Rob Fauber: Yes. These are all great questions. And I want to give you answers to all of them, but I’m probably going to be able to give you better answers in the next quarter. So I guess, the way we are thinking about it is again we’re trying to preview this with our customers so that we can get feedback so that they can iterate the product, so we can think about how we want to price and package that. I expect that many of our users will get some basic level of functionality. And other users will opt in for full functionality. And as I said, we envision that as being an add-on. We’re getting ready to go into our annual renewal cycle. So we’ll have a very good sense on the next quarter call. We’ll be able to give you some update on what that take-up looks like.
And then you’re going to see that then in our — in how we talk about our digital insights business for — prospects for that business for full year 2024. Over — I’d say, part of the vision here is we also want to be able to expose those customers to different content sets than they might have access to today. So imagine that the initial customer is one of our CreditView customers. They’re already a customer, and they decided they want to opt in to the full Research Assistant functionality. But they may not be a customer of other content sets, so let’s say, some of our climate and physical risk content. We will be working over the course of the next year, and we’re already working on this and we’ll be working on this, to be able to provide access to customers for content sets that they find valuable to effectively kind of comingle, right?
So when I ask for a question about credit and I want to understand the impact of extreme weather events on the credit profile of the company, we’ll be able to return that answer. So that’s why you heard me also mention the importance of entitlements. That’s going to be very important for us to get that sorted out across the platform so that we can entitle customers to new content sets and ultimately monetize all that. So again, I know — on the next earnings call, I’ll be able to give you a little bit more insight into the traction that we’ve gotten with our customers.
Operator: We’ll take our next question from Toni Kaplan with Morgan Stanley.
Toni Kaplan: Just given that we’re in late October now, and this is usually the call where you give some color on how you’re thinking about ’24 issuance, Rob, maybe just give us your initial thoughts on sort of what you’re seeing and how you’re thinking about ’24 just shaping up?
Rob Fauber: Thanks, Toni. Yes, happy to do that. And I’ll give you some — I’ll talk a little bit about what’s on our minds. And obviously, on the next call, we’ll take you through the guidance for 2024. But first, I guess, I would say we expect some further economic deceleration in the U.S., Europe and China. But I think probably a reasonable probability that we achieve kind of that mythical soft landing and avoid a recession. Inflation has moderated. There’s still some uncertainty over rates. I think generally, the market is concluding that we are about at peak rates. Obviously, there’s some headline risk though around inflation prints and job reports. Again, you kind of see what happened at the end of September. And that’s important in terms of the market getting comfortable that we are, in fact, at the kind of the end of the tightening cycle.
I would say that we expect default rates to pick up in 2024 but really only modestly above long-term averages. And if that’s the case, spreads should be relatively well behaved because they’re pretty tightly correlated to default rates. I mean, you heard what I said about M&A. I think that’s really more of a 2024 story. We’ll have a better sense for that as we round into the beginning of the year. And we’ve got some pretty sound structural support from the things that I talked about. So we’ll get into more of that on the next earnings call. But hopefully, that gives you a sense of some of the things that are factoring into how we’re thinking about 2024.
Operator: We’ll take our next question from Scott Wurtzel with Wolfe Research.
Scott Wurtzel: Maybe moving back to the MA segment. The results in R&I and D&I stood out to us and were pretty encouraging. So I was wondering if you can maybe go over any of the specific products, verticals or solutions that were driving some of the strength that we saw there.
Rob Fauber: Thanks, Scott. Good to have you on the call. So yes, we continue to see some pretty strong both demand and also utilization. That’s important, right? We’ve talked about the utilization of our products is very important to the overall kind of value capture but around our economic data and our research and our models. I mentioned that we have just recently expanded our coverage within CreditView. And that is integrating the content from Orbis, that company database, and also our credit score. So we — a while back, we started to provide credit scores and effectively every company that is in that giant database. And we have been integrating that into a variety of our different solutions. And we’ve gotten some very nice take-up from that.
I would also say that, again in times where you’ve got economic uncertainty, there continues to be a good bit of demand for economic data and content and ability to kind of forecast and plan. And we have continued to see that. We’ve also seen some interest coming in from some of the government sector. So the growth there has been maybe even a little bit higher than from some of our other segments. So all in all, a number of things that are contributing to — allowing us to keep powering along in terms of growth in that segment. And going forward, we’ve got the coverage expansion in Research Assistant that I think will provide future runway for growth.
Operator: We’ll take our next question from Craig Huber with Huber Research Partners.
Craig Huber: Rob, what’s your updated thoughts on the private credit market out there? And how significant do you think it could be for your ratings business here? And is there an area here where this could potentially be a headwind to ratings growth if it’s not picked up, the stuff there is not rated? I do have a housekeeping question, if I could throw that in there. What’s your incentive comp for the first 3 quarters, please?
Rob Fauber: Yes. So I’m going to let Caroline get to that in just a second. But let me take the private credit question first. And Craig, we’ve talked about this a bit on the calls before. And there are places where you could see this as a headwind, where companies decide that they’re going to tap the private credit market rather than the public markets. We have seen more and more cases where companies have done that. And they’ve actually come into the private — into the public markets. That makes sense. Because in general, the public markets tend to be cheaper than the private markets. So I actually — when this kind of first came up, and I’d say maybe it might have been a year ago when we first started talking about this in these calls, I’ve gotten, I’d say, more and more positive on the opportunity for Moody’s.
And while acknowledging what I just mentioned, there’s just a lot of opportunity for us to serve this market. There’s a lot of opacity in this market. When you’re in times of increasing credit stress, the investors in those markets want to have a better understanding of what the credit risk is of the investments that they’re holding. And so we’ve had some really good discussions both with alternative asset providers, so the private credit lenders, as well as investors in their funds. And so we’re seeing demand for some form of credit assessment coming from both of those constituents. And I spent a good bit of time actually engaging with the private equity firms and alternative asset managers. And there are just a number of ways that we already work with these firms.
They have pretty extensive relationships across the firm. But there are more and more ways that we’re continuing to support them. So in general, Craig, I actually see this as a net positive for us. It has meant that we have had to think about our product offerings. I mentioned the coverage expansion in CreditView. And importantly — one important reason we did that is to make it more relevant to that market. We’ve thought about some of our rating products and assessment tools. So it has led us to think about the product suite and make sure that we’re evolving the product suite to meet the needs of what is obviously a growing market.
Caroline Sullivan: So Craig, with regards to incentive comp, our accruals align with our actual and projected financial and operating performance. And we expect incentive comp to be between $370 million and $390 million for the year with approximately $90 million for the fourth quarter. For Q1, it was $89 million. For Q2, it was approximately $100 million. And for Q3, it was approximately $100 million.
Operator: We’ll take our next question from Owen Lau with Oppenheimer.
