and that will give us the opportunity to optimize our real estate over the next few years. So it's in the same bucket and the same category but slightly different approach. Last time, we were focused on the functional groups and we saw opportunities to optimize functional groups that's not part of this particular program. But we're going to really focus now on our external spends. Procurement is a component of the current program because we believe that we can improve our demand management internally as well as also our contract negotiations going forward.
And then travel is coming down which is the same as with respect to real estate that also to do with new models of work going forward. So yes, there are components that are similar but there's also new components that we've added for this productivity program. With respect to second part of your question, is there more to go? I think you've heard me saying that before I think there's a lot of room we have as a company to optimize and we're going to continue to do that. We have a lot of operating leverage, so you may expect us as a company never be satisfied, never say this is enough. I think there's always opportunities to further challenge ourselves, what we can do better in the future.
Thank you.
Thank you. Our next question comes from Alex Kramm from UBS. You may ask your question.
Quick one to start on the index business. You mentioned, the year-over-year kind of changes there, but can you talk about quarter-over-quarter in particular on the AUM side? If my math is right, average AUM was up 13% from the second quarter, sorry. But I think revenue was only up 2% so was that the same kind of areas that you highlighted on a year-over-year basis or what really drove the slower increase here quarter-over-quarter?
Alex, good morning. It's the same kind of elements that you see quarter-over-quarter as year-over-year. The ETF flows - the ETF AUMs continue to develop in a favorable way, mutual funds also continue to develop in a favorable way. The main difference is exchange traded derivative volumes. We have seen market volatility coming down and therefore also ETD volumes coming down and that is really driving the lower growth in this particular category on the sequential basis.
Thank you. Our next question comes from Craig Huber with Huber Research Partners. You may ask your question.
Doug, just being curious to hear your opinion here as we sort of think out, what the implications of the election. If one side wins versus the other, what it does to policy changes out there and stuff that potentially might happen. How that would impact your outlook as you think out for next year, particularly in the ratings side of the business?
Well, thank you for that and obviously, as you saw when we put up some of the risks and contingencies that we're looking at. We are going to be looking carefully at the outcome from the election. And no matter how the election comes out, we'll be able to work with any administration in the United States. And we think that there will be different types of policies for growth around the globe. Right now, one of the most important things no matter what the outcome of the election is, is to see if there is going to be another stimulus program. The first stimulus program, the PPP, the Paycheck Protection Program, it helped save 13.5 million jobs. And as long as the pandemic is continuing to have its impact on the US around the globe. We think that that right now that probably has a larger impact on the outlook for the economy than the election itself. And so what will happen after the election for any kind of stimulus, what will be some of the policy measures coming out.
We believe that, we could work with either administration, no matter what they come up with. But clearly, we'll be watching if there is any additional oversight of the regulatory side, what are going to be the international implications of co-operation, multilateralism, etc. And so these are the types of issues that we would be watching carefully to see what would be the impact over to the business side from a new administration.
And then my other question, what's your feeling on the M&A environment out there? As it pertains broadly to the ratings mark as you think about Europe and the US, you're in this very low interest rate environment as things progressively get better on the economic front. Are you guys expecting M&A deal flow out there to pick up materially if you think out over the next year or so and what does that mean for your ratings business, please?
This is one of the things when Ewout was talking earlier about what are some of the factors that we look at to see what would be the some of the drivers of revenues in the ratings business that even in a lower issuance environment, M&A would definitely be one of those. We do see a pent-up demand for M&A. We see a lot of deals that have started getting done despite the pandemic and despite social distancing. The pipeline of M&A was really weak, it dropped almost all-time lows in the second and third quarter of this year, but it started picking up and what we see in the pipeline is also starting to pick up. M&A, typically will bring along with it a potentially a ratings evaluation service, there could be a bridge loan, there could be depending on what type of high yield or investment grade type of transaction it is, there could end up being another rating that comes out of it. So M&A is always a very positive leading indicator for the ratings business.
One final thing I'd say that, we're also looking carefully at M&A, I would call it M&A, it's a little bit different, let's call it restructuring because there is a lot of restructuring going on at the deeper end of the credit. And so higher yield's credits that are going through bankruptcies and restructuring because those also end up usually leading to additional business as well for that in the Ratings business because once something's restructured, they go back out for new loan rating, then potentially a bridge loan which goes to a loan rating, which then could go into the bond rating. So M&A is a very important leading indicator for us and we do see it starting to pick up.
Thank you.
Thank you. Our next question comes from Jeff Silber from BMO Capital Markets. You may ask your question.
Thanks so much. Doug, at the beginning of your remarks, I think you were joking. But you talk about the - what are you waiting for list? What do you think those companies are waiting for? Are they concentrated in a specific industry that's under pressure? I'm just curious if there were any attributes that you seek in these companies and do we expect this company to get off and issue debt. Thanks.
Yeah, it is a joke that I said that - there is no specific characteristic of those companies that haven't come to market yet. There are a lot that are sitting on a large amount of capital. There is a couple of possibilities. One is that they have more than enough liquidity already or they're not industries that are strained at all by the pandemic, it could also be that they already issued more recently in the last couple of years. As you know, we're in an environment where interest rates have been low for a while, especially in Europe, in Japan. You've seen very low interest rates in those markets for a long time and even in the US, interest rates have been low.
So just probably that they have enough liquidity, they don't have a need for lowering their interest expense or they've got other more immediate demands, but we are expecting though. So one of the things that we would expect is it some point in time CFOs and Treasurers might start asking the question. Well, shouldn't I go ahead and restructure my debt or issue new debt at these kinds of rate. So that's what we're watching that as a potential pipeline in the future for issuance.
Okay, great. That's helpful. And then Ewout, you talked about in terms of share repurchase or potential share repurchase that you're monitoring the markets for the right time to resume. Can you share with us what are you looking for exactly before starting to repurchase shares? Thanks.
Yes, Jeff, what we are looking for is more stable market conditions to enter into an accelerated share repurchase program. In our assessment, over the next few weeks, we might see a higher level of volatility with the US elections, with the resurgence of COVID cases around the world. So we're watching it's very closely and we'll determine what is the right moment to restart our share repurchase program.
I would like to add there Jeff that overall, our capital framework remains unchanged. So we are still having the target of a return of 75% of free cash flow over time, so we will continue with that. As you know, our balance sheet is rock solid. We have a high level of liquidity. We have low leverage, high cash balance. So this is really to do with timing, we watch this very closely. And when the expected future volatility is coming down, we think it's the right moment to restart.
Okay. I appreciate the color. Thanks so much.
Thank you. Our next question comes from George Tong from Goldman Sachs. You may ask your question.
Good morning. I wanted to just dive deeper into your issuance forecast for next year. You talked about corporate issuance being down 9%. Can you elaborate on your investment grade and high yield expectations within corporate in the US and international markets?
I don't have enough detail to do that yet. And what I'd like to do is when we come back in the next earnings call where we're going to be providing you the 2021 guidance. Let us bring back a little bit more color on that at that point in time.
Okay. Got it. And then as it relates to your new $120 million savings program. Can you discuss how these savings will be distributed among the four segments? And if you expect the full $120 million in savings to flow through to margins or if they will be partially offset by reinvestments [ph]?
Yes, that's a great question, George. If we look at the way how the $120 million will flow through the different segments. I think, the best assumption should be in the same way as you see the overall expense base for the company at the moment. So the highest expense base is in Market Intelligence, then in Ratings and then the other two divisions. So as a proxy, I would say that's probably the best assumption at this moment. Why? Because Market Intelligence has the highest number of employees, so they will benefit from the real estate reduction as well as from the travel reduction, but also Ratings will take a large share of that. So definitely is going to be an element that will help future margin expansion.
Your question about reinvestments, we are of course baking that in. We're doing some reinvestments already this year. Think about the investments in our digital infrastructure, working from home, setting up our employees, digital interactions with our customers. There might also be certain investments with respect to impairments that we would expect over the next periods. So an impairment for example of some real estate in the fourth quarter and the first half of next year in order to achieve the run rate savings going forward.
Got it. Thank you.
Thank you. We will now take our final question from Owen Lau from Oppenheimer. You may ask your question.
Could you please expand a little bit on the China credit analytics program? How much additional investment you expect to spend on MI in China and the opportunity of Market Intelligence in China? Any more color would be helpful. Thank you.
Owen, the investments that we are already doing and are part of the overall investment program of Market Intelligence, the investment for the analytics platform in China. You already see in the current results of Market Intelligence. So Market Intelligence is taking a little bit more than half of the overall investment spend of the company. So if I look at the investment spend in the third quarter in total and that's for all initiatives for the company $30 million. $30 million and then a little bit more than half is in Market Intelligence. And of that in Market Intelligence, it's supporting multiple initiatives, the SME initiative, the marketplace initiative and also the China credits initiative. I'm not going to give you the specific number for China credits, but you should expect it's a couple of million of dollars, but again it's already in the current levels of the results that you see at this moment.
And Owen, let me add that based on some of the information I shared with you earlier. We see that the Chinese financial markets are still going to be undergoing lots of reform. The reform that the domestic regulators would like to see a more global market, they'd like to see a more transparent market and this is going to play to all of our divisions and obviously we're out front right now with the rating agency and Market Intelligence is building a very strong platform of delivering data and analytics, similar to what we deliver in other markets around the world.
Got it. That's very helpful. Just one final question quickly on the expense guidance. How much percentage of the run rate we should expect S&P can save maybe in 2021 and 2022? And finally to cut 100% of that $120 million.
A component of it will come in quite quickly and that has to do with the fact that certain initiatives are already in flight at the moment. And again, we are taking the 2019 expense levels as a base. So for example, we would not expect the travel and entertainment expenses to come up in that level, so that would be basically a say, if we have already realized at this point in time. Also some other elements that will come in quite quickly. But for the remainder we need the next two year to three years. So I would say a reasonable part next year and then the rest will come in gradually over the next two year or three years.
Got it. Thank you very much.
Thank you, Owen. And with that, let me close. First of all, I want to thank all of the investors who have joined the call today for your support. Thank the analysts for joining and your questions. As usual, you always ask very good questions that help us run our business better. Throughout the pandemic, we've been able to accelerate our digital transformation, we've been able to deliver very innovative products and meet the needs of our clients in the markets. With all of the uncertainty, they have been looking for more and more analytical information for research and we're pleased that our people have been able to deliver that. But we would have never been able to do this without the hard work, dedication and perseverance of our employees and I want to thank them today on this call. So thank you to all of our employees and thank you all who have joined the call today.
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